Economy

Markets

Industries

Insights

Reports

Events

Old order should yield place to new

By Fu Mengzi (China Daily)
Updated: 2009-05-18 07:43

The impact of the financial crisis on global politics, economy, security, and social aspects is perhaps greater than that of any previous crisis, war or disaster since the end of the Cold War. Such has been the impact that world leaders could be forced to build a new world order that conforms to the changed political and economic situation and takes into consideration the importance of emerging economies.

The extant world economic order took shape after World War II and helped create what the West calls the "golden period". But it suffered some blows, too, such as the "Nixon shock" in the 1970s - because of then US president Richard Nixon's new economic initiatives - and the side effects of the fast-paced marketization of the global economy in the post-Cold War period.

Globalization did help the world economy to grow at faster pace, but it also created a unipolar world with the US as the undisputed leader.

Related readings:  Making use of the crisis  Ecology in the time of global economic crisis  China may have bigger say in restructured IMF  IMF: Bigger role of China in global economy legitimate

As the world's largest developing country, China saw these changes coming and after decades opened its doors to the outside world. The late 1970s move ensured the country's rapid economic development through the past decades. It also made China, along with Russia, India, Brazil and South Africa, an important non-Western force, which kept pushing for changes in the world order.

The existing economic order does not reflect the changes the world has gone through over the last few years, even though globalization has served as a catalyst for the rise of many an emerging economy.

The US and European countries have nevertheless used their traditional hold on the World Bank (WB) and the International Monetary Fund (IMF) to steer globalization to suit their needs. Plus, the inherent weaknesses of the existing world order have resulted in the marginalization of some countries or regions, giving rise to terrorism, extremism and other violent movements that pose a big threat to global security and economic development.

Ironically, the global financial crisis offers global leaders a chance to change the decades-old world political and economic orders. But a new order cannot be established until an effective multilateral mechanism to monitor globalization and countries' actions comes into place. And such a mechanism can work successfully only if the old order gets a formal burial after extensive and effective consultations and cooperation among world leaders.

Take the UN, the world's largest multilateral organization, for example, which was formed more than six decades ago according to the need of the times. The world is no longer what it was in the 1940s, especially because there's little chance of the big powers going to war. Moreover, a country's sovereignty is no longer confined to territory and politics; it includes its economic and cultural traits, too, raising fears of new types of conflicts between or among nations.

True, countries have become increasingly interdependent because of globalization despite their differences in ideology, social systems and development models and levels. But this interdependence has not been able to eliminate the risk of conflict in economic, financial and cultural fields.

Such a complicated situation calls for strengthening the role of the UN Economic and Social Council (UNESC). According greater power to the council would help the UN improve to global macroeconomic policy coordination, financial monitoring and early risk warning, and help sustainable global development. As a multilateral economic body, the UNESC should remain independent of the WB, the IMF and the World Trade Organization, to provide authoritative advice and guidance on important global economic matters.

The existing global coordination mechanism, too, should undergo a change because it no longer seems capable of tackling the increasing number of global challenges such as global warming, spread of epidemics, terrorism and other non-traditional issues.

That brings us to G20 countries. Since they account for 85 percent of the global GDP, their meetings should be more representational, especially because developed as well as developing countries are a part of it. The half-day agenda of G20 meetings that give a member country less than 10 minutes to put across its points is far from enough to reach a consensual stance on any issue.

No wonder, wide differences exist between developed and developing countries, between the US and European Union (EU) nations and even between EU members over how to rescue the tottering global market and improve financial monitoring and policy coordination. G7 and G20 can be transitional platforms during a crisis, but the world needs a new multilateral framework in the post-crisis period to guide the major powers.

That's why the principles of market economy, though developed on the spirit of equality and credibility, remain impotent in the rapidly developing global economy. And hence, there's an urgent need to change the principle of self-discipline of companies and countries and introduce a new principle of contract to ensure that every country fulfills its commitment.

The author is vice-president of China Institute of Contemporary International Relations.