How To Fix Globalization

The past year was a precarious one.

Not only is growth in many developed countries stagnating, but many developing countries are also now in an economic danger zone. As always, the poor are the most defenseless. Voices around the world are blaming free markets. Others are asking about the failures of governmental institutions. Storm clouds hang over multilateralism and world markets. (Story continued below...)

We cannot turn back the clock on globalization. Even as the United States and the world dig out of the present financial hole, we need to look further ahead.

There is an opportunity now for President Obama to steer the world toward modernizing multilateralism and markets for a new global economy. In doing so, the goal must be to build a more inclusive and sustainable globalization.

The work must involve new economic powers that are on the rise—for example, India and China. Their engagement with the global economy has made them stakeholders in the system, and they want to be heard. Private financial markets and businesses will continue to be the strongest drivers of worldwide growth and development. But the developed world's financial systems have revealed glaring weaknesses. The architecture designed to deal with global markets is creaking.

To deal with all this, we need a new multilateralism, one that suits the times. It should be a flexible network, not a fixed system—a network that maximizes the strengths of interconnecting actors, public and private. It should reach beyond the traditional focus on finance and trade. Today, energy, climate change and stabilizing fragile and postconflict states are economic as well as political issues. They are already part of the international security and environmental dialogue. They must be included in the larger economic conversation as well.

To guide multilateral problem-solving in this world of complex interdependence, we need a steering group that recognizes the interconnections, identifies challenges at the intersection of topics and connects new and existing machinery among governments to solve problems. For a start, we need a core group of finance ministers who would assume responsibility for anticipating issues, sharing information, solving problems and managing differences. The G7 already does some of this, but it is not sufficient. We need a better group for a different time—a new steering group that includes rising economic powers as well as established ones. This steering group should not just replace or expand the G7 with a new fixed number; it should evolve to fit changing circumstances. The World Bank and the IMF, perhaps with the WTO, could help support this steering group and draw on our broader membership to propose new coalitions to address issues.

This new network must assure a sound economic recovery and tackle the reform of financial systems. It must continue to push forward a global trade agenda. It needs to interconnect energy and climate change. World energy markets are a mess. The steering group could help forge a "global bargain" among major energy producers and consumers. At a minimum, such a bargain should involve sharing plans for expanding supplies, including options other than oil and gas; improving efficiency and lessening demand; assisting with energy for the poor; and considering how these policies relate to carbon production and climate change. A climate-change accord would benefit from new tools such as green technologies and mechanisms to support forestation and avoid deforestation. Financial support should be given to poorer countries to help them adapt. The steering group might also assist the U.N. negotiations on the implementation of a global climate-change treaty.

Multilateralism, at its best, is a means for solving problems among countries, with the group at the table willing and able to take constructive action together. Fate presents the new president with an opportunity wrapped in a necessity: to modernize both multilateralism and global markets.