The heads of state of the world’s twenty leading economies came together in November to begin the process of enhancing the ability of international financial institutions to ensure the stability of capital markets. The leaders were spurred to action by the deepest crisis of the global economy since the Great Depression.
It is a truism that in crisis lies opportunity. But in this case, the problem – which comes with a price tag of two trillion dollars in losses (and counting) and a global recession – is a lot clearer than the solution, as the vague outcome of the G20 Summit suggests.
The financial crisis dramatizes several hard truths. First, economic interdependence creates shared risks as well as shared opportunities. Second, existing financial institutions reflect yesterday’s realities and aren’t up to today’s challenges. And third, the old G7 formula – counting on a club of advanced democracies to lead the world – no longer works. Emerging countries like China, India and Brazil have too large a share of the global economy – not to mention $450 billion dollars of G7 debt – to be left out of the search for a more effective international system.
And then there’s the fourth lesson of the current crisis: unless we strengthen mechanisms of cooperation in other areas – by countering global warming, nuclear proliferation, terrorism, the failure of states, and the emergence of new, fast-spreading infectious diseases – our physical security and even our survival will be in jeopardy.
At least the financial crisis has given us another chance. Some of those other threats are not so forgiving. The most compelling example is global warming. We must deal with that before it becomes a crisis.
On November 20, we met with colleagues from around the world to launch a plan for action to meet this goal, designed by the Managing Global Insecurity project. The plan – produced after intensive consultations in the U.S. and with U.S. allies and the emerging powers – shows how America profits from strong international institutions, and explains why the world still profits from strong American leadership. It does not compromise U.S. interests in the search for cooperation, but identifies shared interests in action against transnational threats.
Its scope is broad, but that reflects the real global agenda that will soon confront the Obama administration – starting with climate negotiations in Copenhagen in December 2009, non-proliferation treaty talks in May 2010, and the possible resumption of the Doha trade round at anytime. Each of these processes needs an injection of political courage – and the adrenaline to sustain it – as does reform of global security institutions. The plan for action calls for U.S. leadership and sustained cooperation between the U.S., its allies, and the emerging powers – including through an expanded and reformed G8, a G16 – to provide the necessary political boost.
On day one, crises in Iraq, Afghanistan, Pakistan, Iran and elsewhere will flood the in-coming Administration’s in-boxes and draw attention away form investing in a more effective set of international partnerships and institutions. But in an interdependent world cooperation is not a luxury. Investment in stronger international institutions and better cooperation with the rising powers could help create the diplomatic surge needed to safely withdraw troops from Iraq, build a strong united front against Iran’s nuclear ambitions, and garner the broader partnership necessary to build self-sustaining peace in Afghanistan.
The G20 Summit provides a foundation for stronger global cooperation to meet today’s economic challenges. It also holds out the prospect of broader cooperation. To grasp the opportunity it represents, President-elect Obama will have to break decisively with recent U.S. policy. First, he must demonstrate his commitment to forging a new compact with today’s great powers to tackle collective threats. Second, he must work to build the rules and institutions to handle global threats before they escalate – including a strong and effective UN.
Fortunately, there is another truism of politics: leadership matters. President-elect Obama has written incisively that protecting American security depends on promoting global security. The international response to the election shows a pent-up demand for U.S. leadership. The job ahead is daunting but do-able. Forging effective cooperation against transnational threats is the leadership challenge of our time – and the time to start is now.