Perspectives on Global Development 2021

Overview

Between the global financial crisis of 2008-09 and the coronavirus (COVID-19) pandemic, protests and political instability surged around the world. The pandemic cleared the streets but only for a moment; civil unrest is expected to worsen in its aftermath. People’s trust in public institutions is collapsing; so too is their trust in each other. Political systems in many places are failing to meet people’s demands for change. New technologies are creating new divides within society. A vicious circle is emerging, whereby social fragmentation is impeding the collective action needed – at the local, national and global level – to address the factors behind this discontent. Given the scale of the challenges of the 21st century, this inability to co-operate poses an existential threat to humankind.

The seventh edition of Perspectives on Global Development examines the factors behind discontent and identifies how societies, especially in developing countries, can respond in ways that not only improve livelihoods but also strengthen social cohesion. It is written during the COVID-19 pandemic, which is inflicting a terrible human cost, exacerbating many of the divisions and vulnerabilities that are driving discontent, and exposing weaknesses in international co-operation. The report is intended to promote more inclusive societies in the wake of the pandemic – a project that will only succeed if it engages citizens at all levels and in all places, from the grassroots of local communities to the top of the most powerful multilateral institutions.

Discontent in an era of global economic growth

The surge in discontent over the past decade demonstrates the limitations of focusing on gross domestic product (GDP) and wealth. After all: why were people dissatisfied before the pandemic, when data suggest that they had never had it so good? On average, per capita GDP grew almost uninterruptedly across countries at all income levels between 1990 and 2018 and rose fastest among developing countries (Figure 1). Wealth levels also rose sharply.

Figure 1. Global economic growth rates, 1990-2018

Source: World Bank (2020), World Development Indicators (database), World Bank Group, Washington, DC, https://databank.worldbank.org/source/world-development-indicators.

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This growth was accompanied by a sharp decline in the global rate of extreme poverty, which fell from 36% 990 to 10% in 2015. Middle classes emerged around the world, which by the middle of the 2010s, included more than half the global population. Living standards improved globally, as a combination of sustained economic growth and higher public spending allowed many developing countries to enhance provision of public goods. For the first time, inequality between countries declined, suggesting that developing countries were converging with advanced economies.

This report identifies four keys to understanding why discontent has emerged despite this strong economic performance. The first is inequality: gains from growth in global income and wealth have not been shared evenly across countries, leading to growing inequality in a large number of countries. If the People’s Republic of China (hereafter, “China”) is excluded from calculations, between-country inequality barely moved in three decades. Being middle class in developing countries (again, except China) is very different from being middle class in advanced economies: high levels of informality and low levels of social protection coverage render this status far less secure. Indeed, if poverty is considered in relative terms or against a more ambitious threshold than USD 1.90 (United States dollar) per day extreme poverty line, a large portion of the new middle classes would still be considered poor.

The second key is multi-dimensional well-being indicators, which provide a broader understanding of quality of life. While there have been improvements in indicators such as life expectancy, these gains have not been shared equally across populations; large gaps in well-being between and within countries remain. At the same time, some well-being indicators, notably food insecurity, have deteriorated during the 2000s. Overall, people in many countries have grown progressively more worried and less satisfied with their lives in recent years.

The third key relates to the pressures on the global labour force. While returns to capital have increased rapidly, wage growth across the labour force has not kept pace with productivity gains (although the incomes of highly skilled workers have increased rapidly). Globalisation and technological change, with associated changes in production and consumption, have adversely affected the prospects and job security of workers around the world. Non-standard employment is proliferating in advanced economies, while informality – and working poverty – remain pervasive in developing countries. A new global class – the precariat – has emerged, and its dissatisfaction and insecurity are becoming increasingly influential politically.

The fourth key relates to the catastrophic deterioration of the environment in recent decades. Global temperatures are rising as carbon emissions have risen with global GDP; there has been a staggering decline in biodiversity, with deforestation on a massive scale and many species becoming extinct; and air and water quality have deteriorated to lethal effect. Developing countries are enduring the worst of the climate crisis, despite their miniscule contribution to the stock of global emissions (even if they are increasingly responsible for the annual increases in emissions). Without urgent changes to the way humanity lives and works, its very survival is in jeopardy.

