Prior to the Upcoming Shock

How America Can Build a More Adaptive Global Economy.

The international economy will face a crisis over the next decade. While this warning may seem hasty, the last half-century has demonstrated that tragedies occur on a regular basis. Recent years have seen authorities confront not just the COVID-19 pandemic and its economic toll, but also a series of eurozone crises. These dramas occurred in the aftermath of the 2008 global financial crisis and subsequent recession, which were preceded by the trauma of 9/11. Prior to that day's terrorist attacks, the world had endured the Internet boom and bust at the turn of the millennium; Russia, East Asia, and Latin America's late 1990s exchange-rate and debt woes; painful economic adjustments at the end of the Cold War; developing-country defaults in the 1980s following the 1970s petrodollar lending binge; and stagflation. Throughout history, crises have been the norm, not the exception.

The next complication could originate from a variety of sources. Financial markets may stumble as they shift from an age of government spending and debt that was backed by an abundance of monetary liquidity to one of fiscal austerity and rising interest rates. Wildlife, cattle, other domestic animals, and people interactions will very certainly result in the spread of further zoonotic viruses. At some point, a cyberattack will bring key infrastructure to a halt. Through new platforms and decentralized systems, disruptive technologies are fighting to revolutionize established business paradigms. The globe is in the early stages of a massive and potentially discontinuous energy shift with implications comparable to those of the Industrial Revolution. The possibility of war looms. Even traditional natural calamities have the potential to destabilize communities.

Whatever its causes, the next crisis will wreak havoc on an already fragile economic system. Globally, people are frustrated and restless. Leaders worldwide, mindful of domestic politics, are refocusing their efforts on national industrial strategies and fortifying their borders. Geopolitical competition has generated mistrust among the world's leading economies, and the world appears to be fragmenting into regions drawn by economic gravity toward regional poles of power.

The legacies of previous economic regimes are attempting to adapt to these changes. The International Monetary Fund (IMF) and the World Bank's development mandates must include climate and pandemic policy. The World Trade Organization has been unable to reform its rules through negotiations, and the US has crippled the WTO dispute-resolution system by refusing to designate members to appeals tribunals.

Today's fashion dictates that the old be discarded. It yearns for dramatic, audacious transformation. The Biden administration in the United States determined that the time had come for a new New Deal. On a global scale, the cognoscenti overthrew the venerable "Washington consensus" in favor of a new geoeconomics. New economic orders have been proclaimed by planners at the United Nations, the RAND Corporation, and the World Economic Forum.

However, would-be innovators have a misunderstanding of both economic behavior and good policymaking. Economic systems evolve through ongoing change, which is frequently triggered by unforeseen and random events. They are more akin to evolutionary and ever-mutating processes than to government-directed commands. Therefore, policymakers should continually modify systems to changing situations rather than constructing unique structures to fit the current theories.

Economic diplomacy in the 2020s should prioritize resilience and adaptability. These conceptions are incompatible with the geopolitical ideals of stability and balance, as well as with the hopeful vision of reshaping the world into an ideal image. Economic diplomacy should acknowledge the fact of continual dynamism, as opposed to the expectation of perpetual war and the want for perpetual peace.

Economic statecraft in the United Nations must guide the three major multilateral economic institutions—the IMF, the World Bank, and the World Trade Organization—as they adapt to a varied range of actors, states, and international challenges. The multilateral technique of the 2020s must be capable of operating across a range of public and private networks, including regional, subnational, national, transnational, and global. Ironically, despite the fact that the United States pioneered the establishment of the major international institutions, Washington rarely considers their practical applications and makes less effort to renew them. They have endured in the face of previous tragedies, changing their mandates to assist in resolving whatever crises arose. They have facilitated prosperity for decades and, if properly resurrected, can do so for decades more.

