The New International Economic Order:
The Post Pandemic Global Economy
Remark by Takehiko Nakao
Mizuho Research InstituteAt the Online Conference by Japan Economic Foundation &The Chicago Council on Global Affairs
January 15, 2021
1. Globalization and multilateralism after the Covid-19 pandemici.

Essential functions of sovereign states which are backed by taxpayers
and voters, and provides services including health and social security.

ii.

Need for adjustment to hyper-globalization (national security,
prevention of pandemic, protection of intellectual property, risk ofdisruption of supply chains, management of migration).

iii.

Yet, globalization is irrevocable and will continue. Trade andinteractions between people and countries have been a main driver ofprogress from the beginning of human history.

iv.

Great gains of Asian economies from GVC (global value chain) after
they departed from import-substitution and socialist influence.

v.

Multilateralism is necessary to collaborate for global issues including
peace, climate change, SDGs, trade, taxation, harmonization ofstandards, and assistance to developing countries.

vi.

Needed efforts to address increasing inequality within countries(taxation, public services such as public education and health) to foster
positive attitude toward globalization and multilateralism.

vii.

Need to address problems of IT platform companies (taxation acrossnational boundaries, antitrust policies, privacy, data protection).
12. Competition of regimes, market vs state-guided economy, and democracyvs authoritarian regimei.

Critical advantage of market economy over central control andsocialism. Consensus in Asian developing countries.

ii.

China’s growth has been based on outward-oriented policies andmarket since the Reform and Opening Up in 1977.

iii.

Japan’s development has been promoted by the private sector in theMeiji modernization and post-war high growth.

iv.

Important government roles for i) institution building andenforcement, ii) provision of public goods (including R&D), iii)
addressing externalities, iv) macroeconomic stability, and v)
redistribution of income and wealth.

v.

Democracy and the liberal political system comprising election by all,separation of powers, human rights including freedom of speech,
protection of property rights, are non-replaceable.

vi.

But democracy and the authoritarian regime is not zero/one option.
Many countries have combinations of them.

vii.

Democracy by free election is not almighty and requires certain
conditions such as capable media and bureaucracy, and tradition of
separation of powers as the situations after the Arab Spring reveal.

viii.

Even in established democracies, need to tackle challenges todemocracy in terms of short-sighted populism and chauvinism under
the influence of SNS, resentment for increasing inequality, and loss ofauthority of elites (intellectuals, media and public officials).

ix.

Need to sustain the liberal order as this is based on people’s natural
wishes and represents gains of human society. It is also fundamental tothe sustainable development of society.
23. New International Orderi.

The US and China should not be entrapped in the “Thucydides Trap”
as if an emerging power and an existing hegemon are destined to havea conflict. Better to avoid “decoupling” for everyone.

ii.

No need to repeat history: ① economic integration is no comparison
to Germany and France in the pre-WWI period; ② the threat of total
annihilation by nuclear war is still valid; ③ what China wants is “tomake China great” again after its long humiliation since the Opium
War, and not the Soviet type ambition of communist revolution all over
the world; and ④ we are no longer in the world of imperialism,
colonization and racial discrimination.

iii.

China should understand the serious difference between the way it
wants to view and explain itself and the way others see China. China is
not a mere developing country. China is already a great power in termsof economy, industry, finance, technology, and military presence,
which affect countries in the world. Assertive attitudes would damage
its own national interest. China would be respected even more if it acts
more moderately instead of rushing to project its power.

iv.

One realistic option is “pax-Americana, more moderate version”. The
US still has a non-contestable power including military and soft power,
and is urged to continue to contribute to the stability of theinternational community which is in turn the US interest.

v.

US Allies and like-minded countries should cooperate and make theircontributions to keep the US engaged in international affairs. No needto escalate confrontation, while power balance remains critical.

vi.

Japan can play an important role as a trusted ally of the US, and as aclose nation to China with deep historical and cultural interactions.
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