EBRD Office, Washington D.C., USA
EBRD Rooftop View
Welcome, ladies and gentlemen, to the EBRD’s home in North America.
It seems like only yesterday that I was here to open our DC office.
We want to do even more business with US, Canadian and Mexican firms.
But we also want our office here to be a forum for ideas.
We want to gain a better understanding of what the thinking is on this side of the pond. And we want to share with you our thoughts about what’s happening in our regions.
As for my remarks today, let me say they may sound a bit combative.
This EBRD Rooftop View is about globalisation, yes.
But its title is ‘Globalisation: the fight back’.
Ten years ago the globalisers defined the contours of political and economic debate. No longer.
But the globalisers have not been replaced by a new creed. Rather a case of back to the future.
To a world of growing populism, of economic nationalism, of threats to close borders, to build walls. And growing social and religious intolerance.
The EBRD, dedicated to open markets, swam with the tide of economic liberalism. It was and is the globalisers’ bank. In recent years our very mandate has been implicitly challenged. In some of our transition countries, those which had gained most from the free movement of capital and labour, and which had built institutions that aided transition, there is now a different clarion call.
So the time has come for some home truths, ladies and gentlemen.
We need to restate the benefits of globalisation, the freer movement of capital, goods, services, people and ideas that has connected our world in ways previously unimaginable.
And to remind the sceptics what economic integration, a vital condition for globalisation, has achieved in the past and what we rely on it to do in the future.
At the same time we should be honest about globalisation’s flaws. It is not perfect. The wealth that it has created has not led to opportunities for everyone and its benefits are sometimes spread unequally.
So, the globalisation that I advocate and the EBRD pursues and implements is not just about making economies more competitive.
We also need policies that will boost inclusion and fight inequality.
These are not just ends in themselves. Promoting inclusion and combatting inequality will help make economies more productive too.
Our understanding of what globalisation is and what it should be is not static. It’s evolving.
But only by working closer together can we deliver the real priorities for our world.
Priorities such as the Sustainable Development Goals, approved by global leaders only a year ago.
In restating the arguments for globalisation and for the policies making it more inclusive and equitable let me also make the case for internationalism, the notion that nation states should aspire to deeper cooperation for the greater good of all.
And for multilateralism, the practice whereby those same countries collaborate through bodies such as the international financial institutions and multilateral development banks.
Many of you here today may be thinking that all this is a statement of the obvious.
And yet we all know that the cause of internationalism and the arguments in favour of globalisation are being challenged.
Certainly in my lifetime I cannot remember anything like the scepticism about these values that we see today.
Indeed, I feel sometimes that the main ideological battle of our times is no longer between Left and Right, but between those who believe in Open and those who believe in Closed societies.
Drawbridge up versus drawbridge down, as the Economist put it a few weeks ago.
We hear voices out there suggesting that globalisation is making the problems we face worse.
Or even that globalisation, not the failures of government to address those problems, is actually the cause of some of them.
Such voices advocate a pause in the momentum for greater integration.
Some even argue for rolling it back.
Globalisation is the root of all evil, some say
- The EBRD story
The EBRD’s own history illustrates why.
We were created only 25 years ago so it’s a relatively brief history so far.
Then, as now, the EBRD’s goal was to develop open and sustainable market economies in countries committed to, and applying, democratic principles.
Our founders commended ‘the importance of close and coordinated cooperation’ to help ‘economies become more internationally competitive’.
The EBRD, when it was created, was envisaged as a multilateral financial institution of a new kind.
It would act as ‘a unique structure of co-operation in Europe’, our founding document insisted.
As such, true to its internationalist and multilateral principles, in the last quarter of a century we have invested more than €110 billion in thousands of projects, most of them in the private sector.
We’ve done so in Europe, Asia and, more recently, in what we call the Southern and Eastern Mediterranean.
Over those 25 years, we have seen the role of the private sector enhanced, entrepreneurship encouraged, market competition boosted and emerging economies much more integrated into global supply chains.
Given the circumstances of our birth, soon after the fall of the Berlin Wall, we are, of course, a child of the end of the Cold War.
The values that inspired our creation were very much of their time.
Our purpose was defined as fostering ‘transition towards open market-oriented economies’.
But those values were not actually born in those heady years that witnessed the collapse of Communism on our continent.
Economic integration was one of the values that inspired the miraculous rebuilding of Western Europe after the destruction wrought by World War Two and, one might add, the Great Depression of the 1930s.
Go even further back in history and you see how free trade helped power the expansion of the global economy in the 19th century as well.
- Integration as a strategic priority for the EBRD
Today, integration, a key element of globalisation, is absolutely central to our impact as a Bank.
In fact, along with boosting our countries’ economic resilience and addressing global challenges such as climate change, promoting economic integration is one of our three strategic priorities.
We see economic integration as a powerful force promoting efficient markets and reform.
Wherever we work, we encourage integration within our different regions and between them and global markets.
It increases competition in product markets.
It widens the range of financing sources available for investment.
It allows countries to opt into institutional arrangements of a higher standard.
And, across the EBRD’s regions, it imposes strict discipline on governance, legal, regulatory and other institutions.
Openness to international markets, globalisation if you will, also spurs investment and innovation within businesses and economies as a whole.
If this sounds all rather abstract, let me put it another way.
We believe economic integration, and through it globalisation, empower entrepreneurs and consumers alike.