EVOLUTIONARY ECONOMIC SITUATIONS

Political economists such as Thorstein Veblen and Joseph Schumpeter claimed in the late 1800s and early 1900s that economic conduct is complex and reflects complex reasons, emotions, events, cultures, histories, and technical advances. They felt that an evolutionary worldview grounded on biological science would enable people to better comprehend the economic activity that resulted, including periodic shocks, crises, and entrepreneurial revolutions. Schumpeter contended that the process resulted in "creative destruction," or the replacement of older, obsolete economic ideas and institutions by new ones.

Rather than that, academic economists used mathematical models to convert behavior into systems of equations that result in equilibrium. While shocks such as those that precipitated the Great Depression are possible, economists are focused on intervening to restore stability. Proponents of "rational expectations" and "efficient markets" extended the concept of rational equilibriums to its logical conclusion, believing that while individuals may behave irrationally, the market will react rationally in aggregate. Socialists, on the other hand, sought to direct markets through state planning and ownership.

Nonetheless, during the 1970s, when theories of rational and efficient markets gained traction, economic historian Charles Kindleberger offered a rebuttal. Kindleberger contended that economic systems were characterized by illogical conduct and that crises happened with "biologic regularity." He supplemented this understanding with research on international interdependence and institutional behavior, building on his actual experience as a Marshall Plan employee. This combination led Kindleberger to conclude that the world required systemic leadership that would advocate for cooperative solutions aimed at achieving global public goods, particularly during times of crisis. According to Kindleberger, the role of the leading economic power was to build and adapt to changing conditions international regimes that would support and implement such adjustments. He combined an evolutionary economic perspective with suggestions for how governments may work cooperatively to avert cross-border economic disasters. Robert Shiller, a Nobel laureate in Economics and author of Irrational Exuberance, was one of Kindleberger's students. He studied behavioral economics, a psychological subfield of biological thinking. Indeed, Shiller's latest work draws on epidemiology to examine the transmission impacts of economic events—a natural companion to pandemic thought.

The use of evolutionary economics should not be used as a justification for policy inertia. Neither should it be interpreted as a resurgence of social Darwinism. On the contrary, policymakers' processes and institutions must be adapted to changes and disruptions. However, rather than replacing pre-existing paradigms, they must maintain functional fixes that assist both national and transnational actors in coping with shocks and adjusting.

MISREPRESENTING HISTORY

The proclivity for establishing new international economic regimes dates all the way back to Bretton Woods legend. According to the enticing story, a foresighted group of Americans, with assistance from poorer but educated Britons, identified the world economic system's failings following World War I, most notably the Great Depression. Even while World War II raged on, the visionaries at Bretton Woods laid the institutional groundwork for a new international economic architecture in 1944. They formed the IMF and the World Bank (formally the International Bank for Reconstruction and Development) with the mission of managing exchange rates, facilitating payment and financial movements, financing reconstruction, and encouraging development investment. They drafted proposals for an international trade organization to facilitate business, but negotiations broke down due to disagreements about the scope of rules and restrictions.

Respect is due to the economic leaders concerned. They attempted to learn from previous mistakes when confronted with perplexing problems. They aimed to establish the institutional foundations for a thriving and peaceful global economy. They desired to eschew the divisive and ultimately harmful policies associated with blocs and autarky.

Nonetheless, as economist Benn Steil, an astute historian of Bretton Woods, has pointed out, the conference's architects devised plans based on incorrect assumptions. They assumed cooperation between the US and the Soviet Union, that Germany would be "pastoralized" following its economic collapse, that the British Empire would safely withdraw, and that the IMF's modest balance-of-payments support would rebuild global trade. By 1947, each of those assumptions had been demonstrated to be false. As a result, Europe fell into economic and political ruin, while the global economy remained dormant.

Within a few years following the conference, another group of economic experts led by US Secretary of State George Marshall and US Assistant Secretary of State William Clayton was forced to develop a new strategy. They devised the Marshall Plan, promoted economic unity in Western Europe (including the establishment of a new Federal Republic of Germany), and negotiated the General Agreement on Tariffs and Trade (GATT) in order to reduce tariffs and promote uniform norms. The Marshall Plan enabled Western European countries to work cooperatively to restore their economy. Trade restrictions were reduced, creating worldwide prospects for growth and export-led prosperity.

