Crystal globe and chess pieces on chessboard. Photo: iStock

The liberal world order, which stands for individual freedom, support for democratic rights, and free market capitalism, is falling.

The current threat to the existing world order is coming from the rise of nationalism across the world, especially in America, Britain, Germany and other parts of the European Union.

Democracies across the world are feeling the effects of growing populism and the rise of fanatical leaders. The caliber of discourse in these societies has declined considerably. America’s decision to abandon the role of torchbearer of the liberal world order under the Trump administration has played a critical role in this turn of events.

Events like Brexit and criticism of the established media have played a significant role in undermining public trust in the current world order.  The rise of protectionism, which may lead to trade wars, is just one sign of a growing backlash against globalization.

Fundamental questions

Societies across the world have grappled with the most fundamental questions regarding how to build a proper relationship between the individual and the state, and how to best resolve the inevitable conflicts between states.  

The golden era of globalization, considered to be from 1980 to 2008, was widely perceived to be an inexorable process. The shock of the global financial crisis has drawn attention to the problems of globalization, such as too much debt and excessive concentration of wealth

Trade always plays a crucial role in the maintenance of peace. As the saying goes, “If the goods don’t cross the border, soldiers will.” Trade provides an incentive to forge better connections with other states, and the prospect of enjoying mutual benefits encourages people to look for the good in each other. Trade facilitating more peaceful relations has led to globalization. Globalization has brought enormous benefits to the world such as millions of jobs, rising living standards and an increasingly borderless environment.

The benefits of globalization have certainly outweighed the costs. But the real question that still haunts policymakers is whether the benefits of globalization have been equally distributed among investors, workers, consumers and the broader public.

Globalization has created a common market, facilitated the free flow of workers across borders, and fueled the rise of the multinational corporation, but it has also resulted in one serious problem – unfair wealth distribution. Only certain sections of society – for example, investors and industry – have enjoyed the benefits of globalization.

The golden era of globalization, considered to be from 1980 to 2008,  was widely perceived to be an inexorable process. But the shock of the global financial crisis has drawn attention to the problems of globalization, such as too much debt and excessive concentration of wealth.

The policy shift towards greater openness to free trade and foreign direct investment has not produced the desired results, especially gains in productivity. Many economies are still struggling to achieve sustained improvement in investment and productivity. The fallout from the crisis – slow recovery in developed countries since the 2008 crash – has triggered a populist backlash against globalization and a reversion to nationalism. The bigger question that confronts policymakers is whether a new world order will rise from the ashes.

The emergence of a new world order

Nationalism is the foundation of modern society and social solidarity, say its proponents. The ideology is based on the fact that one particular culture and society is far more morally correct than the other ones. The fallout from globalization is paving the way for nationalism and the rise of protectionism across the world. Some observers see the rise of nationalism in the West as the emergence of a new world order. But historical evidence suggests that nationalism has never been successful in shaping a peaceful world order that is sustainable. World War I and World War II are classical examples of how nationalism always fails to provide growth and prosperity in the world. But there is likely a solution to the existing problems of the current world order –multipolarity.

Multipolarity is a system based on shared values – the idea that each credible nation has a moral responsibility to help to collectively maintain peace and prosperity in the world. There is an urgent need for a global institution that reflects the current realities of the global power structure.

Key institutions like the IMF, the UN and the World Bank must recognize the legitimacy of the new power club in order to maintain their authority. Emerging nations must be given a substantial say in how these leading institutions are run. It’s time to change the nature of the global economy – from one that is war-based to one based on sharing. The sharing economy will not bring about the end of capitalism, but it will certainly redefine the system by creating more prosperity at the bottom of the socioeconomic ladder.

New institutions should be established to redefine the global agenda and order. The world at a large will be better off if we make a transition from globalization to multilateralism. In order to make this happen, developed countries should focus on increasing their flexibility to adjust their changing comparative advantages resulting from rapid technological change and cheap labor rather than pursuing protectionism.

While developing countries must focus on enhancing the quality of education, infrastructure, and technological capability rather than playing the blame game with developed nations. A shared value based on shared interest and shared respect for each other can help us meet the challenges of the 21st century without any conflicts arising.

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Ravi Kant

Ravi Kant is a financial writer with a deep passion for technology and economics, and also covers International politics and cybersecurity. He has wide experience in the financial world and some of his analysis has been published in leading magazines such as Mogul News and The Indian Economist. He tweets @Rk_humour .