Economic development doesn't happen in a vacuum of multilateralism
by
Danny Quah
Jan 2025
Today's degrading of multilateralism is not just a problem in geopolitics. It presents a challenge in economic growth as much as does the shortage of textbooks, tablets, teachers, or any other conventional barrier to development.
Linked below is an excellent reflection by the World Bank's top economists on the challenges ahead for continued economic development. My own two cents, three-points worth to add:
- Many economies are small. Trade and interconnectedness matter to them more than ever. Of the world's richest nations, eight of the world's top 9 have an average population under 5mn, smaller than Singapore's headcount. But at the same time many small economies are poor. Why do some succeed and others fail? Trade and interconnectedness. Small states don't have the size and breadth to do diversity in production or to leverage increasing returns to scale. They produce too much of what their people can and not enough of what their people need. They will only succeed through engaging productively with the rest of the world.
2. For this, small states need an international economic system that is a level playing field: open to trade and investment, and having clear rules. That is what matters, not whether those at the top are there for historical reasons or truly deserve to be there (whatever that means), or have values that are the same as ours.
3. If such a sufficiently multilateral system is in place, then the problem of economic development becomes entirely internal: sufficient capital; a skilled hard-working population that doesn't exclude portions of their own people; domestic peace and stability; and a functioning administration operating good governance. If not, however, then on top of those internal challenges, a developing economy needs to deal also with how other nations will seek to contain its rise, as that economy's continued ascent will restrict those other nations' prospects and freedom of actions.
Recognizing this means that multilateralism, or its lack, is not just a problem in geopolitics. It is as much a challenge for economic growth as any of the other widely-accepted, conventional barriers to development.
Gill, I., and Kose,A. 2025. "Why developing economies need a new playbook", World Bank (Jan) https://blogs.worldbank.org/en/voices/why-developing-economies-need-a-new-playbook
Quah, Danny. 2024. "'Export-led Growth': The Trade-Technology Relation in Small and Poor Economies", LKYSPP Working Paper (May) https://dannyquah.github.io/In-progress.html#small-poor-trade-technology