CAMBRIDGE – There is a silver lining for developing nations in the present crisis, for they will emerge with a much bigger say in the institutions that govern economic globalization. Once the dust settles, China, India, Brazil, South Korea, and a handful of other “emerging” nations will be able to exercise greater influence over the way that multilateral economic institutions are run, and will be in a better position to push for reforms that reflect their interests.
There are two related reasons for this. First, the financial crisis has weakened the United States and Europe. They will be unwilling or unable to provide the kind of leadership that sustained multilateralism in the decades that followed World War II. Developing nations will have to step up to fill the gap.
Second, the relative weight and importance of developing nations in the global economy will have risen even more. Many of the West’s leading financial institutions – those that have not been nationalized – as well some important industrial enterprises, will remain at the mercy of capital from China or the Gulf states. In trade, the current round of global negotiations has demonstrated that if rich nations want developing nations to cooperate, they will need to let them shape the rules of the game.
To make the best of this outcome, developing nations will have to have a good sense of their interests and priorities. So, what should they seek?