Recently I gave a webinar to an 1818 Society audience on my new book ‘Comity; Multilateralism in the New Cold War’, (Edward Elgar. 2021). The book addresses the critical new juncture we now face in international rule making.
The ‘old’ Cold War involved a face-off between contending world views. When the Soviet Union collapsed in the 1990s most of us thought we would see a new benign era for international rulemaking – ever-increasing globalisation of trade and finance and a gradual convergence of international norms of behaviour. Unfortunately, we now must face a world where globalisation has begun to retreat, and normative differences have become acute. There has been a precipitous re-evaluation of the risks of doing business with Russia and a re-evaluation is also beginning with China.
The book attributes this turn-around to two factors. First, shifts in the standing of great powers always lead to tension and the testing of boundaries – China is gaining power, Russia trying to reassert itself, and the US losing relative influence. Secondly, differences in the organisation of domestic authority have gained a new relevance in international relationships. Whether a country is democratic or autocratic has a major impact on the rules they want to see applied in the world. In the ‘knowledge economy’ democratic and autocratic countries apply completely different values. A key founding assumption behind post war international rulemaking, that international organisations could pursue technical objectives and put to one side the way domestic authority is organised, has collapsed. This is the environment of the ‘new’ Cold War.
Over the last 30 years we have lived in a world of optimistic international engagement. In the new environment we are moving back towards containment and, at best, a highly conditional engagement. Democratic countries wish to position their own values in the world relative to those espoused by autocratic countries, protect them from outside erosion and project them into the outside world. Fully international rulemaking is now extraordinarily difficult, and we are looking at a world where different jurisdictions will overlap and compete. This is the world of ‘comity’. It is a term that refers back in legal history to medieval Europe and denotes a situation where different legal systems operate in the same territorial space. The term stands for the idea that the inevitable frictions can be managed in ways that avoid out-and-out conflict.
The book explores the regulatory menu available to democratic countries in positioning their values relative to those of autocratic countries and the methods, involving what are known as ‘permissiveness norms’, to avoid conflict. It discusses how far such rulemaking can claim legitimacy. In this contentious new environment, it identifies two ways forward. The first is to finesse disputes over principles by limiting the agenda to narrow technical objectives. An example is provided by the Financial Action Task Force (FATF) with its 40 ‘Recommendations’ and 9 ‘Special Recommendations’. The second avenue is for clubs of like-minded democratic countries to get together to agree on the rules between themselves and then attempt to extend them globally. The example is provided by the agreement on minimum tax rates for multinational corporations that started life within OECD, was then agreed by G7 and subsequently taken up by G20 and finally more broadly. The book focuses on this pathway. It means that democratic countries must refresh their old alliances, create new alliances, and address their own internal backsliding from democratic norms. Among new alliances we see the example of the Quad between the US, India, Australia, and Japan.
This new environment handicaps the World Bank, as well as other international organisations with global participation, because the divisions are reflected within their own memberships. They will encounter obstacles in agreeing on new rules and major new initiatives. In my talk I therefore suggested that the World Bank should follow the two avenues I identify in the book. First, it could look for technical areas where its enormous knowledge might give it a special edge. For example, it might take the lead in ensuring the detailed application of ESG standards (Environmental, Social and Governance) as a condition of lending to its borrowers in the private and public sectors, including to state-owned enterprises. Secondly, it could look to pursue some development objectives through the formation of special purpose clubs drawn from those of its members with a particular interest in the objective. For example, a small special purpose grouping on the Amazon might spare us the kind of unproductive grandstanding we have seen with the G20.
The international community is having difficulties in grappling with this new environment, (scholars included). It is important that the World Bank finds a pathway forward. The alternative is decline.
KEYWORDS democracy, International organisations, knowledge economy, permissiveness norms, regulation