“America will wake up” – Jean Pisani-Ferry interviewed on Die Zeit

17th April 2019
Jean Pisani-Ferry

Interview to Jean Pisani-Ferry for Die Zeit on globalisation and international collective action in the age of Trump and Xi, 17 April 2019. Thomas Fischermann conducted the interview.


DIE ZEIT: Mr. Pisani-Ferry, representatives of the International Monetary Fund (IMF) and the World Bank, and the finance ministers of the G20 nations met in Washington in mid-April. They want to take steps against the economic downturn and other global problems. But international cooperation has become unfashionable, the organizations are under pressure.

Jean Pisani-Ferry: They are under attack by powerful politicians. A certain type of politician is on the rise right now – Donald Trump in the US, Bolsonaro in Brazil, and Xi Jinping in his own way, in China. These politicians have little appetite for international collective action and they do not trust the international institutions. They see them as instruments of some global elite and as constraints on their own power.

ZEIT: And yet you declare yourself an optimist. You of all people – a Frenchman, a one-time adviser to Macron, a European economist. You believe the global order can be saved.

Pisani-Ferry: We Europeans tend to react very defensively to this issue. It’s like we’re always acting with the same paradigm in mind: Let’s preserve what we’ve got. We won’t get very far with that. But in this new world, we will still need to organize collective action in some other way.

ZEIT: Do you share the view that there is something wrong with the organizations as they are?

Pisani-Ferry: Twenty years ago, I was still convinced you could tame globalization by creating institutions to this end. I was interested in finding ways to liberalize international trade while respecting workers’ rights and the environment. We Europeans always believed the world only had to do things the way we did them. After all, we like to give ourselves common rules, laws, and institutions.

ZEIT: But there were doubts about this even then, they didn’t just start with Donald Trump.

Pisani-Ferry: Yes, the idea began to fail at the end of the nineties already. Plans for an international investment agreement and global competition watchdog came undone. We weren’t able to establish a global environmental organization, even the more modest Kyoto climate agreement failed. Mass demonstrations against the global order filled the streets…

ZEIT: …demonstrations that weren’t being organized by right-wing nationalists at that time.

Pisani-Ferry: Indeed. But these ideas failed above all because of the skepticism of emerging and developing countries. In their view, the superpower USA and the other Western nations had built a system that served their own interests. And they had forced the developing countries to open up every conceivable market without offering adequate quid pro quos.

ZEIT: There’s a lot to be said for that, even if it entails a paradox. Many politicians in emerging countries see the IMF, World Bank, and WTO as instruments of US imperialism. And President Trump wants to weaken these institutions, as he, of all people, reckons they limit his power.

Pisani-Ferry: And both sides are not completely wrong. The USA founded these institutions in the immediate aftermath of the Second World War – in part also as instruments of US power. At the same time, the USA agreed to play by the rules of these institutions. Even a country like Bangladesh could successfully sue the all-powerful USA before the WTO’s arbitration court.

ZEIT: And Trump and many other nationalists around the world won’t accept that anymore.

Pisani-Ferry: And if they succeed, we’ll have a more brutal world with even greater imbalances of power. Because experience shows that when everyone sticks to the same rules, the weakest benefit the most – even if these rules were dictated by the most powerful players.

ZEIT: You are grappling with how common rules might come about despite all the pushback.

Pisani-Ferry: We have to do that! We have huge problems, which we can only solve by acting together. Climate change, above all, but think also about the threats to biodiversity. There are threats to financial stability, there is new trade protectionism, ongoing tensions relating to migration, and cyber-security risks. All of these problems have vast numbers of global interconnections. Nation states cannot do much about them when acting on their own.

ZEIT: But how can we act jointly in a world without global treaties and institutions?

Pisani-Ferry: I suggest we pose this question anew for each problem, for each policy area.

ZEIT: Could you give an example?

Pisani-Ferry: Though challenges still remain, we have been able to successfully take joint action against the threat of a renewed financial crisis. The crucial question is how carefully countries supervise their banks. Governments have agreed standards for this – but they’re not really binding, something we would have wanted in the past!

