By Parag Khanna and David Skilling
In the current phase of globalization, financial, ecological, political and social crises are occurring simultaneously and magnifying each other in unpredictable ways. From the Fukushima nuclear meltdown reshaping German politics and the European power industry, to America’s sub-prime mortgage meltdown threatening the Eurozone, such chain reactions are undermining an already fragile stability.
Large countries and blocs such as the U.S., China and the EU, and new groupings like the G-20 and the BRICS, are grappling with this unprecedented combination of structural challenges and black swans. But there is little evidence of real progress. Coordinated financial regulation remains a chimera, and domestic pressures are fueling the risk of protectionist measures and immigration barriers. The failures of the WTO’s Doha Round and the Copenhagen climate change talks are further evidence of the difficulties in making collective progress on global issues.
Perhaps we need to look elsewhere for the next generation of policy innovations. Specifically, it is small countries and city-states (or city-regions) that are the locus of creative thinking today. Unlike the G-20, which brings together 20 countries that represent over 80 percent of the world economy and population, small, advanced economies – those with populations of under 20 million people – represent about 2 percent of world GDP and population. Yet from Sweden and Denmark to Singapore and New Zealand, small states boast an impressive track record of sustained policy innovation in areas such as economic reform, public sector restructuring, healthcare delivery, and educational performance.
Because small countries are much more exposed and vulnerable to global developments, they have an acute understanding of globalization’s turbulent dynamics. They are open to the world by necessity, not choice, and have developed mature policy responses over a longer period of time. By the same token, small states tend to be good global citizens, both because they aren’t in a position to throw their weight around and also because they tend to have a large stake in global outcomes on issues such as climate change, exchange rate volatility and open markets.
By contrast, big countries aren’t too big to fail. They don’t face the same pressure to respond to emerging challenges and opportunities, and are often slower to innovate. Interestingly, modernization occurs in selected pockets in large countries. In America, for example, policy dynamism is a local phenomenon. Massachusetts leads America in healthcare standards, while Florida is experimenting with smart grids for its utilities. Meanwhile, parts of the Midwest and South have stagnated in recent years. Indeed, cities and provinces around the world are assuming a more important leadership role on global policy issues, such as the C40 grouping of cities on climate change. Even big countries seem to work better in smaller parts.
The same is true for global diplomacy. For decades it has been small states that have advanced the opening of global trade. And there are many more examples. The process spearheading global principles around sovereign wealth funds was hosted by Chile, the leading example of managing natural resource endowments for future generations comes from Norway and Singapore has led the world in economic development and urban technology and planning. All of these small states can and should actively export their ideas and experience around the world – even and especially to bigger states.
For these reasons, it makes sense for a “g-20” to convene as often as the G-20 does. The g-20 would comprise small and innovative states such as Denmark, Finland, Israel, New Zealand, Singapore, the Netherlands, the United Arab Emirates, and others. It would not be a universally representative or formal body – the G-20 is neither of these things either. And the “g-20” can be more open to inviting cities and companies with breakthrough ideas into its consultations as well.
Global governance doesn’t suffer for lack of competitive groups and agendas, but there is an urgent need for groups focused on generating breakthrough ideas. The G20 is needed, but it is not enough. It is in this spirit that the “g-20” should convene to provide a platform for small states and actors to generate ideas that can overcome the inertia and positively impact the deliberations and actions of larger powers. The world needs big ideas now. They are more likely to come from small places.
Parag Khanna is a senior research fellow at the New America Foundation, visiting senior fellow at the European Council on Foreign Relations, and author of The Second World and How to Run the World. David Skilling is founding director at Landfall Strategy Group, a Singapore-based advisory firm.