PRINCETON – One clear lesson from last month’s damp squib of a climate summit in Glasgow is that multilateralism is difficult to pull off. This has always been the case. Many of history’s biggest international pow-wows ended in failure, not least the 1919 Paris Peace Conference, the 1933 London World Economic Conference, and pretty much every G7 or G20 meeting. Big successes like the 1944 Bretton Woods Conference and the April 2009 G20 meeting in London were exceptions that prove the rule.
Does the latter meeting, convened amid the global economic turmoil triggered by the collapse of Lehman Brothers the previous September, offer a blueprint for improving international summits? One takeaway is that whatever emergency is meant to be addressed, participants need to define their objectives precisely. The lack of a clear vision – or at least a basic understanding of the goal – will inevitably produce failure. Reflecting on the world’s collective inability to provide solutions to the Great Depression, John Maynard Keynes suggested that a workable plan could be produced only by “a single power or like-minded group of powers.”
Blame games also tend to produce failure. Nowadays, pretty much every global issue invites debate about who is originally responsible. Consider refugees. The European Union blames Belarus and Russia for funneling Middle Eastern migrants to its borders, whereas Russia argues that it is Britain and America who destabilized the Middle East in 2003 (or was it in 1991, or even 1919?). The same dynamic applies to COVID-19. Since the virus emerged in China, shouldn’t China pay? The Trump administration thought so and even issued that demand in international fora.
Climate change is the subject of a similar debate. If the original acceleration in the rise of Earth’s temperature is a consequence of the early industrialization that enriched Western countries (above all the United States and the United Kingdom), don’t they have a responsibility to pay up? To a historian, this all sounds like the poisonous reparations debates after 1918, when the argument was over who bore responsibility for the outbreak of World War I.
There is a better path. We should focus on how the current problem can be measured, rather than on how it originated. Unless phenomena can be mastered through calculation, they will remain abstractions, fueling nervousness and recrimination. Reliable data about costs are essential to building a consensus on solutions. The success of the Bretton Woods negotiations enabled the World Bank and the International Monetary Fund to tackle development in a new way, because they were operating under a new framework of national income accounting. Although that framework had been developed in industrialized countries to meet the challenge of mobilizing resources for war, it could also be used for building peace.
Now, it is the old framework that gets in the way. It is too simple for today’s world, and it directs attention in the wrong direction. When journalists report on the twice-yearly IMF meetings, they focus on the participants’ assessments of GDP growth, because that is what the IMF puts front and center. Yet when it comes to the biosphere, GDP is not an asset but a liability, eroding rather than enhancing the wealth of nations.
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In a 2021 review of the “economics of biodiversity” for the UK government, Partha Dasgupta of the University of Cambridge highlights the need to think differently about growth, by including an indicator that captures the depletion of natural resources. We need to identify the wedge between “the prices we pay for Nature’s goods and services and their social worth in terms of what economists call ‘externalities.’” If such accounting is treated merely as a rhetorical exercise in persuasion, no action will follow from it. It is prices that drive behavior. Without that mechanism, we cannot ensure that externalities are accounted for.
The threat of biosphere degradation is not the only development that should provoke concern. Another worrying megatrend that demands international attention is the data revolution, and the application of new techniques to manage it, not least artificial intelligence. Managing these developments calls for more detailed and more frequently updated data. The ideal is real-time data provision, not once every six months when the IMF releases a new World Economic Outlook.
Securing correct and timely data from member countries has always been a contentious issue for the IMF. The requirement that members supply data, including on gold supplies, was probably responsible for an early decision that profoundly affected the IMF’s role in the post-war architecture of global governance: the Soviet Union’s refusal to participate in the ratification of the Bretton Woods agreements in December 1945.
Such disruptions are very much still with us. We are living in a world where security concerns – often loosely described as shifting “geopolitics” – dominate the economic news, whether it is Russia’s pricing and provision of gas to Europe or the escalation of tensions over Taiwan and the South China Sea.
Addressing climate change requires a proper accounting of national wealth. And that, in turn, will require the latest tools and methods, as well as negotiations between powerful, increasingly assertive nation-states whose interests do not necessarily align. Precise and accurate data will be the critical instrument in defusing anger, preventing a blame game, and promoting constructive engagement.