The COVID-19 pandemic has undone some of the gains made over the past three decades: economies have shrunk, an estimated 255 million jobs have been lost, and some 100 million people have fallen into extreme poverty. Millions are threatened by famine. Economic output in advanced economies is expected to rebound to pre-crisis levels in 2021, helped by massive stimulus packages during the crisis and first access to vaccines; for many developing countries, the recovery will take far longer, and the long-term scarring will be more severe. Meanwhile, inequalities have widened within countries at all income levels.

The case for global discontent

These four keys – inequality, uneven progress in improving well-being beyond income, worsening labour conditions and the climate crisis – provide important context for the current wave of discontent but do not fully explain it. To understand discontent, it is necessary to take a closer look at who is protesting and where. Yet discontent is not only visible in the streets: the report identifies declining trust in government, a loss of support for democracy, and long-term declines in voter turnout as evidence of dissatisfaction with the way societies are organised and governed. Discontent will be harder to identify in countries that lack these democratic institutions and where protest is not a legitimate form of political expression, although protests have increased even in authoritarian states in recent years.

Figure 2. Number of protests in selected regions, 1991-2019

Source: Clark, D. and P. Regan (2021), “Mass Mobilization Protest Data”, Harvard Dataverse (database), Harvard University, Cambridge, MA, https://doi.org.10.7910/DVN/HTTWYL.

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Various sources attest to the rise in protests during the 2010s, which was evident across all regions (Figure 2). Political instability during this period was far more pronounced than in the 1960s, for example. Civil unrest was detected in one-quarter of countries around the world in 2019, a year when the proportion of protests that were violent rose sharply after declining steadily since the 1990s. Meanwhile, protests spiked in autocracies across Africa, the Americas and Europe in 2011 and trended upwards between 2015 and 2018.

The report demonstrates that protests are not concentrated in the countries with the weakest economies and that it is not the poorest members of society who are most likely to protest. Rather, protests during the 2000s have been most prevalent in middle-income countries, and people from the middle classes have been most apt to mobilise. This suggests that protests are inspired by frustration at progress interrupted and expectations unfulfilled. These movements, which often act at a remove from traditional political parties and lack clear leadership, are demanding systemic change: the protests in Chile in 2019, which set in motion a process to rewrite the constitution, are a good example. Evidence of contagion of protests between countries and the emergence of global protest movements suggest that people in societies around the world are finding common cause.

Other indicators strengthen the case for generalised and worsening discontent. The proportion of people expressing confidence in their national government declined on average between 2006 and 2018 in Latin America and the Caribbean, the Middle East and North Africa, and Organisation for Economic Co‑operation and Development (OECD) countries but increased elsewhere (Figure 3). Voter turnout has fallen around the world since the 1960s. Support for democracy is also decreasing, and there has been a prolonged decline in the strength of democratic institutions during the 2000s that accelerated in 2020 amid the COVID‑19 pandemic.

Figure 3. Those who profess to have confidence in their national government

Note: Respondents were asked if they have confidence in the national government of their country.

Source: Authors’ calculations based on Gallup (2019[46]), Gallup World Poll 2019, www.gallup.com/analytics/318875/global-research.aspx.

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To answer the question of why discontent is worsening, especially in developing countries, the report starts by analysing what citizens themselves are saying. Public attitude surveys in Africa and Latin America, for example, show the extent to which economic factors – such as unemployment, low wages and the cost of living – were at the top of individuals’ concerns before COVID-19. This is hardly a surprise, when the proportion of individuals who feel that they are doing well or getting by has declined in both regions, to 37% in the case of sub-Saharan Africa (Figure 4). Citizens in both regions were pessimistic even before the COVID-19 pandemic. Across 18 countries in Africa surveyed in 2019, 63% of respondents considered the state of the economy “bad” or “very bad”, while only 12% of Latin Americans considered the economic situation in their countries “good” or “very good” in 2018, down from 25% in 2013.

Figure 4. Those who are living comfortably or getting by on their current household income, 2007 and 2018

Note: Graph shows percentage of respondents in each region who answered yes to the question of whether they were living comfortably or getting by.

Source: Authors’ calculations based on Gallup World Poll 2019, www.gallup.com/analytics/318875/global-research.aspx.