BREACHING, NOT BENDING

Nonetheless, the post–World War II economic structure had to evolve. Bretton Woods' fixed exchange rates endured until 1971, when the United States severed the dollar's link to gold. For several years, major economies attempted to reintroduce fixed exchange rates at various levels. However, the pursuit of a structured order for currencies gave way to another system, this time characterized by flexible, floating exchange rates.

The transition to floating rates was lengthy and challenging, made all the more difficult by the fact that abrupt changes in monetary and energy policies generated massive capital flows. France and Germany eventually opted, for various reasons, to return to fixed exchange rates and, later, to create a single currency as part of their efforts to unite Europe. Numerous emerging markets have experienced currency and debt problems. To reduce currency and price volatility, some developing countries amassed large dollar reserves and implemented "dirty floats," which enable their currencies to move but only within a specified range. However, flexible exchange rates liberated governments from the fixed constraint of preserving the value of their currencies, relying instead on markets to alter each currency's relative price.

To minimize political pressure for trade protection, the US decided in the second part of the 1980s to promote collaboration among the finance ministers and central bankers of the G-7 countries in managing trade imbalances and exchange rate differentials. As emerging economies gained prominence and the G-7 waned in relevance, the G-20 emerged as a more effective forum. For instance, the 2009 G-20 summit in London orchestrated an appropriate economic and financial regulatory response to the global financial crisis. The G-20's impact has waned in recent years as a result of its size, ideological divisions among its members, and bureaucratization.

The IMF and the World Bank, too, reacted to changing circumstances. The IMF concentrated on macroeconomic reforms—fiscal and monetary policies—and established itself as a financial firefighter for economies experiencing balance-of-payments and debt problems. It expanded into structural economic reforms, particularly for states undergoing market economy transition. Additionally, the IMF acted as an expert advisor to the G-7 and, later, the G-20 in their cooperative efforts. Eventually, the IMF assumed the task of monitoring and advising on the strength of financial institutions, alongside the Financial Stability Board, which was established in 2009.

In turn, the World Bank adapted to shifts in development experience and philosophy. Initially, it was primarily used to provide financing for postwar reconstruction in Europe and Japan, as well as infrastructure development in developing countries. However, it shifted over time to assisting in the funding of anti-poverty programs, advising on structural reforms, providing crisis support and debt restructuring, promoting private sector development, providing public goods, assisting fragile and insecure states, supporting the United Nations' Millennium and Sustainable Development Goals, and sharing experience with middle-income economies. The World Bank then redirected its efforts to infrastructure development via new financing mechanisms.

The GATT expanded from 23 to 164 members. The participants negotiated eight trade rounds, lowering tariffs, broadening the scope of covered topics, and establishing new norms. The Uruguay Round, which concluded in 1994, converted the GATT into the WTO, establishing a disciplined dispute-resolution mechanism and, ostensibly, an ongoing agenda of discussions. The WTO is the primary example of a multinational body with agreed-upon rules and a mechanism for resolving disputes. While the framework protects members' sovereign rights to reject WTO decisions, it also allows counterparties to negotiate compensation or withdraw corresponding trade gains. The laws, which are validated by a neutral tribunal, have prompted economies to remove trade barriers.

Over the 78 years since the Bretton Woods institutions were established, would-be builders have frequently proposed new international economic regimes. However, practical realities have resulted in experiences more akin to those of the 1947 leaders, who saw that the Bretton Woods system was not working as intended. Policymakers experimented as the global economic system matured, including through shocks and crises. Rather than seeking a newly manufactured stability, pragmatic officials understood that they would have to maneuver through changeable conditions on a continuous basis. The legacy institutions have not been the primary source of contention; individuals can change them to meet new requirements. When leaders fail to respond to the next phase of uncertainty, the system ossifies.

