Why We Fail at Managing Global Disruptions
7 min read

Why We Fail at Managing Global Disruptions

In a recent online lecture, Dani Rodrick argued that the type of globalization we had today was our choice. We could have focused globalization on global health, environment or human development in general. But we did not. Instead, the type of globalization we have today is the one focused on trade and economy. Looking back, there is a logic why. International cooperation went down to lowest common denominator. Global economy provided incentives for nations to cooperate. Global protection of public health and environment did not.

Global governance we have today is not perfect, but it was successful in achieving its goals. International organizations helped to maintain peace and integrate national economies. They provided platform for voices of nations that never have been heard before. They provided a foundation on which the world stands.

But time has changed.

Continued international peace and globalization of economy catalyzed a set of global forces that can dramatically transform and disrupt the way the world operates today. I call them global disruptions. Some of them always existed, but we never paid attention. Some of them we have encountered for the first time. In this essay, I illustrate that current global governance architecture is not designed to govern global disruptions that we have today. At the time, when the world needs global solutions to global disruptions, international organizations that are the main forums for global decision-making stay paralyzed by the gridlock.

Globalization

The world we have today is a result of globalization that started after the end of the World War II. Globalization is “the spatial organization of social relations, an increase in their extensity, intensity, velocity, and impact.”[^1] Globalization was not a natural evolution of human relations, but was a political decision, motivated by the horrors of the Second World War. The founding stone of globalization was an establishment of global cooperation forums, that now we call international organizations, where states would come together to decide on the global matters. Centered around the United Nations, it was Global Governance OS 2.0, that was re-designed to fix bugs and failures of its previous version League of Nations.

The logic of this political decision was to tie the hands of nations and prevent them to going to war again. This could be achieved by making economies of nations interdependent, so the cost of going to war against each other becomes high. The shift of global decision-making from secret bargains among great powers toward open and collective decision-making at international organizations did not directly result in globalization. But it created conditions under which globalization can emerge and thrive. Goal was to create “a market-based world economic system open to all who would play by the rules.”

How international organizations contributed? They helped (and continue to help) to maintain peace. More importantly, they ensured that companies can trade internationally without a fear of the world sliding back into wars. International peace was and is a founding stone of the world as we now it today. First, international peace motivated companies to explore and expand into foreign markets. Once global governance set the course on trade liberalization, markets around the world has opened up for companies. This was the first point on the path of companies on becoming globalization supporters. Second, now companies could not only sell their goods and services to foreign customers, they also could invest in foreign industries. This strengthened support of companies for globalization, as international peace and globalized economy were essential for protecting their foreign investments. Third, by-product of international peace was technological advancements. Having invested abroad, companies now used technology for innovating and improving their products, services and operations to increase their global competitiveness. Continuous peace and globalized economy ensured continuous technological advancements. Lastly, international peace gave confidence to companies to not be afraid to shift their productions abroad and rely on global supply chains and global labor mobility. By now, companies became key stakeholders in globalized economy and international peace, as their operations acquired multinational character with customers, investments and supply chains provided and secured by globalization.

Surprisingly, the original plan was to maintain peace and globalized economy, mainly for developed nations. Once these achieved, globalization should have stopped here. But it did not. It became a self-enforcing process that creates more demand for further globalization as nations are becoming more and more integrated.

Global Disruptions

What actually happened is that globalization catalyzed new global processes. Liberalization of trade and finance, technological innovations, global mobility and supply chains created global forces that previously we could not imagine. What used to be domestic and local, now became global. What used to be distant and global, now have direct local effects. Global disruptions are global forces that not only transform, but also pose a risk of disrupting the way the world operates if not properly governed. Some of them are result of our recent history: terrorism, technological waste, financial crisis, health pandemics, humanitarian and migration crises, depletion of natural resources. Others have existed for a long time, but we never paid attention to them, like climate change and environment. When disruptions happens, they come as a surprise. Each time, no one expects them. The reason is that our current global governance was not designed neither to predict and prevent nor to manage them. The ambitions of those who designed international organizations were moderate: to prevent future wars and integrate national economies. Both goals were achieved.

And yet, more than 20 years of international peace transformed our world and challenges we face. International organizations, designed to address disruptions of their time, were not ready to address new one. Neither they were able to adjust and adapt. Global governance that we have today has significant frictions in dealing with disruptions. In the next section, I will explain why.

Global Gridlock

What happens when old organizations face new disruptions? Two options: either they adapt and adjust, or slide into gridlock and become irrelevant. International organizations were unable to adjust. They did not became irrelevant yet, but they are paralyzed by gridlock. As Hale, Held and Young illustrate, there are several reasons for this.