And create new incentives and opportunities for everybody involved in a modern economy.
So we support integration through cross-border financial flows and investment, trade finance, infrastructure, improved skills and standards in SMEs, policy dialogue and partnerships with institutional investors.
- What more internationalism can achieve
So much for the way integration defines what we do across our countries of operation.
But we at the EBRD are also engaged in an even bigger and more ambitious project, the new international agenda as articulated by the SDGs and COP 21.
An agenda which can deliver sustainable growth, more opportunities and better quality of life for all, as well as, we hope, limit global warming.
Today, more than ever, we need collective will and collective action to address these global challenges that are complex and interconnected.
This new agenda is inspired by a vision that is universal in scope.
It requires integrated solutions at scale.
And it will call on substantial input from many different actors, among them nation states and multilateral development banks such as ourselves.
We recognise that the MDBs have a major role to play in delivering this agenda.
For the EBRD, in particular, this means a focus on working with the private sector to raise the investments needed to make the agenda a reality.
Indeed, the MDBs as a whole are one of the key engines of funding for development - either directly or by catalysing other public and private resources.
If you’re a national government and looking for the best return on your investment in this field, then the MDBs provide a very efficient way of doing so.
MDBs also provide much needed policy advice and technical assistance supporting countries to identify priority investments with the right standards.
For instance, to build up the capacity for infrastructure, they continue to work together on joint platforms such as the PPP Knowledge Lab, the International Infrastructure Support System, the PPP Certification Program, and a global refresh of Infrascope.
If major nation states are going to spend the next few years looking ever inwards, then how much more important is it that we MDBs take the broader, more long-term view.
- A new globalisation
The EBRD’s experience highlights the importance of that broader, long-term perspective.
We’ve been guided by the values of internationalism ever since our creation.
We’ve always seen economic integration as one of the most effective vehicles for advancing its cause.
But our experience also offers a vision of how much more these values can deliver in the future – and how sometimes they might be reimagined to address new challenges.
The last few decades of globalisation have transformed our lives.
We see this in the countries where the EBRD invests, as well as other emerging markets and the advanced economies.
And, yes, at the same time we see that the rewards of globalisation have not been distributed equally. There have been losers as well as winners.
This is not news to us.
Although, to listen to some of our opponents, you might be forgiven for thinking that this insight is somehow theirs alone.
That the ‘global elites’, as embodied by the international financial institutions, have been wilfully blind to this phenomenon.
And that we have nothing to contribute to the debate about it, let alone any remedies for the problem.
In fact, we at the EBRD were one of the first to spot it.
That’s one of the reasons we’ve been reviewing our definition of what a successful modern economy is.
If, in the past, the overriding imperative was that it should be competitive, now it needs to be more than that.
The qualities that make for success today are those of inclusiveness and good governance.
Successful modern economies need to be green.
They need to be resilient, able to withstand the shocks that different cycles can inflict on them.
And, last but not least, they need to be integrated.
These are the qualities we want from the globalisation of the future.
The qualities that will drive sustainable growth that can deliver better lives for all.
And we need growth because, without it, inclusion on its own merely redistributes an existing, finite pie.
The EBRD does not have a magic wand which can make our vision of the future come true - just like that.
But we are already working closely with national and municipal governments, the private sector, civil society and other international partners to help make it happen.
And what of the alternatives?
What do protectionism and isolationism have to offer the challenges facing the EBRD’s regions, stretching from Morocco in the West to Mongolia in the East, and Estonia in the North to Egypt in the South?
What good would reversing the trend towards greater integration and shelving new trade agreements do?
Would it counter the negative effects of sluggish or non-existent growth on the EBRD regions as they emerge, still, from the financial crisis of the last decade?
Of course not.
Nor would it make up the shortfalls in investment that make reenergising that growth so hard.
It would do nothing to counter the threat to our societies posed by rising inequality.
We’re on the ground, helping some of our countries deal with an influx of millions of refugees.
Would isolationism resolve that particular crisis?
And it has nothing to say about climate change, an area in which we are pioneers of the private sector approach to growing the green economy.
On all these fronts – and many more - ‘going it alone’ is not the answer.
We are doing the opposite.
We are actively going out and looking for new partners to work with and strengthening our relationships with our existing friends and clients.
That’s especially true of other MDBs, where we launched joint projects with the AIIB as soon as it opened for business.
It is no coincidence, by the way, that one of the partners we work most closely with – the European Union - shares our internationalist values. Integration is at the very heart of what the European Union stands for, after all.
Ladies and gentlemen, I am concerned that supporters of globalisation and everything it has done for our world are ceding ground to our opponents.
Perhaps, for now, we are on the defensive.
But it is time to fight back.
Yes, we need to do a better job of delivering growth and distributing its fruits more equitably.
The best way to do that is to create greater opportunities for all, opportunities that transcend gender, race or social background.
And to improve access to markets, global or otherwise.
Whether literally, through new physical infrastructure, or via enhanced access to financial services.
So better globalisation, not less of it.
An important part of that fight back, at least the EBRD’s contribution to it, will come in the shape of our next Transition Report, to be launched in a month’s time.
It will look at equal opportunities in an unequal world and examine some of the real reasons for inequality – and suggest remedies for it.
Make no mistake, nation states will have to do a lot of that work themselves.
But they can only succeed in this, and the broader international agenda as outlined in the SDGs, if they do a better job of working together.
For the greater good of all.