Reconfiguring globalisation in a new world order

Globalisation is under threat. In an increasingly fractured world, the interdependence generated by trade and technology is starting to break down. But governments, businesses, and broader society can revive the globalised order into a more resilient form that fits the needs of today.

“We should think about how we can reconfigure the cooperation and connectedness that is necessary for globalisation to work,” said Gordon Brown, former Prime Minister of the United Kingdom.

He was speaking at HSBC’s Global Investment Summit in Hong Kong, where he shared his vision for renewed multilateral cooperation that can address some of the major issues that the world faces.

How has globalisation got into this fragile state? Mr. Brown pointed to three major changes in the world order.

The first is multipolarity, which is due to shifting geopolitics in recent years – resulting in a power-based order, rather than the rules-based order that governed international relations in the past. The consequences of this change can be seen in the crises and conflicts that characterise a world in permacrisis.

The second change relates to economics, with the dominant neoliberal economics of the past few decades being gradually replaced by something more mercantile, with protectionism becoming a more popular policy to manage trade relations. At the same time, economic policy is no longer restricted to monetary policy, and industrial policies are coming to the top of the agenda.

And finally, there are growing calls for deglobalisation. The world is already so interconnected that this will be hard to achieve completely. Still, it is possible that we could be left with shorter supply chains due to trends that include nearshoring, reshoring, and friendshoring.

“These are three huge shifts that are taking place in the global economy,” said Mr. Brown. “But it doesn’t mean that globalisation should be any less effective than in previous years in increasing people’s standards of living, as it has done in the past.”

The solution, he says, is greater multilateral cooperation, which is in the interests of many parts of the world.

In Europe, for example, multilateral agreements are necessary for its security, its acquisition of energy, and its trade with Asia. The Global South, including Africa and Asia, cannot industrialise or tackle climate change without the distribution of resources from developed economies, which again requires multilateral cooperation. And the US needs to work with others, via global institutions, in order to succeed in this multipolar world.

The type of cooperation will be different than in the past, said Mr. Brown. It will be more inclusive, as problems will not be solved by great powers coming and signing a treaty. The main multilateral institutions – such as the World Bank, and the World Health Organisation – will continue to play an important role. But their responsibilities will gradually change over time.

In conversation with Noel Quinn, Group Chief Executive, Mr. Brown pointed to climate change as an area where we can see this kind of cooperation in action.

Successive summits on the climate have moved from countries defending their own interests to major agreements that set the path towards a Net-Zero economy. These include the commitment to keeping temperatures within 1.5°C of pre-industrial levels, as well as the nationally determined contributions that are a key part of the Paris Agreement.

Now that there is significant political will to address climate change, the next step is to create similar momentum to fund the energy transition.

“There is no shortage of commitment or intent to find solutions,” said Noel Quinn, Group Chief Executive, HSBC. “But at times there is a shortage of deal structures or contract structures, and this is where the public sector can help the private sector do its part.”

In developing markets, it can be challenging to fund a renewables facility, due to issues such as political and currency risk. A solution is for the public sector to put in place a guarantee, thus derisking the project, so that the private sector is confident enough to provide the necessary capital.

Mr. Quinn described how HSBC is working with the World Bank, as part of its Private Sector Investment Lab, to reform its guarantee business in a way that creates simplicity, greater access, and faster execution. The marketplace aims to help triple the World Bank’s annual guarantee issuance to US$20 billion by 2030¹.

It is this kind of cooperative engagement between the public and private sectors that will create the necessary conditions for renewable infrastructure to be funded. And instead of relying on one organisation to address an issue of international significance, multiple parties will need to come together to offer whatever best fits their strengths – a cooperative endeavour, characteristic of the next wave of globalisation.

“No one organization can solve the challenges of financing energy and renewable energy by themselves over the next 30 years. And that's where that collaboration has got to come,” said Mr. Quinn.