Seasoned observers of international politics and economics don’t need to be told that the system is in turmoil. That fact is broadcast from every available screen. From the rise in gold prices to the collapse of international aid allocations, there are shockwaves pulsing through the world at ever-increasing velocity.
Former UN deputy secretary general Mark Malloch Brown is one of those figures who sees a way forward for key international institutions that appear bound to be sidelined by recent developments. The British former diplomat’s starting point is rejuvenating the organisations that emerged after the Second World War, in particular the International Monetary Fund and the World Bank.
These two bodies and their ancillaries can trace their roots to a meeting held in 1944 in Bretton Woods, in the White Mountains of the US state of New Hampshire. But more than eight decades later, at a time when the global system seems to be “organising into two or three power blocs”, there is a sizeable number of countries seeking alternatives to that path.
A report co-authored by Mr Malloch Brown for the UK Overseas Development Institute points out the dramatic break with that Bretton Woods order since the election of US President Donald Trump. “The provision of grants from wealthier countries to poorer ones has lost political support, becoming another casualty of the collapse of global solidarity. This shift places greater pressure on lending institutions, rather than grant-making ones, to fill the gap,” the document argues.
In other words, it is the Bank and the Fund that have most scope for a comeback at this time. Mr Malloch Brown told me of the hunger that exists for solutions from countries that “want the freedom to make their own political choices”.
There is plenty of speculation that competitor bodies, controlled by the big polarised powers, will encroach on the space of the global institutions.
When UN Secretary General Antonio Guterres warned how his organisation was in crisis last month, there were many who saw the weakening as deliberate. “Either all member states honour their obligations to pay in full and on time – or member states must fundamentally overhaul our financial rules to prevent an imminent financial collapse,” he said.
The launch of the US President’s Board of Peace is just the latest grouping that would seem to encroach on territory that was once the preserve of the UN.
Yet Mr Malloch Brown points out that many of the countries and leaders signing up to the Board of Peace made clear they were doing so because of the role it would play in the reconstruction of Gaza. This is something that was of course affirmed by the UN Security Council’s resolution, and there is an expectation that its activities in Gaza would be reported to the Security Council. Thus, the role of the UN is changing – and not ended – and there are clear points in which countries are relying on the UN in embarking on a new approach.
Mr Malloch Brown points out that World Bank Group President Ajay Banga signed up to the Board of Peace to ensure that his body was part of the funding for the reconstruction plans. Mr Banga himself told an Indian broadcaster at Davos that his view was he was signing up to a once-in-a-lifetime opportunity. “It is important to get the right political buy-in,” he said. “This is not an alternative to the UN.”
With the traditional leadership among donors switching so dramatically away from the US and the Europeans, the focus of the developing world will inevitably shift too. Here, there will undoubtedly be new roles for what Canadian Prime Minister Mark Carney defined in Davos as the “middle powers”.
Looking at a role for the Gulf countries in this context, Mr Malloch Brown sees not a pure replication of the grant-giving activities of earlier decades but developing the potential of available resources.
For example, he points to the role of the region’s sovereign wealth funds in supporting areas where “strategic security interests and investment meet”. With the global institutions working alongside them, it would be possible not only to fulfil the strategic positions of both sides but also ensure that countries don’t get left out.
The genius of 1945 – in forging development finance bodies that create opportunities for developing nations to borrow from markets at highly preferential rates – remains at a high point of the international system. The increasing questions over established international alliance structures, dollar dominance and the rise of alternative credit systems have in many ways enhanced these institutions’ role as the last resort.
These competing pressures also create momentum for rapid reinvention in how they operate. This, Mr Malloch Brown says, would mean there is greater scope for countries to own their development finance plans.
The strengthening of the Bank and the Fund comes with a lot of caveats and is an accidental consequence of the biggest political twist in generations. What is certain is that middle powers have a clear opportunity to ensure that resources are used differently and can be better drivers for growth for the developing world in the brave new approaches that lie ahead.
