As G20 leaders gather in Japan, they should call for a new multilateralism that combines mission-oriented rules with a commitment to shared prosperity and environmental recovery and that leads by example, with or without the US, which Financial Times columnist Martin Wolf descibes as a "rogue superpower".

The original Bretton Woods system did promise a value-driven, mission-oriented, and rules-based international economic order for the post-World War II world. That order was tasked with keeping the financial system stable and with coordinating policies in support of full employment, productive investment and increased trade; avoiding imported deflation and pre-empting beggar-thy-neighbor policies were priorities. Still, the rules ensured that there was ample policy space for sovereign states at all levels of development to pursue their particular national priorities.

The system began to break down in the 1970s as the US economy struggled to contain its twin deficits and as corporate and financial elites began circumventing national regulations in pursuit of global markets and investment opportunities. Initially under the umbrella of GATT (and later the WTO and thousands of regional and bilateral trade and investment treaties) and with the active engagement of the IMF and the World Bank, a new set of enabling norms and rules emerged that allow footloose finance and firms to move freely within and across borders and into ever expanding spaces for profit making. What is more, these norms and rules are actively enforced by a combination of market disciplines and "investor-state dispute resolution systems" where the interests of foreign investors trump governments and citizens. 

This has resulted in a world that is inherently unstable, increasingly unequal, and politically paralysed in the face of a climate breakdown. Many of the current proposals – from abandoning special and differential treatment at the WTO to more securitized financial instruments to leverage investment, to ramped up public-private partnerships – won’t solve these problems. In fact, some of them are why we are facing these problems in the first place.

As a handful of powerful corporate actors have assumed ever greater control of markets and supply chains, they have been less inclined to reinvest the resulting profits in decent jobs and a deeper skill base, or the local communities where they reside. Since 1980 the size of the financial system has grown by a factor of 25 to over $300 trillion but real investment in productive and employment-driven growth has remained at less than 20 percent of GDP. 

Instead, the financial system feeds on itself and has triggered a major financial crisis somewhere in the world every half decade since the early 1980s. And despite rising debt levels and surging asset prices since the crisis, wages (with the exception of a handful of Asian countries) have remained stagnant and labor’s aggregate share of global income declining and inequality on the rise everywhere.

In 2015 the global community came together at the United Nations to fashion a new and ambitious mission for itself, the Sustainable Development Goals (SDGs). Their delivery requires significant investments across the world to raise standards of living in an environmentally sustainable and inclusive manner, within and across countries. Parts of the international system, especially development banks, began to align their activities to this new mission, and new momentum appeared to be on the horizon. But with no matching ambition to reform the international trade and financial system, reaching the SDGs by 2030 will increasingly become an unlikely prospect. 

A new multilateralism must prioritize the role of global public goods needed to deliver shared prosperity and a healthy planet, promote cooperation and collective actions to bring fairness and balance to market outcomes, coordinate policy initiatives to mitigate common risks, and ensure that no nation’s pursuit of these broader goals infringes on the ability of other nations to pursue them. In short, we need a global green new deal to reclaim multilateralism.

With the SDGs providing the mission, we have, in a series of deliberations at the United Nations in Geneva, advanced a series of design principles for a new multilateralism:

1.Global rules should be calibrated toward the overarching goals of social and economic stability, shared prosperity, and environmental sustainability and be protected against capture by the most powerful players 

2.States share common but differentiated responsibilities in a multilateral system built to advance global public goods and protect the global common goods

3.The right of states to policy space to pursue national development strategies should be enshrined in global rules

4.Global regulations should be designed both to strengthen a dynamic international division of labor and to prevent destructive unilateral economic actions that prevent other nations from realizing common goals

5.Global public institutions must be accountable to their full membership, open to a diversity of viewpoints, cognizant of new voices, and have balanced dispute resolution systems

As the US has signalled its intent to withdraw from the Paris Agreement, others such as China, Germany and the United Kingdom are leading by phasing out fossil fuels, investing in clean technologies and advancing green industrial policies; but actions at home must be globalized. 

G20 members should collectively task their finance ministers and central banks to join The Coalition of Finance Ministers for Climate Action and the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) and engage in industrial and innovation policies for green growth and good jobs.

The G20 should push for a reformed IMF tasked with reducing speculative financial flows and augmenting those in support of productive, low-carbon investments, including through the monitoring and elimination of misguided subsidies and the elimination of illicit financial flows. What is more, when crises do occur, the remedy should be for a counter-cyclical and inclusive response rather than austerity and social unrest.

Development banks across the world, at the national and global level, will need to work together to help countries identify low-carbon high-productivity activities and design appropriate industrial policies, to scale up their resources in sustainable infrastructure and to support a just transition for workers and communities attached to carbon-intensive and outdated economic activity.

Perhaps most importantly, trade ministers should work to introduce reforms to the WTO and the myriad trade and investment treaties to accelerate trade and investment in net zero carbon economic activity, to eliminate incentives for trade and investment in sectors that are in need of a phase-out, and to accelerate green industrial policies for full employment at living wages. And they should do so in full knowledge that developing countries face specific challenges that will need differential support.

We have just under a dozen years to reduce carbon emissions and achieve the broader set of SDGs. The increase in climate-related catastrophes, social unrest, and the rise of right-wing populism are early warnings of what will become a new normal in hot-house earth. Even if the United States has foregone its leadership role then it is up to other G20 leaders in Osaka to stand up and lead themselves. Time is running out.

Kevin P. Gallagher is a professor and director of the Global Development Policy Center at Boston University.

Richard Kozul-Wright is director of the Division on Globalization and Development Strategies at the United Nations Conference on Trade and Development.

They are authors of the new report, A New Multilateralism for Shared Prosperity: Geneva Principles for a Green New Deal.

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.