Economic Principles for A New World

Order of Multipolarity and Multilateralism

Danny Quah∗

April 2024
[Link to latest version]

Abstract
This paper argues that, besides geopolitical and security factors, eco-
nomic variables are key drivers for world order. While this is not
the first time world order is splintering, economic interconnectedness
traditionally raised fragmentation costs and thus served to hold the
world together. Now, however, the logic is reversed: economic integra-
tion is, instead, a prime contributor to fragmentation. New mindsets
are, therefore, needed. The paper proposes three guiding principles
for world order: First, build mechanisms for inadvertent cooperation,
requiring for success not explicit collaboration but just individual-
nations advancing self-interest; second, separate out problem domains
where only zero-sum outcomes are available from those where mu-
tual gain is available, possibly by nudges; and third, provide space
for constrained multilateralism—whether plurilateral, minilateral, or
otherwise—that is open and inclusive, and that will allow full-blown
multilateralism to re-emerge where possible.

JEL: F13, F15, F42, F50, F51, F52, F53, F55,

Keywords: global economic order; epic fail; fragmentation; hegemony; in-
advertent cooperation; minilateralism; plurilateralism; zero-sum

∗
Lee Kuan Yew School of Public Policy, NUS, [email protected]. The author is
also Faculty Associate, Centre on Asia and Globalisation. He thanks for helpful com-
ments Chatib Basri, Michael E. Cox, Mari Pangestu, Dani Rodrik, Joe Stiglitz, Heiwai
Tang, Alessio Terzi, and participants at the Medellin 2023 IEA World Congress, the 2024
India-in-Asia Conference, and LKYSPP International Relations and LKYSPP Economics
Brownbag workshops.
 1 INTRODUCTION

1 Introduction
If world order is fragmenting, that provides opportunity to reconstruct the
international system. But to do so effectively requires first understanding
the drivers underlying the fragmentation, and then putting in place a design
that takes into account and uses to advantage those centrifugal forces.
World order is the operating environment for the global community—
the cross section of nations with diverse self-interests, at different stages
of development, with populations seeing different levels of income. That
global community chooses to hew to the international system’s rules, norms,
and conventions when the benefits to doing so exceed the costs of deviating.
Subject to remaining within an accepted locus of flexibility and dissent, not
all nations need take precisely identical trajectories of practice. World order
faces pressures to fragment when the choices that nations make are mutu-
ally inconsistent or otherwise put pressure on the boundaries of acceptable
behaviour.
This paper builds on the state of the international system as described in
Georgieva (2023), Gopinath (2024), and others, to propose principles for a
world order that works, not necessarily optimally, but just reasonably well.
The traditional thinking is that most geopolitical and security concerns,
all else equal, tend to lead to ever greater world fragmentation, as values,
interventions, and threat perceptions all collide ever more obviously. Thus,
such geopolitical and security considerations naturally provide a centrifugal
force to the international system. In that traditional thinking, however,
the global community also values how economic integration—international
trade, foreign investment, cross-border flows of finance, ideas, and people—
make for increased efficiency, production diversification, economies of scale,
and thus increased prosperity, and so provides a centripetal force to hold
the world together. World order holds in balance these centripetal and
centrifugal forces.
The fragmentation of world order described in, among others, Aiyar
et al. (2023); Georgieva (2023); Gopinath (2024) reflects an increase in cen-
trifugal forces, and is predicted to precipitate not only a decline in economic
prosperity worldwide but an increase in the likelihood of international vio-
lent conflict. The proposal in the current paper shares the same motivations
as Gopinath (2024), Rodrik and Walt (2022), Stiglitz and Rodrik (2024),
Tucker (2022), Vines (2023), and others, who seek to repair or navigate

2
 1 INTRODUCTION

world order’s fragmentation.

