This paper takes its inspiration from an article written by Daniel Drezner, published in World Politics in 2014 under the title The System Worked: Global Economic Governance during the Great Recession . Drezner argued (contrary to much analysis and commentary at the time) that multilateral institutions adapted and responded to the 2008 financial crisis in a robust fashion. They passed the stress test—global economic governance has been good enough . He attributed that relative success to the ongoing strength of US hegemony in providing global financial liquidity, the role of the EU and China as supporting cast members, the key roles of the IMF, the World Bank, and the WTO in providing global public goods, and an ideational consensus – backed by the G20 - on keeping the markets for finance, trade and FDI open for business. He concluded by arguing that not only had the post-crisis multilateral system increased in resiliency, but that a new crisis could trigger a renewed surge in policy coordination .
But how has this argument aged in light of COVID-19? Many have argued that multilateralism was dealt a heavy blow by the Trump administration, and that with the strong growth and more assertive role of China over the last decade, the G20 has effectively devolved into the G2. Traditional trade and trade regulation have been supplanted by global supply chain trade and a proliferation of bilateral trade agreements, both arguably diminishing the relevance of the WTO. The hegemonic role of the dollar has also, according to many, been gradually ebbing away. Moreover, the nature of the current crisis is quite different from the post-2008 financial crisis: while the developed economies bore the brunt of the economic fallout then, this time less developed and emerging market economies have also been heavily hit – straining the capacity of the Bretton Woods institutions to respond. Supply chain trade disruptions have defied easy solutions. The fact that this a global health crisis as well as a global economic crisis adds massively to the challenges to multilateralism.
The argument in this paper is twofold. First, although there have been significant tensions between ‘us first’ positioning by states and attempts to sustain international cooperation, despite much ‘catastrophism’ the multilateral anti-crisis apparatus depicted by Drezner has functioned well once again and even expanded under COVID-19. But second, Martin Rhodes argue that the institutional legacy of the financial crisis has not created a global financial safety net that is fully inclusive of developing and emerging market countries. Moreover, the greatest weakness – strongly impacting the Global South – has been the failure of multilateral responses (via ‘global health diplomacy’) to the pandemic itself. The different dynamics of cooperation between the anti-crisis system that emerged from the financial crisis and ‘pandemic multilateralism’ – the first strong, the second weak - can be explained by the quite distinct distributions of power and organized interests that underpin them.
Martin Rhodes is Distinguished Professor at the Josef Korbel School of International Studies, University of Denver and currently a Robert Schuman Fellow at the EUI.