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Citizens also worry about the quality of public goods, such as security, good governance and public services. Satisfaction with these varies by region: in Latin America and the Caribbean, satisfaction with health, education and the judicial system has declined in recent years, but in Asia, public services are increasingly meeting people’s expectations. However, it is notable that across all regions, people’s standard of living in 2019 was much lower than they had expected it would be when asked in 2014. The report also identifies a tendency for people to feel that the government does not listen to them and that elections do not bring about change. This might explain why satisfaction with democracy is declining and why people feel more inclined to take to the streets and less inclined to vote.

These concerns and frustrations about the state of the economy and the quality of public goods resonate with the so-called “development traps” of low productivity, poor institutions and socio-economic vulnerability. These are systemic and interrelated challenges that require a broad response: addressing these factors behind discontent is not a question of matching policy to individual grievance. Moreover, while these trends contribute to the rise of discontent, they cannot explain it alone; discontent is, after all, a psychological and sociological phenomenon, and as such, cannot be understood solely with reference to people’s material conditions. It is also necessary to look at the way societies function as a whole.

The structural causes and politics of discontent

The report contends that discontent emerges from the interaction of the contingent causes of discontent identified above with deeper societal divisions and political dysfunctions reflected in a lack of social cohesion. These structural factors, which can be understood as societies’ fault lines, have many manifestations. Perhaps the most obvious are the inequalities that exist in any society – not just in terms of income and wealth but also across the many dimensions that determine a person’s ability to live the life they choose. However, a direct link between inequality and discontent is difficult to establish; rather than inequality per se, the report stresses the anger and frustration attributable to relative deprivation – the perception, particularly at a group level, of being systematically disadvantaged within a society. Gender‑based discrimination, as captured by the OECD’s Social Institutions and Gender Index, is perhaps the most glaring and far-reaching example of this phenomenon. Relative deprivation also explains how frustrated expectations and broken promises cause unrest where decades of economic exclusion did not.

Social cohesion is also weakened by the social fragmentation associated with modernisation long studied by sociologists. The report identifies low levels of interpersonal trust across many developing countries – a major impediment to social cohesion and collective action. It also finds evidence that people’s support networks are fragmenting at a time when they are increasingly under stress. These trends are reflected in a decline of the intermediary (or secondary) social institutions seen as key to a functioning society; civic engagement is declining, along with membership of unions, political parties and other associations. This tendency not only compounds the atomisation of societies but also deprives citizens of interlocutors between them and the state, not to mention a critical source of identity, recognition and social capital. Rising stress levels and deteriorating mental health further attest to the difficulties people face today.

Notwithstanding these specificities, the report identifies commonalities among countries that strengthen the argument for the existence of generalised discontent. These relate both to the megatrends of our age – globalisation, rapid technological change, the climate crisis and migration – and to the longer-term impacts of modernisation on societies.

Escalating culture wars – contestation over differences in values, attitudes and outlooks within a society – further jeopardise social cohesion. These divergences are attributable to a wide range of demographic and socio-economic factors that make them particularly susceptible to rises in inequality. Moreover, these differences in values, and the extent to which they influence people’s worldview, are making it considerably harder to achieve consensus on public policies to address key issues that societies confront, such as inequality, the climate crisis and migration. They have shaped how countries have responded to the COVID-19 pandemic.

Political systems in many countries are proving unable to mediate adequately between different groups, to provide a level playing field for citizens or to respond to demands for change. The report focuses on two possible explanations for their failure. The first is the weakening and fragmentation of political identities (in particular, following the end of the Cold War), which has disrupted the political landscape and often created a distance between politics and people. The second is the winner-takes-all politics that emerges when the economically dominant groups within a society also dominate its politics; political inequality and economic inequality become self-reinforcing, and the capacity for people to effect change diminishes accordingly. In this context, the rise of populist parties or leaders appealing directly to the disenfranchised and positioning themselves against the elites is easy to understand. However, there appears little chance they will provide any answers to the challenges their societies confront, not least because the constituency they represent is so diverse.

Technological advances associated with the Third and Fourth Industrial Revolutions and accelerated by the COVID-19 pandemic are threatening social cohesion via a number of channels. They have the capacity to transform lives but can also perpetuate inequalities and reinforce power imbalances. Digital divides mean that some groups, even some countries, are being left behind by those better able to harness the power of new technologies. Changes to the way people communicate are expanding people’s networks without necessarily making them feel less alone or happier with their lives. Digital technologies have also changed the way people consume information: the transmission of news through social networks creates “echo chambers” that lead to further polarisation.