INNOVATION IN THE UNITED STATES

The most effective leaders in the United States anticipated – or at the very least recognized – altering problems. They altered established networks and organizations, or created new ones, to address unexpected concerns. They realized that leadership frequently required a combination of repurposing existing systems and inventing novel functional remedies. Schumpeter might have coined the phrase "multilateralism's creative devastation."

Today's policymakers might draw lessons from the United States' experience regarding how to construct and maintain successful adaptive systems. The primary lesson is that systems must be adaptable to changes in technology, finance, and business models. Private sector innovation is constant. Entrepreneurs' trials serve as catalysts for change. However, disruptions necessitate costly modifications.

Ironically, many foreign policy leaders in the United States have neglected the country's inventive capabilities. President Richard Nixon and his adviser Henry Kissinger envisioned a new multilateralism in the 1970s to assist control what they considered to be the United States' economic downfall. Nixon's substantial economic shifts in August 1971, when he abandoned the dollar-gold link, were intended to equalize international economic duties, much as the Nixon Doctrine emphasized more equitable security burden sharing. However, President Ronald Reagan and Secretary of State George Shultz held a more positive view of the US economy's potential to reinvent itself in the 1980s. As a result, following Nixon's abandonment of the fixed exchange rate related to gold, Shultz advocated for flexible exchange rates rather than resetting currency prices at new levels. He believed markets needed to be allowed to adjust freely.

Schultz and Kissinger at a UN Security Council meeting in New York City, September 2009 
Schultz and Kissinger at a UN Security Council meeting in New York City, September 2009 
Kevin Lamarque / Reuters

Additionally, adaptive systems identify shifts in power, whether caused by economics, technology, demographics, or military strength. Following World War II, the United States aided in the reconstruction of Europe and Japan. Throughout the 1970s and 1980s, US policy had to adjust to both countries' growing size and importance. In the 1980s and 1990s, the US began to understand the continental implications—and risks—of Mexico's transformations. Washington established a new North American cooperation with Canada, anchored by the North American Free Trade Agreement.

The United States has had to adapt in recent decades to the expanding influence—and problems—of emerging countries. China's rise has become Washington's primary external concern, despite the fact that the US has failed to articulate a coherent vision for a system that can accommodate both countries peacefully. Americans acknowledge India's future as a center of power, but they have been sluggish to recognize Southeast Asia's changing economic trends. Africa's demographics loom large in the future.

The third lesson learned from the American experience is that successful adaptive systems require domestic political support. From 1947 to the present, presidents have maintained a close eye on public opinion and forged alliances with Congress as they crafted international policies. Polls indicate that Americans respect global interconnectivity, yet public support for foreign responsibilities fluctuates. While dramatic events can capture people' attention temporarily, their attention gradually shifts to other problems. Successful political leadership has taught voters that domestic and foreign objectives are not diametrically opposed. The United States government must assist its population in adapting to change while not impeding innovation.

EXPECTATION AND ADJUSTMENT

While policymakers have difficulty forecasting events, they can and should anticipate trends. They should take into account a variety of changing characteristics of today's global economy. To begin, the globe is currently engaged in a historic fiscal-monetary experiment. Since the global financial crisis, the world's leading central banks have extended money and credit significantly. Major economies, particularly those in the developed world, have spent trillions of dollars in response to the pandemic, relying on monetary policies to purchase additional government assets. Even without making rash predictions about future inflation, pockets of excess, balance-sheet and macroeconomic vulnerabilities, or the US dollar's standing, policymakers must brace for substantial, abrupt adjustments in economic expectations, asset valuations, and financial flows across countries and markets.

Finance ministers and central bankers from big economies require a small, informal meeting to discuss macroeconomic and financial situations on a regular basis, share viewpoints, and, when necessary, act cooperatively. To avoid power struggles, the IMF could convene quarterly meetings of the major actors in the global financial system, those whose currencies are denominated in Special Drawing Rights (SDRs), the IMF's international reserve asset: China, Japan, the United Kingdom, the United States, and the eurozone countries (and the European Central Bank). These economies will need to collaborate when the next crisis strikes.

