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A New Multilateralism for the 21st Century The Richard Dimbleby Lecture was founded in memory of veteran BBC broadcaster Richard Dimbleby, who died in 1965. It has been delivered by an influential business or political figure almost every year since 1972. Christine Lagarde, Managing Director of the International Monetary Fund, delivered the 2014 lecture at Guildhall in London on February 3. ©International Monetary Fund. Not for Redistribution This page intentionally left blank ©International Monetary Fund. Not for Redistribution Introduction: The Legacy Yet 1914 was the gateway to 30 years of disas- of Bretton Woods ter—marked by two world wars and the Great Depression. It was the year when everything Good evening. It is a great honor to be invited started to go wrong. What happened? to deliver this year’s Dimbleby Lecture, and I would like to thank the BBC and the What happened was that the birth of the Dimbleby family for so kindly inviting me— modern industrial society brought about and especially David Dimbleby for his warm massive dislocation. The world was rife with words of introduction. tension—rivalry between nations, upsetting the traditional balance of power, and inequal- This evening I would like to talk about the ity between the haves and have-nots, whether future. Before looking ahead, however, I would in the form of colonialism or the sunken like to look back—for the clues to the future prospects of the uneducated working classes. can often be read from the tea leaves of the past. By 1914, these imbalances had toppled over I invite you to cast your minds back to the into outright conflict. In the years to follow, early months of 1914, exactly a century ago. nationalist and ideological thinking led to an Much of the world had enjoyed long years unprecedented denigration of human dignity. of peace, and giant leaps in scientific and tech- Technology, instead of uplifting the human nological innovation had led to path-breaking spirit, was deployed for destruction and terror. advances in living standards and communica- Early attempts at international cooperation, tions. There were few barriers to trade, travel, such as the League of Nations, fell flat. By the or the movement of capital. The future was end of the Second World War, large parts of full of potential. the world lay in ruins. The 44 nations gathering at Bretton Woods were determined to set a new course based on the principle that peace and prosperity flow “from the font of cooperation. A NEW MULTILATERALISM FOR THE 21ST CENTURY 171 ©International Monetary Fund. Not for Redistribution ” I now invite you to consider a second turning Because of their work, we have seen unprece- point—1944. In the summer of that year, the dented economic and financial stability over eminent economist John Maynard Keynes and the past seven decades. We have seen diseases a delegation of British officials embarked on a eradicated, conflict diminished, child mor- fateful journey across the Atlantic. The cross- tality reduced, life expectancy increased, and ing was risky—the world was still at war and hundreds of millions lifted out of poverty. enemy ships still prowled the waters. Keynes himself was in poor health. Today, however, we are coming out of the Great Recession, the worst economic crisis— But he had an appointment with destiny, and and the great test—of our generation. Thanks he was not going to miss it. to their legacy of multilateralism—inter- national cooperation—we did not slip into The destination was the small town of Bretton another Great Depression that would have Woods in the hills of New Hampshire, in brought misery across the world yet again. We the northeastern United States. His purpose all passed the test—rejecting protectionism, was to meet with his counterparts from other reaffirming cooperation. countries. Their plan was nothing less than the reconstruction of the global economic order. Yet there will be many more tests ahead. We are living through a time every bit as The 44 nations gathering at Bretton Woods momentous as that faced by our forefathers a were determined to set a new course based century ago. Once again, the global economy on mutual trust and cooperation, on the is changing beyond recognition, as we move principle that peace and prosperity flow from from the industrial age to the hyperconnected the font of cooperation, and on the belief digital age. that the broad global interest trumps narrow self-interest. Once again, we will be defined by how we respond to these changes. This was the original multilateral moment, 70 years ago. It gave birth to the United As we look ahead toward mid-century, toward Nations, the World Bank, and the the world that our children and grandchildren International Monetary Fund—the institu- will inherit from us, we need to ask the ques- tion that I am proud to lead. tions: what kind of world do we want that to be—and how can we achieve it? The world we inherited was forged by these visionary gentlemen—Lord Keynes and his As Shakespeare says in Julius Caesar: “On such generation. They raised the phoenix of peace a full sea are we now afloat, and we must take and prosperity from the ashes of anguish the current when it serves, or lose our ventures.” and antagonism. We owe them a huge debt of gratitude. This evening, I would like to talk about two broad currents that will dominate the coming decades—increasing tensions in global inter- connections and in economic sustainability. 