Meanwhile, trust in media is declining, in part due to the rapid proliferation of misinformation or fake news through social networks. The market power of new (and some old) media entities further weakens confidence in the notion of independent news and objective facts. Last, and of particular importance to this report, social media has proven a critical mobilisation tool for protests the world over, albeit one that cannot replace the infrastructure of previous social movements that enhanced the latter’s likelihood of achieving a lasting impact.

Just as it did the contingent causes of discontent, the COVID-19 pandemic has led to further social fragmentation and exacerbated the structural factors behind discontent. Digital divides have widened, especially in education and the workplace. Culture wars have become more ferocious. Lockdown measures left people even more isolated, and mental health issues have become more commonplace. Inequalities across numerous dimensions have been reinforced. Nonetheless, the COVID‑19 pandemic also provides a rare opportunity to reset. As societies plan their recovery, they will need to confront the fault lines laid bare by the pandemic and decide whether they wish to return to life as it was before or, as many people hope, build back better.

From protest to participation

To prevent a surge in discontent in the aftermath of COVID-19, societies need to be rebuilt collectively and from the ground up. The challenges of the 21st century and the social fractures identified in this report cannot be addressed separately: for their legitimacy and effectiveness, the responses need to be mutually reinforcing. The objective is a double dividend, whereby inclusive, participatory processes generate better development outcomes and strengthen social cohesion. Realising this vision requires a fundamental reappraisal of the relationship between state, society, the economy and the environment.

To instigate an inclusive post-pandemic recovery and the broader structural reforms demanded by the current situation, it is important to recall the role of culture and institutions in promoting collective action and shaping societies’ development. The report operationalises this role through the concept of social capital: the networks; the bonds of trust, recognition and reciprocity that hold these networks together; and the tacit knowledge (or know-how) that exists within these networks. Social capital operates both vertically and horizontally: two-way vertical links connect individuals to civil society and link civil society to the state. Horizontal links bind households, communities and society. These different flows of social capital are demonstrated in Figure 5 in accordance with a framework developed by the World Bank incorporating “bonding”, “linking” and “bridging” capital between and across levels of society. These links are essential for social cohesion and fundamental to the social contract.

Figure 5. Social capital flows in a stylised representation of society

Source: Authors’ elaboration.

The report adapts this stylised representation of relations between society and the state to the development traps discussed previously to demonstrate the different channels through which strengthening social capital can also improve development outcomes. The first step in this process is to convert the social model into an economic one by distinguishing between the economic actors that would typically be considered as belonging to civil society – micro, small and medium-sized enterprises – and large firms or clusters of firms (including multinational enterprises) that have very weak links to civil society. The second step is to drop a vertical red line that divides society primarily (but not exclusively) in economic terms (Figure 6).

Figure 6. Stylised model of a divided economy

Source: Authors’ elaboration.

The objective is to represent (in basic terms) the inequalities and exclusion identified earlier in the report while emphasising how these phenomena operate both horizontally and vertically. The red line can distinguish traditional firms and modern firms, regions that are more or less economically productive, or individuals or groups according to their economic, social or political status. Their position either side of the line also demonstrates their access to institutions and the social capital they possess. Inclusive development, which aims to maximise the inclusion and agency of individuals and civil society, requires pushing the red line as far to the left as possible.

The response to each development trap reflects a ground-up approach, but the success of each is also contingent on the government reaching down to empower civil society. Starting with the productivity trap, the report highlights how industrial districts can bring together traditional and modern enterprises and explains how this collaboration can thrive with the support of local communities and national governments. It also emphasises the important role that trust and know-how play in allowing firms to expand their operations and markets to evolve.

In the case of the institutional trap, the report underlines the importance of tax morale – the virtuous or vicious circle that can form when citizens feel (or do not feel) that the government is making good use of the taxes they pay. Where the quality of public services is poorly perceived, tax morale (and thus compliance) is likely to decline, depriving the government of resources it needs to improve services. In developing countries, whose tax-to-GDP ratios tend to be far lower than those of OECD members, this phenomenon is felt keenly; recent trends in tax morale in Africa and Latin America are cause for concern.