As a host and neutral institution, the IMF should provide independent assessments. The IMF's managing director might act as an economic diplomat, quietly proposing cooperative measures. The G-7, the G-20, and the IMF's broader membership would continue to work together, contributing to and broadening the reach of the core SDR group.

Additionally, such a forum could foster cooperative behaviors and a sense of shared responsibility. This mindset may aid these actors in devising solutions to issues such as developing countries' debt. Numerous developing economies now look to Beijing as their lender of last resort, but China's lack of debt transparency obstructs progress for all parties, including China itself. As reserve currency countries experiment with digital currencies and payment systems, the organization might potentially address issues of interoperability, trust, and security. While political constraints may limit or prevent cooperation, this forum could at the very least suggest positive action choices.

Economic stability is jeopardized by factors other than fiscal policy and markets. As the COVID-19 pandemic demonstrated, external, noneconomic forces like as diseases have the potential to fast trigger global economic crises, and the world is still learning how to prevent, recognize, and respond to hazardous viruses and other threats to biological security. The frequency and expense of viral disease epidemics have increased in lockstep with the fast expansion of connections between wildlife, cattle, other domestic animals, and people. Global transmission is accelerated via transportation networks. South Asia, Southeast Asia, and Sub-Saharan Africa are particularly volatile areas. The slow rate of vaccination in developing nations allows for the emergence of other variations, which could subsequently spread over the globe in destructive waves. The economic consequences of sickness have disproportionately impacted the poorest populations.

UN agencies tasked with the responsibility of enhancing the provision of global public goods, such as the World Health Organization (WHO), lack the resources and power to carry out their objectives. The real decisions are made (or vetoed) by the nation-states that comprise its governing bodies. Each institution has its own distinct political culture. Multilateral economic institutions should bolster these organizations with their experience, resources, and convening power. Even though the majority of the same governments are members of the United Nations and multilateral economic organizations, each organization is comprised of distinct ministries, power centers, and advocates.

For instance, while the world's finance ministries attempted to deal with the global financial crisis in 2008, food costs in developing countries skyrocketed. The World Bank tailored its assistance to United Nations humanitarian organizations that deal with food and agriculture, and collaborated with the WTO and the G-20 to defy export bans and increase transparency in order to avert panic and hoarding. When economist Chad Bown revisited the transparency program more than a decade later, he concluded that the improved information networks were still assisting in mitigating price spikes and export restrictions that may worsen food price concerns.

COVID-19 proved that the WHO lacks the field capabilities necessary to contain a worldwide epidemic. During the first decade of the twenty-first century, the organization aided in the establishment of GAVI, the Vaccine Alliance—a public-private partnership between the Gates Foundation, UNICEF, pharmaceutical companies, and the World Bank that assists in the development of vaccines in developing countries. COVAX, GAVI's campaign to combat COVID-19, has faltered, as have numerous national initiatives. The Economic Commission for Africa of the United Nations and the African Export-Import Bank moved quickly to coordinate vaccine suppliers, promote African vaccine production, leverage national delivery systems, and get swift financing.

A new international accord on biological security could bolster this institutional and financial collaboration. Both health and veterinary authorities must collect and exchange more accurate and timely data on zoonotic viruses. Health officials may be able to map the DNA sequences of potentially harmful diseases with the assistance of research funds. The World Bank and the US Agency for International Development should collaborate with the WHO to guarantee strong connections throughout the vaccine supply chain, particularly in impoverished nations' health systems. The United States' President's Emergency Plan for AIDS Relief, or PEPFAR, which was established over two decades ago to combat the HIV/AIDS pandemic in Africa, presents a clear yet mysteriously underused paradigm.

