Former Bank of England/Bank of Canada Governor and now Canadian Prime Minister Mark Carney laid bare his view of the breakdown in the global order at Davos today.
The comments are intense, if not frightening.
“It seems that every day, we’re remind that we live in an era of great power rivalry, that the rules based order is fading, that the strong can do what they can and the weak must suffer what they must. This aphorism of Thucydides as inevitable, as the natural logic of international relations reasserting itself and faced with this logic, there is a strong tendency for countries to go along in order to get along, to accommodate, to avoid trouble. To hope that compliance will buy safety. Well it won’t.”
He talked about how ordinary people live within a preformative lie, but how that system is fragile because people can stop performing the lie. He said it’s time to stop pretending the world order still exists.
He goes on.
We knew that the rules-based order was partial false, he said. That the strongest would exempt themselves when convenient, that trade rules were enforced asympetrically and international law applied with varying rigor. This fiction was useful he said.
“American hegemony in particular helped provide public goods, open sea lanes, a stable financial system, collective security … We largely avoiding calling out the gaps between rhetoric and reality. This bargain no longer works. Let me be direct. We are in the midst of a rupture, not a transition … recently, great powers have begun using economic integration as a weapon. Tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited.”
He said the multilateral institutions of collective problem solving are under threat. When the rules no longer protect you, you must protect yourself.
“A world of fortresses will be poorer, more fragile and less sustainable,” he said.
The gains from transactionism will be harder and harder to get, he warned.
The question for middle powers, he said, was either to respond by building higher walls or doing something more ambitious. He outlined a system of working with different partners on different issues where there is enough common ground to work together.
He also called for some kind of economic bloc of middle powers.
“The great powers can afford to go it alone,” he said. “When we only negotiate bilaterally with hegemons, we negotiate from weakness; we accept what’s offered, we compete with each other to be the most accommodating, this is not sovereignty, it’s the performance of sovereignty while accepting subordination.”
He went on:
“In a world of great power rivalry, the countries in between have a choice: Compete with each other for favor, or combine to create a third path with impact…. the power of legitimacy will remain strong if we choose to wield them together.”
Carney said Canada has what the world wants: energy, critical minerals, an educated workforce and fiscal capacity.
“The old order is not coming back… we believe we can build something better, this is the task of the middle powers. We have the capacity to stop pretending, to build our path together. We choose it openly, confidently and open to any country willing to take it with us.”
He got a standing ovation.
This article was written by Adam Button at investinglive.com.