The report then examines the positive impact of civic engagement on the quality of education. Where parents engage with teachers and administrators and where the government listens to both parties, the quality of education is likely to improve. In the absence of institutions that facilitate these interactions, such improvement will be much harder to achieve; frustrated parents, if they can afford to do so, will seek out private alternatives rather than use their voice to improve the public system. The importance of voice is also discussed in the context of urban services, particularly infrastructure: participatory budgeting in Brazil has shown the myriad benefits of engaging residents, especially the most vulnerable, in discussions around municipal spending. Such mechanisms, which have become widespread in developing and developed countries alike, can only achieve their potential of “democratising democracy” if they involve real transfer of power and resources to citizens.

The third trap, related to social vulnerability, can only be addressed through a significant expansion of social protection coverage. Less than half the world’s population has access to any social protection programme, with coverage especially low in Africa and Asia. The vulnerable middle classes are often structurally excluded, falling into a “missing middle” of social protection provision because they are not eligible for poverty-targeted programmes and not covered by social insurance, which typically only includes people in formal employment. The COVID-19 pandemic has demonstrated the critical importance of moving towards universal social protection coverage; the report argues that countries at all income levels can set their sights on this objective, which should be perceived as a driver of development rather than something that can only be afforded once a certain level of development is attained.

Social protection binds society and the state while, at an individual level, promoting agency, empowerment and inclusion. It is not only an important mechanism for eradicating poverty and narrowing inequality; it also allows individuals to go to school, stay healthy and look for jobs, and it protects them against the multitude of risks that might result in them falling back into poverty. Social protection allows people to participate in daily life; a universal approach removes the stigma and resentment suffered by social protection recipients when programmes are targeted to the very poorest members of society. In many cases, especially among low-income countries, this will be a long-term goal; where governments still need to target social protection programmes to the most vulnerable households, community involvement is critical to identifying the desired intended beneficiaries and ensuring the intervention’s legitimacy.

Although these approaches operate at different levels, their respective contributions to exiting the development traps and addressing discontent overlap. For example, making the economy more inclusive and productive will generate higher revenues for public services and create large numbers of good-quality jobs, thereby providing a route out of the institutional and vulnerability traps. It is also important to note that it is not possible to push the red line without a co-ordinated effort at all levels. National development strategies are a key mechanism for achieving the coherence and co-ordination among approaches on which their success relies. National strategies can also promote popular engagement by providing a common vision for a country’s future in which every citizen can recognise their contribution. By being inclusive both in formulation and outlook, they can hardwire equality, universal rights and social cohesion into a country’s development.

The report charts a sharp increase in the number of countries that have a development strategy in recent years: from 62 in 2006 to 134 in 2018. More than 80% of the world’s population lives in a country with a national development plan, a proportion that might rise further as countries chart their recovery from the pandemic. It also identifies a shift towards a “collaborative” logic, whereby strategies are not seen as top-down exercises in planning and problem solving but rather as an ongoing process of social deliberation that spans communities and focuses on values as well as outcomes to ensure that choices are both technically desirable and politically acceptable, thereby maximising their effectiveness and legitimacy.

Fostering innovation and experimentation is important for contexts of high uncertainty and rapid change. Experimental democracy aims to generate innovative solutions by promoting decentralisation of power and resources and emphasising partnerships between the public and private sectors to harness the know-how of diverse communities. The effectiveness of this approach is contingent on a shared understanding of the most pressing challenges countries face, rigorous evaluation of different approaches and rapid diffusion of successful innovations from one locale to another. The central government plays a facilitative and supportive role in this context rather than a directive one.

The report recognises three potential impediments to implementing the institutional transformations discussed above, especially in the aftermath of the pandemic. The first is that there is likely to be an emphasis on resilience and efficiency rather than innovation. This will in part be motivated by the second constraint: the damage inflicted on public finances by the pandemic, as a result of which many governments will have fewer resources to invest in the economy and public services than before the crisis. The final impediment is inequality, which in many places has worsened during the pandemic: unless efforts to counter inequalities of different types – economic, social and political – are part of the design of participatory processes, such processes risk enhancing the position and interests of privileged groups, thereby worsening inequality.

These are indeed major challenges, but they are not insuperable. To implement these approaches, conceptions of resilience would have to change: rather than being understood as the capacity to absorb and eventually repel a shock, resilience can be understood in a more biological sense as the capacity to adapt. When the cost-benefit analysis on which efficiency is typically assessed is broadened beyond economic factors to include environmental and social costs and benefits, and when it is assessed with reference to a longer time frame, the systemic and structural changes advocated in the report might be considered to enhance rather than reduce efficiency.

