Global Governance 4.0: ‘Agile’ or ‘Waterfall’?

It is by now widely acknowledged that the old global economic architecture is due for an upgrade. The successive stages in the construction of global economic architecture were characterized by the progression of economic integration from country-level (Governance 1.0) to regional integration (Governance 2.0) and global/multilateral institutions (Governance 3.0). These stages in the evolution of global governance have reached limitations and constraints that call for new approaches towards modelling the global economic architecture. The advent of Globalization 4.0 and the Fourth industrial revolution are set to be accompanied by the emergence of Global governance 4.0 that incorporates the rising role of technology into the multilayered edifice of the global economy. 

Technology is accounting for a rising share of global GDP, financial market capitalization and is bound to play an increasingly important role in the labour market. Indeed, as the foundation of economic relations undergoes massive changes, most notably in the technological sphere, there is a need for a different super-structure embodied in a changing global economic architecture to reflect these massive changes. 

In this respect the key question for the new framework of global governance is this – what are the ills of the current economic order that the new governance structure needs to address? Is it the lack of technological innovation, the lack of flexibility in the global governance structure or something else? In the current juncture it appears that the more important issues on the global agenda revolve around the North-South gap (whether in technology or economic development more broadly) and the dominance of national self-interest at the expense of international cooperation. Rather than simply allowing for more cooperation across a wider array of programs and initiatives or instead of simply according more weight to technological factors, the new global governance framework needs to prioritize the resolution of those ills that have brought about a major financial crisis in 2008, an unprecedented wave of protectionism and risks of a global economic slowdown and possibly even an outright recession in the years to come. 

A novel vision of the contours of the future global governance architecture was outlined in a recent World Economic Forum report entitled “Globalization 4.0 Shaping a New Global Architecture in the Age of the Fourth Industrial Revolution”. The proposed governance structure was characterized by greater flexibility at various levels of governance to pursue plurilateral agreements in specific sectors without the need to ensure complete support for new liberalization initiatives from all countries. 

According to the WEF report, “a more integrated, interoperable and agile approach to economic governance and cooperation can help the international community transcend the technology policy dilemmas, trade policy frictions, impediments to shared value creation and financing gaps that are preventing markets and economies from growing to their full potential. At the same time, a more multidimensional, outcome-oriented and human-centred approach is needed to stabilize humanity’s environmental footprint within sustainable boundaries while diffusing the benefits of technological progress and economic growth more widely through stronger broad-based progress in living standards.” 

The global governance framework as outlined by the World Economic Forum seeks to bring together the working groups, organizations, initiatives and programs that range from global trade and technology to climate change and human capital development. The whole construct de-emphasizes hierarchy and seeks to exploit horizontal linkages across regions, corporates, think-tanks and industries. Partly due to the rising importance of technological advances in global economic development there the governance structure is to be rendered more “Agile” (flexible in operation, with less emphasis on hierarchy and procedures and more focus on the end result), in line with the governance structures that are increasingly adopted by tech companies.

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But while the agile model and the lack of hierarchy may prove advantageous in bolstering the dynamism and connectivity among the various actors of the global economy there may also be the question of whether such a blue-print leaves the level of global international organizations still weak vis-à-vis the power of national self-interest. For in the end the real problem of global governance today is the prevalence of national self-interest over international cooperation at the levels of regional and global institutions. 

The latter in turn argues for a more hierarchical and rules-based model (“Waterfall model” as a governance model pursued in the corporate world) as well as a staged approach to global governance, in which the regional layer is more coordinated with other layers of governance and is significantly reinforced to neutralize in part the excess of egoistic practices emanating from the country-level. Within such a setup, the regional layer of global governance could include a platform for the cooperation of regional economic blocks, regional development banks and regional financing organizations. Both the regional layer and the layers of international multilateral institutions within the “Waterfall model” could imbue the new global governance with more rules-based elements that otherwise would likely be lacking in an “Agile-type” framework. 

Importantly, the new WEF global governance framework does single out quite explicitly these venues for regional coordination – in particular the WEF proposal include references to coordination among multilateral (including regional) development banks, the closer integration of RFAs into the global financial safety net and the need for cooperation among the emerging trade mega-blocks in Asia. What may be needed in order to strengthen the potential synergies among these elements of regional institutions is to create a common platform for regional institutions with stronger linkages to international organizations.   

Another question is whether an “Agile structure” of global governance provides sufficient mechanisms to counteract the rise in inequality and unbalanced development across countries, including along the North-South axis. In fact, as is the case with the effects of faster technological development of the past several decades, the new governance models could mostly benefit the most advanced economies, with the developing world still faced with a massive technological gap. 

In sum, an additional layer of global governance targeting technological development that is more agile in the mode of its operation could complement the hierarchical/rules-based model (“Waterfall” model), in which country-level, regional and global layers interact with each other. Such a hybrid model of global governance that combines the hierarchical elements across countries and regions with agile elements targeting sectoral and technological cooperation could be the new mix to address the daunting challenges of unbalanced development, inequality and national egoism.

   

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.