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Yaroslav Lissovolik

Chief Managing Director of Sberbank, Head of analytical Department of global markets Sberbank Investment Research, RIAC Member

Today’s international scene is dominated by Realpolitik – national interest reigns supreme not just at the country level, but is also strongly felt at the level of regional and global institutions. In fact, the current set-up of global governance appears to amplify these proclivities of countries rather than establish constraints on the excesses of national self-interest. A revamping of the global governance system needs to target a rebalancing of the policy of self-interest with greater responsibility of countries (particularly the largest economies) for securing global welfare, stability and international cooperation. 

Today’s international scene is dominated by Realpolitik – national interest reigns supreme not just at the country level, but is also strongly felt at the level of regional and global institutions. In fact, the current set-up of global governance appears to amplify these proclivities of countries rather than establish constraints on the excesses of national self-interest. A revamping of the global governance system needs to target a rebalancing of the policy of self-interest with greater responsibility of countries (particularly the largest economies) for securing global welfare, stability and international cooperation.

According to existing cross-country research the values of individualism appear to have become more prevalent across the globe, something that is registered at the country, regional and global levels. In particular, Henri C. Santos et al (2017) examine 51 years of data on individualistic practices and values across 77 countries. What they find is that “individualism is indeed rising in most of societies we tested. Despite dramatic shifts towards greater individualism around the world, cultural differences remain sizeable. Moreover, cultural differences are primarily linked to changes in socioeconomic development… Supplemental regional and country-specific analyses indicated that individualism rose in all the regions and most of the countries we examined”1.

According to the study the key factor accounting for the rise in individualism was the increase in the level of economic development, though this relationship had some significant exceptions: “the fact that most of the countries that did not show an increase in individualist values were among the lowest in socioeconomic development over the time period examined is consistent with the observation that socioeconomic development drove the rise in individualism. China is an exception to this pattern, showing a decrease in individualist values even though the country has experienced economic growth.2”

The domination of the ever less enlightened self-interest was given a boost and made evident since the 1990s by rising income inequality, bouts of “irrational exuberance” across financial markets, and the propagation of individualistic values in the former socialist block with oversimplified interpretation of the economic models of self-interest and rationality. The transmogrification of the former Soviet Union countries was to go from the extreme of self-sacrifice and egalitarianism to the idolization of individualism and inequality as the new vector of the moral compass. At the country level, the Western domination throughout the 1990s resulted not in an inclusive model of international cooperation, but rather unilateralism and the by-passing of the UN in pursuing geopolitical goals.

The whole algorithm of how individual self-interest leads to global welfare is far from self-evident – hence the references to the “invisible hand” as well as majestic rationality and efficient market assumptions/hypotheses. What is perhaps somewhat more credible is the possibility that individualism that is venerated at the key societal value breeds an individualistic/Realpolitik type of foreign policy. This in turn may present obstacles to building equitable and stable regional alliances, with the same holding true for global institutions in which countries strive to gain a larger share of the vote at each others’ expense. The result as game-theory would suggest is a “prisoner’s dilemma” pyramid that is built from the foundations of individual values to the level of international institutions.

It turns out that the egoism in today’s world economy is multi-dimensional and multi-layered. Within countries the society appears to be more often than not atomized and individualistic, with individualism espoused as a virtue, and collectivism perceived as a threat to individual freedoms. At the country level we are witnessing the propagation of protectionism to record high levels in various shapes and forms – from the standard tools of tariff restrictions to currency wars and non-tariff barriers. At the regional level regional integration groups are either afflicted by economic nationalism and disintegration (Brexit) or are built on principles of exclusivity and/or non-recognition of other regional blocks. At the global level international institutions that are built around the principles of the bulk of the votes being allocated to the largest economies may lead to the amplification of the Realpolitik excesses rather than the contrary effect that should be expected from global institutions.

What is the construct of the global institutions that would render global governance less susceptible to the dominance of narrow self-interest? At the level of global institutions it is a lower level of asymmetry in the share of votes across countries as well as a greater focus of the global institutions on resolving global rather than national issues. A greater level of equity across countries in global institutions would raise the level of commonality in taking decisions and would reduce the scope for the largest countries to push through their own agenda at the expense of others.

Importantly, the blueprint of the construction of global governance has never been predicated on considerations of economic efficiency, inclusivity or equitable globalism, but was at the outset based on Realpolitik considerations and was performed in a largely unilateral (i.e. Western-led) setting. A new global governance construct needs to change the balance between national self-interest and international cooperation in the world economy. It also needs to look at the economic efficiency consideration of how the global governance structure is to be formed with due account paid to issues such as externalities and spillover effects across countries and regions.

At the level regional integration groupings it is important that they are predicated on the principles of openness (something that accords with the international norms of the GATT/WTO, article XXIV) and inclusivity (UN Development Goals). Regional integration can act as a deterrent to openness or as a crucial engine of liberalization in the case of open regionalism. At this stage the rules governing the operation of RTAs are weakly enforced at the WTO level, with national and regional self-interest reigning supreme.

At the national level as well as the level of individual values greater priority needs to be accorded to supporting the most vulnerable strata of the population and addressing the high levels of inequality. Progressive income tax systems, prioritization of human capital development, most notably education and health care, countering corruption among other steps would serve to put limits on the excesses of individualism.

Overall, a rebalancing of the national self-interest with incentives for international cooperation could in part be attained through building a regional layer of global governance and a greater integration of regional arrangements with global institutions. Within such a global construct the self-interest motives of countries would be partly counterbalanced by the greater prevalence of various forms of cross-border and transnational cooperation.

Another important element in a reconstruction of global governance involving greater prominence of regionalism has to do with the need for economic policy rules over discretionary policy-making. In particular, there may be a case for a greater element of policy rules (that are typically associated with regional and global institutions) compared to the more discretionary and ad hoc pattern of policy-making at the country level. This in turn is particularly important in the midst of trade disputes and the propagation of protectionism, with regional integration becoming the key provider of economic openness and liberalization.

In the end, a moral audit of the world economy suggests that part of the story of “global imbalances” that are blamed for the world’s economic ills may have to do with an excess of national self-interest over cooperative motives across countries, regions and global institutions. Rebalancing the world economy may necessitate a reassessment of values and a shift in gears to effect a transition to a new moral “steady-state”. A wealth of research may still need to shed light on how egoism goes from being “enlightened” to “predatory” or how it gets propagated from the micro-level of individual motives to country-level egoism and then on to higher levels of global governance. Of course elements of self-interest in international politics will be inexorable and there is always going to be a palpable element of self-interest in any world order that emerges as a result of the transformations we are witnessing. But a life in a fragmented world imbued with self-interest and egocentric Realpolitik is far from fascinating compared to that of celebrating the common efforts and achievements of mankind. Maybe the world and the future generations deserve better.


1. Henri C. Santos, Michael E. W. Varnum, Igor Grossmann. Global Increases in Individualism. In Psychological Science 28(9) · July 2017
2. Henri C. Santos, Michael E. W. Varnum, Igor Grossmann. Global Increases in Individualism. In Psychological Science 28(9) · July 2017

Source: Valdai Discussion Club

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