However, a disease epidemic is only one way for nature to contribute to an economic shock. Climate change is triggering new environmental and carbon laws, which will alter energy markets and costs throughout the course of a lengthy phase-out of fossil fuels. Disconnects will occur as a result of significant structural changes in energy sources, production, transmission, and pricing. Some of the world's largest developing economies, who are already grappling with COVID-19, will vehemently oppose paying for the changeover. The global economy will also suffer significant adaption costs.

In 2008, the World Bank secured funds for the creation of new Climate Investment Funds. The CIF tested climate solutions for developing countries in areas such as technology, resilience, energy availability, and forestation. The initial $8.5 billion leveraged approximately $70 billion in total investments. In practice, developed-country donors were willing to entrust the World Bank and regional counterparts with creative trust funds (and review mechanisms), but not to simply give cheques to developing countries.

The UN pushed for its own funding mechanism, which resulted in the establishment of the Green Climate Fund. The GCF has fought for a decade to establish scale and confidence. Meanwhile, the World Bank's CIF has been relegated to the background. Developing countries argue that higher-income states are failing to meet their commitments to assist in financing the transition to low- or zero-carbon energy. The United States and its partners require tangible modifications to break out of this stalemate; they should draw on a track record of success.

Arriving at a Green Climate Fund pledging conference in Paris, October 2019
Arriving at a Green Climate Fund pledging conference in Paris, October 2019
Pascal Rossignol / Reuters

The International Financial Reporting Standards Foundation's newly formed International Sustainability Standards Board can assist. It will develop climate disclosure standards that should provide trustworthy, comparative environmental data to investors in 130 countries. Investors, customers, and regulators are putting pressure on businesses to clarify their carbon-neutral promises and energy transition strategies. Climate risks are being factored into the financial evaluations of banks, other lenders, and countries by around 100 financial authorities and the IMF. Taken together, these advances are laying the groundwork for the construction of a data infrastructure for carbon credit markets. The World Bank should connect development projects to institutional investors through the establishment of new, massive, liquid carbon finance markets, in which carbon financial products will be tracked and traded similarly to other commodities.

The energy industry is not the only one that has the potential to destabilize the global economy or that would benefit from increased monitoring and oversight. Digital and data flows will progressively support the global economy in the coming years. Even prior to the pandemic, growth in manufactured goods trade had slowed significantly, while trade in services had accelerated. The pandemic economy has exacerbated this tendency, since digital connectivity enables even more extensive and diverse increases in services. However, the norms and regulations governing the interchange of data and digital products remain ambiguous. Conflicts will increase in frequency. Cyberattacks will bring critical information systems to a halt.

The United States has historically been a leader in promoting new international regulations and standards, in part because American corporations have been at the bleeding edge of innovative operations. However, economic and technical processes are advancing at a breakneck pace now, with little multilateral supervision. Washington should be developing new laws for digital commerce, initially in collaboration with like-minded allies. The standards should facilitate the cross-border transmission of digital services and data while allowing countries to determine their own levels of security, safety, and privacy.

However, applying these new US-made laws globally will prove challenging. The United States is always at odds with China, the world's second largest economy. Both have undermined the international economic system that has facilitated the former's unmatched power and the latter's historic rise. Both have demonstrated a lack of interest in sponsoring systemic reforms.

Washington must decide if it is capable of cooperating practically with Beijing on mutually beneficial issues. At times, US policy currently seeks to constrain, contain, disconnect, or penalize China's economy. On other instances, Washington has demanded that China increase its purchases of US exports and improve its treatment of US companies—steps that would further integration. At times, the US wishes for China to follow rules, whether international or domestic, but at other times, the US acts as if China is too large, bullying, or untrustworthy to operate reliably under any system of norms. US strategies must also take into account the interests of the US's allies and partners, who cannot envision China's containment or complete decoupling.

When Kindleberger examined the origins of the Great Depression, he emphasized the absence of a dominant country that would act in the system's best interests as well as its own. The United Kingdom possessed experience but lacked the capacity to lead in the 1930s; the United States have potential but lacked the disposition or experience. Additionally, Kindleberger cautioned that leadership abdication or dispute would result in deadlock and economic suffering. He would have been concerned about today's tensions between the United States and China.