More productive and inclusive economies and stronger public finances generate virtuous circles. However, they require the government to play a catalytic role – something that will be difficult to achieve in the post-pandemic context. There exists significant scope for developing countries to enhance tax revenues, particularly through taxes on income and profits. However, the political economy of the required reforms will be difficult to navigate, and international co-operation will be essential to reduce tax evasion and avoidance by firms and individuals, and to tax the digital economy. International support and co-ordination are also needed to ease developing countries’ post-pandemic debt burden to ensure that the cost of servicing debt taken on during the pandemic does not absorb a major proportion of government revenues.

Mainstreaming environmental policies into these approaches is imperative, given the climate and biodiversity crises. The report identifies numerous instances where economic, social and environmental concerns are set in competition with each other, thereby undermining popular support for a green transition. Natural systems play a vital role in sustaining humanity’s existence: their sustainability is integral to its survival and is therefore not something to balance with other priorities. Governments can promote this change in approach by locating environmental policies at the centre of government, embedding them in development strategies and devising appropriate governance structures that reflect the key role of social capital in protecting public goods and avoiding the tragedy of the commons.

Global governance and discontent

Discontent is a phenomenon that challenges notions of scale. While a protest might be confined to one very local space, such as a city square, the factors behind discontent (and the participants in the protest) are likely to be spatially more diverse. Moreover, the factors motivating discontent are likely to be a combination of local, national and global grievances. The report concludes by examining the global aspects of discontent. It observes the same interaction of contingent and structural factors discussed earlier and identifies institutional failings and power imbalances in global governance analogous to the weaknesses in political systems.

The COVID-19 pandemic is a clear example of how phenomena from outside a country’s borders can cause or aggravate discontent: it has devastated economies, demonstrated weaknesses in public health and other services the world over and exposed inequalities within and between countries. The international response to this global threat has been mixed: the rapid production of vaccines attests to the strength of international scientific collaboration and highly efficient supply chains, but competition between countries to access these vaccines has been chaotic and counterproductive, and developing countries have been left behind. Growing rivalries between countries have weakened international co-operation, while the role of the World Health Organization has become politicised nationally and internationally. The pandemic has also demonstrated how one global crisis can stem from another – in this case, the growing risk of zoonotic diseases directly traceable to biodiversity loss and uncontrolled urbanisation. Similar systemic factors are behind the locust swarms that beset East Africa and Western Asia in 2019-20.

Another category of global discontent is directed at the global system itself. The anti-globalisation protests in Seattle and elsewhere around the turn of the millennium, which brought together thousands of civil society organisations from many countries, shone a light on the downsides of globalisation, for example its impact on workers’ rights, its adverse environmental consequences and the inequality it fosters. However, there were limitations to how much these protests could achieve: the plurality of voices made it hard to decide on tactics or articulate a coherent agenda, and there was also a tendency for organisations from the Global North to speak for the Global South. Last, it was difficult for such movements to identify the appropriate global institution towards which to direct their protests.

Nowadays, it is not only civil society organisations that are alarmed about globalisation and the inability of global governance to address the causes of discontent. In 2020, the United Nations (UN) Secretary-General, António Guterres, spoke of a “pandemic of inequality” and stated that “[inequality] starts at the top: in global institutions”. This report examines the evolution of multilateralism since the 1940s, particularly in light of the Secretary-General’s assertion that “[the] nations that came out on top more than seven decades ago have refused to contemplate the reforms needed to change power relations in international institutions”. It divides this evolution into four phases: the birth of multilateralism, decolonisation, the Washington Consensus and the “shifting wealth” era.

The first decades of multilateralism, which included the establishment of the United Nations and the Bretton Woods institutions, is often perceived as a golden age of international co-operation. During this period, the so-called embedded liberalism paradigm prevailed as the foundation of the post-Second World War consensus, whereby countries gradually opened up commercial ties at the same time as investing in domestic industry, promoting full employment and expanding social protection systems. Capital flows were tightly regulated to ensure the stability of international economic systems.

