The New Global Economic Order

In this chapter, Joseph E. Stiglitz and Dani Rodrik argue that the prevailing model of global economic integration—often rooted in neoliberal principles—has failed to deliver equitable growth and has instead created a dysfunctional system. They contend that the nation-state remains the primary site of political accountability and economic experimentation. Because global governance is frequently used by powerful nations and special interests to extract rents from weaker economies, the authors propose a shift toward a minimalist global architecture.

The authors outline four foundational principles for this minimalist approach:

1. Restrictive Discipline: International rules should only target policies that are explicitly 'beggar-thy-neighbor' (BTN), meaning they provide domestic benefits solely by imposing direct costs on other nations.
2. Institutional Diversity: Agreements must respect national differences in preferences, history, and economic conditions, allowing countries to tailor regulations to their specific needs.
3. Global Fairness: Governance must address resource and technology transfers from the North to the South, ensuring that developing nations are not forced to bear disproportionate costs for global public goods like climate mitigation.
4. Political Accountability: Economic arrangements must consider their broader social and political consequences, as excessive constraints on national policy space can undermine democracy and fuel populist backlash.

The authors apply this minimalist framework to several critical areas. They argue that intellectual property regimes, such as TRIPS, have prioritized corporate profits over public health, as seen during the COVID-19 pandemic. They also critique the OECD's tax reforms for failing to adequately address profit shifting by multinational corporations. Furthermore, they suggest that investment agreements, which often grant foreign investors excessive rights, should be terminated. Regarding trade, they emphasize that industrial policies—even those that distort trade—may be necessary for green transitions and national security, and should not be reflexively disciplined by global bodies.