However, unlike many others, this paper takes an opposing view on the
role of economic factors in world order. The paper suggests that economic
considerations now provide not a centripetal tendency but instead have
joined the driving forces for world fragmentation. The reason is simple:
Economic integration is no longer unambiguously viewed positively in many
of the world’s polities.1 This is not to deny for trade, say, the theory of
comparative advantage or that international trade improves global well-
being on net. Instead, it is a statement to distinguish collective global
well-being from individual nation objectives. Sovereign nations can only
seek to advance national interests. Whether global well-being improves as
a result is a by-product that attracts little weight in a nation’s decision
processes.2
The current conjuncture is one where for economic integration there is
perceived to be a divergence between global goals and national objectives.
One powerful driver for this is that trade is perceived to lead to increased
income inequality. But the effect is more general: It arises from the simple
fact that economic integration changes prices. Those who see prices move
against them will obviously oppose further economic integration (Quah,
2024). People correctly associate a decline in their output price with layoffs,
unemployment, and factory closings; they don’t see their price fall as a
signal they should re-tool and learn how to program computers.
Previously, pursuing geopolitical or security goals that put up barri-
ers to economic integration come at economic cost to oneself and one’s
allies. Policymakers would be reconciled to the idea that that cost was,
unfortunately, necessary. Now, however, that economic cost has turned to
economic benefit. Across significant parts of Western Europe and the US, it
1
Closely related but different from this is that there have long been economists who
have warned on risks inherent to globalisation, e.g., Rodrik (2011) and Stiglitz (2002).
Arguments that parallel my China Shock argument in Section 3.1 include that of “im-
port dependence” in O’Rourke (2024) and “financial indebtedness” in Stiglitz and Rodrik
(2024). Section 3 will explain the relation between these reasonings and my own.
2
As impressed upon me by readers of early versions of this paper, this is not to say that
the underlying economics has changed. It is, instead, that the policy actions I highlight
are taken by actors different from those traditionally studied. My approach focuses on
individual effects, not overall systemic well-being. While this might appear unconventional
to some, it is no different from when analysis focuses on inequality effects, rather than
aggregate or representative-agent well-being.

3
 1 INTRODUCTION

is the so-called “China Shock” (Section 3.1 that has grown uppermost in the
thinking of policymakers, where trade with China is viewed to be “taking
our jobs, hollowing out our industry, stealing our intellectual property”.
Thus, the traditionally opposing drivers in world order have now aligned
instead. This multicollinearity of different forces all working in sync con-
founds attribution of the ultimate cause for world fragmentation. Policy
discussion finds it progressively less relevant to unpack if international dis-
agreement is genuinely because of discord on political values or because
one’s economy is no longer competitive along traditional lines and, thus,
can no longer generate sufficient prosperity for one’s citizens. Language
such as “working to impede China’s advance” or “deter China” have become
conventional, with different political and economic stakeholders interpolat-
ing into them whatever meaning is convenient.
This alignment of centrifugal forces means simply urging cooperation
between nations will be even less likely to be effective in reducing world
fragmentation (Gaspar, Hagan, and Obstfeld, 2018; Sanders, 2023; United
Nations, 2021). Instead, more helpful will be principles that are finetuned
to work against each of the different causes.
The analysis in this paper seeks to provide mechanisms that help keep
together world order, even with this turn around in perspective. On the
economic reasoning that underlies the paper’s proposals, e.g., the analysis
of “inadvertent cooperation”, the closest previous study is Armstrong and
Quah (2023). That latter, however, draws still on a traditional model of
economic and security considerations working in opposition to each other.
By contrast, the current analysis develops the hypothesis that those drivers
now work in the same direction. This paper thus advocates principles that
seek to keep world order from further fragmenting, even when geopolitical,
security, and economic forces are all working to worsen fragmentation.
The remainder of this paper is organized as follows. Section 2 sets
out how this paper conceptualises world order. The underlying ideas here
will be familiar to most readers but the atypical language recasting will
help present more efficiently the subsequent economic analysis. Section 3
develops the hypothesis that economic considerations now work alongside
geopolitical and security concerns to worsen world fragmentation. Section 4
advances the principles for stabilizing world order. Finally, a brief summary
is provided in the concluding Section 5.