This period coincided with widespread decolonisation and an associated rapid increase in the number of countries: between 1945 and 1970, the number of UN member states rose from 51 to 127. Despite their rapid growth number, developing countries were not granted a commensurate voice on the global stage, particularly in the dominant global economic institutions. Institutions that emerged in the early 1960s, such as the Group of 77 and the United Nations Conference on Trade and Development, articulated the frustrations of newly independent countries vis-à-vis existing international economic arrangements and challenged the industrialised nations, but they were not able to wrest power from them.

The Washington Consensus era arose from the collapse of embedded liberalism and the emergence in the United States of a new economic paradigm that emphasised the primacy of markets over the state. The Washington Consensus took hold in developing countries in the 1980s, as its prescriptions – which included extensive liberalisation – were built into the structural adjustment programmes that followed a series of debt crises across Africa and Latin America. UN organisations ensured that human interests were not overlooked; over time, the Washington Consensus evolved to recognise the importance of social safety nets to protect the poor (those “left behind” by globalisation) and to promote country ownership. The Millennium Development Goals, with their focus on expanding living standards across a number of dimensions, codified the importance of development outcomes beyond GDP growth.

Around the turn of the 21st century, the global economy’s centre of gravity started moving towards the east and south – from OECD members to emerging economies – in a phenomenon known as shifting wealth. The sustained rise of Asian economies, in particular China, has challenged the primacy of the advanced economies, as well as the alliances, institutions and ideologies through which this primacy is articulated. While this era coincided with continued acceleration of liberalisation and globalisation worldwide, the rise in South-South economic co-operation was particularly notable. However, South-South co-operation has not solely been commercial: for example, it has given rise to new dynamics in development assistance. China’s Belt and Road Initiative is perhaps the most dramatic and ambitious example.

As international transactions multiplied and interconnectedness intensified, myriad new agreements and institutions were established on a bilateral, regional and global basis, in some cases diluting the power of the institutions that had dominated multilateralism up to that point. New, non-state actors entered the global development space. Amid this fragmentation and growing complexity, the world was nonetheless able to reach three landmark agreements in 2015-16: the Sustainable Development Goals (SDGs), the Addis Ababa Action Agenda and the Paris Climate Accords.

These agreements represent a universal commitment to a fair and sustainable world in which all countries are on equal footing. The five years that followed the SDGs have failed to realise this ambition: indeed what might have been known as the SDG era currently resembles an era of crisis. As well as the COVID‑19 pandemic and the worsening environmental crises, the period has been marked by a deterioration of international co-operation that can be traced to the trends in national politics discussed in this report. The twin impulses of populism and nationalism have driven competition and rivalry between countries when co-operation is essential to confront threats to global security and to realise the vision of the SDGs. Many multilateral institutions are alive to the dangers that exist and are leading calls for bold and collaborative new approaches in the post-pandemic world but are finding it hard to forge alliances.

To escape the era of crisis requires a better understanding of where power currently lies in the international system. To rely on nation states to fix the problems of international co-operation is to overestimate sovereign power in a globalised world: countries at all income levels are, to a greater or lesser extent, locked into economic models that are socially and environmentally unsustainable. As multinational enterprises have become increasingly able to dictate terms, developing countries in particular are rewarded not only for adopting market-friendly economic policies but also for ensuring that these policies are institutionalised and insulated from domestic politics. If they refuse to abide by these terms, governments face legal sanction and lose their “investor-friendly” status. The consequence for these countries is sovereignty without autonomy; for their voters, it means freedom without choice. The cumulative effect is to undermine collective action and thus efforts to address discontent.

Yet the report contends this is not inevitable; a response can and must be found. However, current institutions – even current mind-sets – are not well adapted to the task. Governments can work with markets to address issues such as the climate crisis or SDG financing to a certain extent, but public institutions at the national and international level require the power, legal authority and global legitimacy to ensure that social and environmental sustainability take priority over economic gain. Recent advances in international tax co-operation proves that this is possible, while the SDGs provide a roadmap for the progress that is needed over the next decade.

The challenges that the world confronts today are vast and require fundamental changes in attitudes and behaviours, as well as an unprecedented degree of international co-operation. Such transformations require new approaches to multilateralism that harness the collective intelligence and imagination of people around the world, and provide platforms where these voices can be heard and where disagreements can be resolved productively. They also need a broad and fundamental acceptance that change is needed and that collective action is possible. It is possible to detect evidence of both messages in the rise of discontent around the world; ultimately, rather than being something to assuage or repress, discontent might be a phenomenon for humanity to harness.