The US will almost certainly adopt a hybrid approach toward China, combining exclusion, involvement, and possibly even cooperation. In doing so, the US will need to decide if it chooses to explore adaptive techniques with China or to fight Chinese participation on a broad scale. If the world's two largest economies are at odds, the world economy is unlikely to evolve firmly and resiliently.

The WTO's plight exemplifies the difficulty of adjusting multilateral institutions to new conditions in an era when national governments are more interested in political posturing than in constructing meaningful, if flawed, cooperation frameworks. Globalization's opponents have criticized the WTO's rules while simultaneously demanding new international laws to advance their preferred causes. Others have claimed that WTO rules should take their preferences into account—whether or not there is a negotiation process. Despite the fact that the United States has won the great majority of WTO cases it has brought—and has used litigation to achieve gains in other situations—certain US interests have objected to losing any lawsuits at all. The US administration has laid blame for bad WTO verdicts on the WTO's Appellate Body and crippled the institution by delaying appointments. Rather than striving to reform the WTO, the Biden administration has thus far joined the chorus of critics.

AVOIDING PERMANENT EXTINCTION

Globalization's forces have not withdrawn. Consider the difficulties associated with climate change, biological security, migration, and financial and data movements. However, globalization's governance has weakened and fragmented, and individuals around the world appear detached. These circumstances help to explain the allure of developing new, far-reaching economic systems. However, they will be ineffective.

Since the Great Depression, the United States' economic diplomacy has been most successful when officials paired a vision for an open, cooperative, and mutually beneficial international economic system with a problem-solving mindset. Americans have adapted pragmatically to a range of forces and events. They have implicitly understood that the international economy, whether totally capitalist or socialism, behaves more like an evolving organism than a rational model. The objective has been to cultivate economic resilience.

Resilient systems do not avoid hazards; in fact, taking calculated risks contributes to economic success. A robust, adaptive system's primary goal is to avoid tipping points or negative spirals that could result in extinction. Multilateral economic institutions and regimes can assist national governments and private sector actors in surviving and adapting to shocks and changes. They can foresee trends, promote cooperation, act as buffers, recommend redundancies, organize resources, give knowledge and ongoing education, facilitate discussion, and assist in dispute resolution. However, they adjust gradually and rely on the cooperation of their member countries. Multilateral institutions should now broaden their economic and development mandates to include transnational concerns, in collaboration with UN agencies specializing in health, the environment, migration and refugees, and food and agriculture. Additionally, they can contribute to the economic, governance, and legal foundations for security in conflict-torn states and areas.

According to economist Markus Brunnermeier, resilient and adaptive economic systems are a natural complement to free and open societies. Transparency, open information, and solutions obtained via the collaborative efforts of numerous private and independent actors enable such systems to thrive. Free-flowing information facilitates adjustment by establishing feedback loops. By contrast, authoritarian regimes respond to crises by attempting to suppress disruptions. They choose controls, just as Beijing did with COVID-19. When shocked, open societies and economic systems appear fragile, but are more likely to recover through adaptation. The United States, the United Kingdom, and the European Union have created world-class vaccinations and treatments; they are likely to survive future pandemic waves using a mix of high-quality vaccines, natural immunity, and therapies. China will have to choose between stringent regulations and adjusting to virus outbreaks that will inevitably affect its population. A disproportionate dependence on suppression will result in China's isolation.

The US has been most successful when it has created multinational coalitions that have permitted other participants to pursue their own national and systemic objectives alongside Washington. The country will not become safer by fleeing behind walls and borders, nor will it achieve security by toppling the established order and following chimeras. Washington must recover its capacity to respond pragmatically to changing circumstances. As West German chancellor Helmut Schmidt stated in the late 1970s, "Those who see visions should consult a physician."

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