OXFORD – World leaders attending the International Monetary Fund and World Bank annual meetings in Marrakesh this week have some difficult decisions to make.
For starters, numerous developing economies – including Egypt, Ethiopia, Ghana, Kenya, Pakistan, Sri Lanka, Tunisia, Ukraine, and Zambia – are teetering on the edge of default or have already defaulted. Meanwhile, the United Nations’ recent “global stocktake” climate report shows that we are far from reaching the 1.5º Celsius target for global warming.
While robust economic growth could provide the necessary resources to tackle these challenges, the IMF foresees global sluggishness and a prolonged fight against inflation. Without international cooperation, countries may become ensnared in a slow, messy, and expensive effort to manage their debts, combat climate change, and stimulate growth.
This is not the first time that the world has faced such a crisis. As economic historian Martin Daunton notes in his forthcoming book, The Economic Government of the World 1933-2023, policymakers from 66 countries convened at the 1933 London Economic Conference to address challenges eerily similar to the ones we face today: debt, protectionism, financial instability, and polarization. With the world economy in freefall and commodity prices crashing, demand for industrial goods evaporated. As unemployment surged, so did the tensions between domestic political agendas and international economic concerns.
The London conference seemed doomed from the start, as political and economic turmoil elevated extremist leaders. In Italy, the post-World War I economic downturn facilitated Benito Mussolini’s rise to power. In Germany, Adolf Hitler had recently been appointed Chancellor. Joseph Stalin ruled the Soviet Union with an iron fist, and China was embroiled in a civil war, having been invaded by Imperial Japan just two years earlier.
There were deep disagreements within both the United States and the United Kingdom over the appropriate response to the crisis. As tensions escalated between the US, the UK, and France over wartime debt, an American journalist labeled the conference a “plot to cancel debts owed to America.”
The London conference oscillated between calls for international cooperation and their dismissal by those who, in the words of US Secretary of State Cordell Hull, were “futilely and foolishly striving to live a hermit’s life.” Despite more than a month of wrangling, participants left without any resolutions. Daunton attributes this to disagreements between politicians, central bankers, and the “motley collection” of experts in attendance over the problems facing the world economy and how to address them.
In Marrakesh, representatives of 190 countries, each grappling with its own internal disputes, will attempt to strike a balance between international cooperation and domestic politics. Daunton’s book offers several cautionary tales for them to consider.
While the first part of Daunton’s book, which focuses on the response to the Great Depression, offers little encouragement, the second, which covers the Bretton Woods era, features more successful examples of effective international cooperation. The creation of multilateral institutions like the IMF and the World Bank facilitated a greater understanding of global economic problems and potential solutions, as experts could aggregate and analyze data from all member countries.
In contrast to many other works, Daunton highlights those relegated to the periphery of this emerging order, as his narrative delves into the politics of Ghana, India, and the developing world during the Cold War. In the 1960s, the Kennedy Round of the General Agreement on Tariffs and Trade (which was succeeded by the World Trade Organization) reduced industrial tariffs. With their concerns and interests sidelined, developing countries turned to alternative international forums such as the UN Conference on Trade and Development and the New International Economic Order.
The third part of Daunton’s book charts the rise of the “hyper-global” and “neoliberal” Washington Consensus. As the IMF and World Bank became agents of globalization, the WTO was established, and rentier capitalism spread across economies, reaching deep into the European Union.
The final part of Daunton’s narrative begins with the 2008 financial crisis and explores the threats to today’s global order. Daunton then proposes a range of potential paths to a “fairer, more inclusive capitalism,” including tougher competition enforcement, progressive taxation, job initiatives, leveling-up, de-financialization, and implementing a Green New Deal.
A theme that runs throughout the book is the contentious nature of international cooperation. Early on, we learn that in the 1930s, US President Franklin Roosevelt’s “brain trust” presented him with a plethora of conflicting views on foreign economic policy. It was not until FDR sided with his more internationalist officials that the protectionism and currency instability of the Great Depression began to subside.
During the first half of the twentieth century, the UK considered three competing global economic visions. The first emphasized full employment, which required countercyclical policies, international buffer stocks to maintain stable demand and prices, and public works financed by the International Bank for Reconstruction and Development (the World Bank’s lending arm) to offset labor-market fluctuations.
The second vision focused on the sterling area, imagining a world divided between the US dollar and the pound in which the UK would maintain imperial preferences and look to Africa as an expanding market. At the heart of the third perspective was the Anglo-American relationship, suggesting that Britain should align neither with its own empire nor with Europe, but instead collaborate with the US within a dollar-based economy. Contemporary British politics echoes these discussions, as officials debate whether to strengthen relations with Europe, the Commonwealth (as part of its Indo-Pacific strategy), or the US.
In every era explored, Daunton presents readers with a rich tapestry of competing ideas, underscoring the challenge of forging multilateral agreements between dozens of countries, each with its own internal disputes. As Daunton observes, we again find ourselves in an era of uncertainty and debate over the structure of the global political economy.
Over the past 30 years, international cooperation has often been conflated with globalization, market liberalization, deregulation, privatization, and capital flows. But domestic and international debates are now characterized by other issues, including job quality and social welfare, climate change, the geostrategic implications of global supply chains, technological competition driven by national-security considerations, and the growing normalization of sanctions and economic warfare.
While these priorities are at odds with the globalization-facilitating cooperation that Daunton describes, the agreements and institutions forged over the past century enable us to achieve a new and different form of cooperation. Policymakers and the representatives of international organizations attending the Marrakesh meetings have studied both domestic and international challenges, allowing them to explore collaborative solutions and highlight the concerns of member countries during negotiations.
Though this process may appear inefficient and laborious, it remains indispensable to a world that values state sovereignty and fosters international cooperation. While Daunton’s book underscores the numerous obstacles facing such efforts, it also illuminates the myriad ways a functional international order can emerge.
Ngaire Woods is Dean of the Blavatnik School of Government at the University of Oxford.
