- Coronavirus is showcasing a lack of global cooperation, and even opening a new frontline for competition.
- The key lesson from the 2008 financial crisis was that coordination stemmed not from selflessness among parties, but precisely because it was in the interest of each party to work together.
- At a time when global leaders are looking to maximize the benefit of stimulus responses to their own citizens and businesses, they would do well to cooperate with one another.
The great global misalignment is that at the very moment cooperation is more vital than ever to address urgent challenges, it is in decline.
In late June, referencing the fractured response to the COVID-19 crisis, UN Secretary-General Antonio Guterres warned “there is total lack of coordination among countries.” Some have gone further, drawing on examples from history and comparing the global quest for a COVID-19 vaccine to the space race between the United States and the Soviet Union, where each side was looking to “win” at the expense of the other.
Though lamentable, it should not come as a surprise that the coronavirus is showcasing a lack of global cooperation, and even opening a new frontline for competition.
The pandemic struck an already unsettled world: one in which profound shifts in power were underway and causing competitive instincts to overtake cooperative mindsets.—Børge Brende, President, World Economic Forum
But the virus can also serve to reset these instincts by reminding global actors that coordination is the key to advancing not just shared priorities, but also self-interests.
The economic system is perhaps the most salient example of how frictions were increasing prior to the outbreak of the coronavirus. Between 1990 and 2015, extreme poverty declined from close to 40% of the global population to 10%. This result was largely possible because of a more integrated global economy and global value chains—the effect of comparative advantages between countries in action. Unwinding this system would come at a high cost and would lead to lower growth and fewer jobs. Let’s not forget that almost 50% of global trade involves the global value chains.
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Yet, this system for advancing joint prosperity—albeit a system that was imperfect—was used in recent years as a mechanism for enacting punishment on rivals. Trade has become less about creating win-win agreements and more about gaining advantage at the expense of a global competitor. In late 2019, the International Monetary Fund warned that rising trade tensions would pose a drag on economic growth of approximately $700 billion in 2020.
The same increase in friction was manifesting in the area of technology. After years in which the United States and China had identified areas for science and technology cooperation, a “tech race” is now quickly unfolding. This competition is high-stakes: the number of internet users has gone up from 1.6 billion during the 2008 financial crisis to 4.1 billion today. And, artificial intelligence could increase economic growth by as much as 30 percent over the coming 15 years in those countries that master the technology. This is why there is a sense that controlling—rather than cooperating on—frontier technologies is a path toward material and geopolitical gain.
Amid today’s polarized context, many have pointed to the coordination that took place in the wake of the 2008 financial crisis as an example of parties uniting to address a common and urgent challenge. Only weeks after the collapse of Lehman Brothers, central banks around the world coordinated in cutting interest rates. Shortly after, members of the G20 met in Washington, DC and issued a joint declaration that they were “determined to enhance our cooperation and work together to restore global growth and achieve needed reforms in the world's financial systems.”
The key lesson from the 2008 financial crisis was that coordination stemmed not from selflessness among parties, but precisely because it was in the interest of each party to work together. The global economy was so interconnected that a financial crisis in one country affected markets not just in another but in all those around the world.
Today, the world is even more intertwined than it was 12 years ago. The coronavirus—the effects of which have spanned borders and industries—makes this clear. And just as the coronavirus respects no line on a map, neither do cyberattacks nor greenhouse gas emissions nor economic challenges. Only through coordinated action can the world climb out of a deeper-than-expected recession in 2020 as projected by the International Monetary Fund, with global output declining by 4.9 percent.
This moment of crisis can serve as a stark reminder to leaders that global coordination is in fact in each country’s national interest. While the $9 trillion worth of combined stimulus measures G20 governments are injecting into their economies are vital to each country’s recovery, the OECD has said that not only would coordination among countries make the stimulus measures “considerably more effective” but “uncoordinated or unilateral action would exacerbate the overall social and economic costs”.
By generating positive outcomes in the immediate term, aligning responses to the economic crisis could serve as the spark that resets global postures away from rivalry and toward cooperation over the long term.
This article was first published in The Japan Times.