172 INTERNATIONAL MONETARY FUND ©International Monetary Fund. Not for Redistribution We are living through a time every bit as momentous as that faced by our forefathers a century ago. I would then like to make a proposal that For one thing, world trade has grown expo- builds“ on the past and is fit for the future: nentially. We are now in a world of integrated a strengthened framework for international supply chains, where more than half of total cooperation. manufactured imports, and more than 70 percent of total service imports, are intermedi- In short, a new multilateralism for the 21st ate goods or services. A typical manufacturing century. company today uses inputs from more than 35 different contractors across the world. Tensions in Global Financial links between countries have also grown sharply.” In the two decades before the Interconnections crisis in 2008, international bank lending—as a share of world GDP—rose by 250 percent. And we should expect this to rise further in the GROWTH IN INTERCONNECTIONS future, as more and more countries dive into the financial nexus of the global economy. I will start with the first major current: tensions in global interconnections, tensions We are also living through a communications between a world that is simultaneously com- revolution. It has produced a starburst of ing closer together and drifting further apart. interconnections, with information traveling at lightning speed from limitless points of ori- By “coming together,” I mean the breakneck gin. The world has become a hum of intercon- pattern of integration and interconnectedness nected voices and a hive of interlinked lives. that defines our time. It is really the mod- ern counterpart of what our ancestors went through in the fateful years leading up to 1914. Just look at the great linking of the global economy over the past few decades. A NEW MULTILATERALISM FOR THE 21ST CENTURY 173 ©International Monetary Fund. Not for Redistribution Today, 3 billion people are connected to each or how social media carrying the message of other on the Internet. Three million emails Malala in Pakistan pricked the conscience of are sent each second. There are almost as the entire world. many mobile devices as people on the planet, and the “mobile mind-set” is deeply embed- It is not all bright skies, however. When link- ded in all regions of the world. In fact, the ages are deep and dense, they become hard to highest rates of mobile penetration are in disentangle. In such an interwoven labyrinth, Africa and Asia. even the tiniest tensions can be amplified, echoing and reverberating across the world— Back in 1953, when people tuned in to the often in an instant, often with unpredictable coronation of Queen Elizabeth II, their expe- twists and turns. The channels that bring rience was mediated essentially by one voice— convergence can also bring contagion. the masterful Richard Dimbleby, whom we honor today. In contrast, when Prince George Because of this, the global economy can arrived last summer, his birth was heralded by become even more prone to instability. If not more than 25,000 tweets a minute. managed well, financial integration can make crises more frequent and more damaging. With such a dizzying pace of change, we can Consider, for example, where and how the sympathize with Violet Crawley, Downton recent global financial crisis began—in the Abbey’s countess, who wondered whether the mortgage markets of suburban America—and telephone was “an instrument of communica- spread all around the world. tion or torture.” The communications revolution too has a dark side. It can sow discord, instill factionalism, BENEFITS AND COSTS and spread confusion. Instead of an online OF INTERCONNECTIONS forum for ideas and expression, we could have a virtual mob or a global platform to promote This brave new world—this hyperconnected intolerance or hatred. Instead of a beautiful world—offers immense hope and promise. symphony, we could have an ugly cacophony. Stronger trade and financial connections can bring tangible benefits to millions of people— So the key challenge for us in all this will be through higher growth and greater convergence to magnify the good and diminish the bad.

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