Analysis: Move from US and EU dominance leaves complex currents

THE annual spring meetings of the International Monetary Fund and the World Bank have provided a window on to two fundamental trends driving global politics and the world economy.

Geopolitics is moving decisively away from a world dominated by Europe and the United States to one with many regional powers but no global leader.

Europe’s economic crisis dominated this year’s IMF/World Bank meetings. The Fund is seeking to create an emergency rescue mechanism in case the weak European economies need another financial bailout, and has turned to major emerging economies – Brazil, China, India, the Gulf oil exporters, and others – to help provide the necessary resources. Their answer is clear: yes, but only in exchange for more power and votes at the IMF.

In 2010, when the IMF last increased its financial resources, the emerging economies agreed to the deal only if their voting share was increased by about 6 per cent, with Europe losing about 4 per cent. Now emerging markets are demanding an even greater share of power.

The underlying reason is not difficult to see. According to the IMF’s own data, the European Union’s current members accounted for 31 per cent of the world economy in 1980. By 2011, the EU share slid to 20 per cent.

This decline reflects Europe’s slow growth in terms of both population and output per person. On the other side of the ledger, the global GDP share of the Asian developing countries, including China and India, has soared, from about 8 per cent in 1980 to 25 per cent in 2011.

The US insists it will not join any new IMF bailout fund. The US Congress has increasingly embraced isolationist economic policies, especially regarding financial help for others. This, too, reflects the long-term wane of its power. The US share of global GDP, about 25 per cent in 1980, declined to 19 per cent in 2011.

But the shift of global power is more complicated than the decline of the North Atlantic (EU and US) and the rise of the emerging economies, especially the Brics (Brazil, Russia, India, China, and South Africa). We are also shifting from a unipolar world, led mainly by the US, to a truly multipolar world, in which the US, the EU, the Brics, and smaller powers (such as Nigeria and Turkey) carry regional weight but are reticent to assume global leadership, especially its financial burdens. The issue is not just that there are five or six major powers now; it is also that all of them want a free ride.

The US has shifted rapidly from global leadership to that kind of free riding, seeming to bypass the stage of global co-operation. Thus, the US excuses itself from global co-operation on climate change, IMF financial-bailout packages, development-assistance targets, and other aspects of international collaboration.

Yet the IMF/World Bank meetings remind us of an overarching truth: our crowded world has become a highly complicated vessel. If we are to move forward, we must start pulling in the same direction, even without a single captain at the helm.

• Jeffrey Sachs is a professor at Columbia University and a special adviser to UN secretary-general Ban Ki-Moon.