First, international organizations are treaty-based. It means two things. One, that states have to come together and negotiate to agree on rules that they all agree to follow. Second, that in order to change treaties, *all* states have to come together (again) and negotiate (again). It takes time and politics to motivate states to *agree* for new negotiations. It takes even more time and politics to come up with an agreement itself.

What happens when old organizations face new disruptions? Two options: either they adapt and adjust, or slide into gridlock and become irrelevant

Second, number of states increased dramatically. At the creation of the United Nations, there were 50 states. Now, 193 states are members. It took enormous political effort to get 50 states to agree with each other.  Horrors of the war provided strong motivation. Imagine what it would take to 193 states just to agree to sit the negotiating table, not to mention agreeing on new rules. Smaller states also became more important. They project significant influence over specific issue-areas. For example, we cannot create global agreement on climate and environment, without nations with a large amount of rain forests. We cannot get any progress on anti-money laundering and tax heavens without small island-states.

Third, global disruptions now are more complex. Thanks for globalization, global issues interconnect and overlap. Previously, model of having one international organization dealing with one specific issue worked - one for addressing global poverty, one for global health, one for global trade. Now, international organizations have to deal with an array of interconnected issues at the same time. Now, UNDP has to deal with poverty, finance, climate and health _just to keep up_ with global developments. WHO no longer deals with health matters only, but with global supply chains, migration, humanitarianism, conflict zones, demographics and economy. WTO not only focuses on trade barriers reduction, but also addresses environment, labor standards, human rights, good governance and safety measures. We can go on and on with examples, but the point is, global issues we want to solve no longer fall into one governance domain. They overlap, they transcend borders, they do not recognize jurisdictions, they do not discriminate based on the wealth, class, gender or geographic location.

…the point is, global issues we want to solve no longer fall into one governance domain. They overlap, they transcend borders, they do not recognize jurisdictions, they do not discriminate based on the wealth, class, gender or geographic location.

Finally, global governance now is more fragmented than it ever was. We have more organizations operating on the global scale than we ever had. Gridlock in major arenas like the UN and WTO have created governance gaps. This led to institutional innovations in global governance, as organizations of various designs emerged to fill in these gaps. Aside from intergovernmental organizations, now we have transgovernmental networks, global public-private partnerships and other informal international organizations that address specific issues and incorporate more range of actors than formal international organizations. None of them, however, enjoy decision-making powers of formal international organizations. Rather they create non-binding rules, standards and best practices that encourage desired behavior, but cannot enforce it. On the one hand, lack of treaty-based foundations, makes these organizations flexible, adaptive and innovative. They also create a competitive market for global governance services which might push established international organizations for healthy competition and innovation.

On the other hand, the presence of such market provides a mixed incentives for states. Instead of complying with international law, states may choose to “comply” with standards and soft laws, thereby escaping any costly commitments. It also send incentives for established international organizations to not address a particular issue if they see that other organizations are already addressing it. Combined, it makes collective global governance difficult. It adds confusion regarding which rules and which standards to follow, it adds additional transaction cost to decide between organizations, its add duplication and overlap, it pushes focus towards specific policy issues thereby avoiding addressing systemic patterns and causes.

Factors mentioned above - treaty-based nature of international organizations (1), increase in the number of states (2), new and increasingly complex global issues (3) and fragmentation of global governance (4) - contribute to global decision-making gridlock. These factors do not lead to gridlock separately, but it is their combination that results in global governance which is slow to adapt, unable to change and take fast decisions in the times of global disruptions. When states fail to agree on new rules, they go on and create or switch to alternative forums for decision-making that will serve their interests better. Established international organizations stay paralyzed not being able to accommodate diverse interests of its many member-states. Over time, their rules became outdated and no longer can capture the increasing complexity of new issue. No longer seeing them as relevant, states and multinational companies switch to non-treaty based forums, with adaptive and flexible standards, but they cannot enforce commitments, so when one state or company does not comply, it de-motivates others to comply as well. Worse, states return to bilateral or unilateral solutions to global issues, making collective efforts asynchronous and ineffective. We already have seen it: global disruptions do not make discounts for a lack of global coordination.

Conclusion

So happens that we faced both gridlock and disruptions at a critical juncture. It is a challenge to deal with both at the same time. However, while global disruptions could be a curse of globalization, they also can be a gift. More than ever, we need a better incentives for nations to build fast and adaptive global cooperation. Global disruptions may act as such: pushing leaders to re-imagine global governance based not on economic benefits, but human development, sustainability and survival.