Multilateralism is failing---remedying international imbalances is key to solve.

Since reconstruction of the world economy was the priority, the rest of the world was happy with the unipolar multilateralism, focusing on trade, finance and development. Geopolitics was constrained during the Cold War since the Soviet bloc was strong militarily but weak economically. Development went reasonably well under Pax Americana.

Ironically, the success of this system gave rise to new population powers that now threaten its viability. China, Russia, India and other players began to challenge the order.

With the outbreak of the Ukraine war, the division is sharper than before. The real issue is whether we continue with a unipolar-led multilateralism or change to a multipolar multilateralism – for which the rules are yet to be revised.

We saw this after the 2008 global financial crisis, when the G7 recognised that they must accommodate new powers and the G20 was formed, to include China, Russia, India, Indonesia, Brazil, South Africa, Saudi Arabia, Türkiye, Argentina, Mexico, South Korea, Australia and the European Union.

Today, the G20 annual summit, to be hosted this year in Bali, covers a wide range of topics from money and finance to foreign affairs and agriculture. But since the G7 will not talk to Russian President Vladimir Putin, whether the Bali summit can achieve global consensus on climate action and peace remains to be seen.

Now, all three pillars of the existing structure are in trouble. The WTO’s progress in trade dispute resolution stalled when the US disagreed with rulings against its interests. Tariffs have returned and sanctions threaten to decouple global supply and payment chains.

In finance, the US dollar remains dominant. But even though the IMF had an injection last year of US$650 billion in special drawing rights, the combined resources of the World Bank and multilateral development banks remain small relative to the need to deal with climate change, global debt distress and other global public good issues.

Polarisation has stemmed from a seismic shift from diplomacy and negotiations towards the weaponisation of finance, sanctioning of media, individuals, corporations and country, and military clashes.

Global inequality thought leader Branko Milanovic asked recently: “Does the United Nations still exist?” Development occurred with peace, but the UN was unable to keep the peace when its rules were openly violated.

After the Cold War, he noted, the US and its allies attacked five countries on four continents without UN authorisation: Panama, the former Yugoslavia, Afghanistan, Iraq and Libya (in Libya’s case, the overthrow of the regime exceeded the UN Security Council resolution mandate). In other words, if permanent members of the UN Security Council do not obey the rules, who else will?

Milanovic cited two other reasons the UN is failing – a broadening of its goals into areas that could be handled by national and local governments, and a clear lack of resources to deal with key issues such as climate change and social inequality.

After the Covid-19 pandemic and Ukraine war, the world has been divided into at least three blocs, with the G7 dismissing the challengers as “revisionist”. But others, such as China, are not against the Bretton Woods institutions, United Nations or WTO. They only demand further discussion on how these can be reformed, funded and perhaps with more of a voice given to non-G7 members.

At the heart of the multilateralism debate is who ultimately funds global public goods, such as security, health, climate action and the addressing of local imbalances. No taxation without representation.