ZEIT: What if someone doesn’t stick to what has been agreed?

Pisani-Ferry: Then there’ll be no penalties. But we do have a quite transparent monitoring system. Everyone can see which countries are in compliance and which ones aren’t. And lo and behold, other than you might think, the standards are not simply being ignored.

ZEIT: Why not?

Pisani-Ferry: Primarily out of self-interest. Each country is looking out for its own financial system, and the rules help to create stability. In parallel there is also the problem of trust. Every country wants to be sure that no other country is giving its banks unfair advantages, for example, through lax rules. That’s why transparency can have an effect all by itself – it creates trust. Another reason standards aren’t being ignored is that the financial sector has been heavily involved in formulating them. Bankers now see them as their own rules.

ZEIT: Transparency instead of coercion – that sounds interesting. But how many problems will we be able to deal with like this? Just think of the challenges posed by climate change.

Pisani-Ferry: This is the most difficult task of all. We tried to tackle climate change through a binding international agreement, the Kyoto Protocol, and we failed with that. The Paris Agreement, which was ratified in 2016, now follows a different paradigm. Each country now sets its own targets for how much it wants to contribute to climate protection.

ZEIT: But that will simply tempt countries to do as little as possible.

Pisani-Ferry: The results are really bad at the moment, worldwide CO₂ output is still rising. But the idea is one for the longer-term. The Paris Agreement also has this transparent monitoring system built into it. Everyone knows who is doing how much for climate protection. Over time, it will become more and more obvious that much more needs to be done. The pressure will grow for countries to increase their commitments to protect the climate.

ZEIT: You’re sure about that?

Pisani-Ferry: The first countries will soon begin to really feel the effects climate change. I expect the breakthrough will come when the US changes its position about protecting the climate. America will wake up because it will be badly hit by climate change. And knowing the US, it will probably impose a tax-penalty on all imports from countries not doing enough to limit CO₂ emissions. Other countries will follow suit. There will be a “Climate Club,” like the one Nobel Laureate William Nordhaus is already promoting. Whether these steps will be big and fast enough to limit the temperature rise to below two degrees is another question.

ZEIT: You mean the global crises will intensify and there will be renewed calls for joint action?

Pisani-Ferry: Yes, although I don’t see us setting up new global institutions in the near future. That would be difficult. But we still have all those existing organizations! Depending on the problem, I imagine we’ll turn to the institution that seems most suited to providing a solution.

ZEIT: Could you give an example?

Pisani-Ferry: Take the OECD …

ZEIT: … a club of 36 rich countries, based in Paris.

Pisani-Ferry: The OECD was founded in 1948 to manage international co-operation during the reconstruction of Europe. But today it does completely different things. It assesses the quality of national education systems, it is developing a new measure of national economic strength as an alternative to GDP, and it is an important player in the fight against tax avoidance.

ZEIT: Did it usurp these powers?

Pisani-Ferry: Not all by itself. The EU initially wanted to tackle the problem of tax avoidance by private individuals itself, but it was stuck. EU decisions in this area have to be taken unanimously, and representatives of tax havens had blocking minorities on the responsible committees. The US set things in motion and got governments participating in a G20 summit to ask the OECD to find a solution. The result was an agreement to abolish banking secrecy.

ZEIT: Do you have other examples?

Pisani-Ferry: Yes. A few years ago, the OECD was given a new task – the so-called BEPS initiative, which is supposed to find ways to curb tax avoidance by multinational companies. This will be a tough battle against powerful interests, including those German and French companies that shift their profits to tax havens. But the public is in favor of reform. People are fed up with having to pay taxes while some large corporations pay nothing.

ZEIT: So you have already given up on that old post-war ideal of an ordered global system with numerous institutions that regulate the coexistence of the countries of the world?

Pisani-Ferry: I’m worried about it, to be quite honest. The idea is illusory that we just have to endure Donald Trump to return to the old ways when he’s gone. But we won’t help ourselves now if we invoke a lament along the lines: We no longer have a global order, so there can be no systematic solutions and we can’t do anything! The latter is simply not true.