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A MULTIPOLAR WORLD ECONOMY Global and domestic
challenges

• Paolo Guerrieri
• University of Rome La Sapienza

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CONTENTS

• The rise of new powers is making the world
  economy increasingly multipolar.
• The multipolar world could evolve in different
  ways
• The EU desirable model of multipolarity would be
• multilateral
• The domestic and global reform agenda to make it
  politically sustainable
• The stakes are very high the prospects for
  prosperity of much of the world

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A MULTIPOLAR WORLD

• There is a redistribution of economic power at
  world level across countries and areas
• Emerging countries - China and India in
  particular - will take a greater slice of the
  world economy.
• On current trends, in 2020, the US, China and the
  EU will each have a little under 20 per cent of
  global GDP, while India will have almost 10 per
  cent
• The rise of new powers is making the world
  economy increasingly multipolar.

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WORLD GDP SHARES
1950
1913
2005
2020
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GLOBAL GOVERNANCE in a MULTIPOLAR WORLD

• How will China and India exercise their powers?
  Cooperative and/or conflicting behaviors?
• The new global governance and the stability of
  the multipolar world
• A further expansion of globalization?
• Two models of multipolarity multilateralism and
  neomercantilism
• The linkage between global governance and world
  economic growth

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THE MULTILATERAL MODEL
World GDP will grow at an average annual rate of
3.5 - 4 in 2006-20 (similar to the past 15
years). China and India will be among the
fastest-growing economies The pace and extent of
globalisation will be the single most important
determinant of world economic growth Gradual
trade and investment liberalization Well-function
ing international institutions and a rule-based
international order
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The Multilateral Model Global Economic Growth
2006-2020 3,5
2000-2007 3,6
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.
GDP Growth Rates 2006-2020
China
India
Russia
Middle East
Eastern Europe
Africa Sub-Sah.
Latin America
US
EU 25
Japan
Average 3,5
Source EIU, 2006
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THE NEO-MERCANTILISTIC MODEL
Multipolarity based on great power
rivalry Governments are moving away from
reliance on multilateral rules to emphasise the
promotion and protection of national
interests More protectionism and
neo-mercantilistic policies Global growth in
2010-20 would drop significantly (1.5-2),
implying for many countries and areas essentially
stagnant world percapita incomes. The hardest
hit would be the emerging markets, especially the
poorest ones
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Neomercantilistic Multipolarity World Economic
Growth
Valori proiettati del PIL Miliardi di dollari USA
Cina
USA
India
Giappone
Russia
Italia
Valori costanti 2003 Fonte Goldman Sachs, 2003
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THE EU IN A MULTIPOLAR WORLD
In the second scenario the EU rate of economic
growth will be significantly reduced In any
global system based on great power rivalry
Europeans would find it much harder to tackle the
problems they consider most urgent The EU
desirable model of multipolarity, by contrast,
would be multilateral. The EU must not be a
passive observer of the new international order
that is emerging
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Multipolar World Globalization Models
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THE BENEFITS and COSTS of WORLDWIDE
ECONOMIC INTEGRATION
The globalization, in some appropriate form, is
a major engine of economic growth and its
contribution to economic development are palpable
But exposure to the international economy can
impose serious costs on people, industries,
regions and even whole countries and these costs
vary from place to place and time to time It
has become increasingly unpopular Persuasion
alone wont suffice
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Institutional Reforms and Policies
at Domestic Level

• Institutional reforms and policies are needed at
  home and internationally to render further market
  opening politically acceptable and sustainable a
  Multilevel Governance Agenda
• The benefits of trade and financial globalization
  requires better domestic institutions and
  policies to smooth transitions, essentially
  improved safety nets in rich countries

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Institutional Reforms and Policies at Global
Level
Work should be done to strengthen multilateral
bodies, and the international rule of law. The
governance agenda of the existing multilateral
institutions The multipolar world will also
need new institutions, both formal and informal,
to manage the stresses and strains of
globalisation (in the spheres of economics, the
environment and security and to accommodate the
rise of new powers). But many other challenges
would be better served by informal groups of the
most relevant countries
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THE LESSONS OF HYSTORY
The earlier wave of globalization (1815-1913)
collapsed because of the inability of the
international system to cope with the tensions
created by the expansion of global finance and
trade Main problems inherent instabilities in
global finance, a growing social and political
backlash, and the overloading of multilateral
institutions These problems are remarkably
similar to those we face today
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THE CHALLENGES AHEAD
A Multilevel Governance Agenda the challenges
is not only how to liberalize further, but how
to allow countries to handle the problems that
openness and economic integration creates. No
magic formula The EU desirable model is for an
open multilateral world economy The EUs own
attitudes, policies and actions will have a big
impact on how the multipolar world develops
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THE CHALLENGES AHEAD II
So the priority for an European reformist
agenda is clear The EU must be able to relaunch
its social-economic model and speaks by a single
voice a stronger and more influential EU The EU
should become a fundamental tool to manage the
multipolar world and transform the many threats
into viable opportunities The stakes are very
high the prospects for prosperity of Europe and
much of the world as well