4
 2 WORLD ORDER AND ITS FRAGMENTATION

2 World Order and Its Fragmentation

By world order I mean a particular setting for the rules, norms, and conven-
tions that govern the behaviour of nations towards one another. Examples
of such settings might include rule of law; freedom of navigation; respect
for national sovereignty and territorial integrity; procedures for interna-
tional dispute resolution; agreement on the parameters for flows of labour,
capital, and goods and services (including digital versions of these); and so
on.
International institutions such as the IMF, World Bank, and the World
Trade Organization are concrete manifestations of rules and conventions,
and so are included in the definition of world order. Nations are part
of a world order when they subscribe to that order’s rules, norms, and
conventions.
World order does not have to be official: Part of world order is the
world reserve currency, which is an unofficial naming of some currency to
global pre-eminence that emerges through hundreds of millions of unco-
ordinated savings and exchange choices by individuals and financial insti-
tutions across the world. World order can also show multiplicity without
inconsistency: history and logic both allow multiple co-equal world reserve
currencies circulating alongside one another.
World order assumes the entire world is the cross section of nations
that subscribe to it, but of course, when appropriate, the definition allows
natural forking into subdefinitions of regional orders. Absence of rules is,
by logic, also a rule, just a particularly simple one. Hence, anarchy is
also an instance of world order. World order includes the possibility of
disorderliness.
Sovereign nations choose their own systems of government: therefore,
in a world order that includes independent self-determination and national
sovereignty, labels such as democracy or autocracy are not necessarily help-
ful. Historically, however, labels like these have been used to categorize
blocs of nations across the world. The collection of all possible “rules,
norms, and conventions” constitute a high-dimensional mathematical space;
a particular world order is just a point in that space. As world order evolves,
a trajectory of points is traced out in the space of possible world orders.
International economic relations constitute an important subset of world
order. World order, thus, typically includes rules that govern international

5
 2 WORLD ORDER AND ITS FRAGMENTATION

trade and foreign investment, as well as principles and procedures for trade
and investment dispute resolution. Rules here might seek to establish not
just the principles of exchange but also the nature of economic competi-
tion across nations, conditions under which market economies become no
longer market economies because of, say, excessive state intervention, and
so on. For concreteness when needed, this economics-directed subset of
world order will be referred to as the global economic order.
World order fragments when one or more of the following occur. The
cross-section of nations can de facto partition into separate blocs, each
seeking to have progressively less to do with others. Alternatively, nations
can put pressure on the boundaries of the locus of acceptable behaviours.
The order-rule of national sovereignty, for instance, would be tested by
a foreign power’s seeking regime change or prosecuting military invasion
or interfering with a nation’s domestic political affairs. When its global
economic order is globalization-oriented then world order fragments when
nations set up barriers to trade and foreign investment.
World order can adapt to fragmentation pressures in different ways.
The rules that constitute an order might be rewritten to increase the lo-
cus of flexibility: this keeps within the fold those members seeking to de-
viate from the original rules. Or world order might partition into non-
overlapping, non-interacting sub-orders, perhaps dividing geographically,
or by differences in political systems or alternative approaches to economic
organization: world order then comprises not a single consistent system
but becomes a (mathematical set) union of disjoint sub-orders.

2.1 Models for Stable World Order

Great Power competition provides a concrete framing for this analysis. Call
Great Powers those nations that show a discrete upwards separation from
other nations in population count, economic size, military capabilities, or
resources generally. A branch of Realist theory hypothesises that conflict
between incumbent and rising Great Powers erupts with high probability
at a time of Power Transition (Allison, 2017; Mearsheimer, 2014).
Different formalisations for this are possible. The standard model hy-
pothesises that nations seek to maximize the probability of their survival
subject to feasibility constraints. Under assumptions such as how survival
probability is reduced if one is not the most powerful nation, such an op-

6
 2 WORLD ORDER AND ITS FRAGMENTATION

timization program has solution that instructs the incumbent to contain

its rising competitor at such time when marginal benefit to containment
just equals marginal cost. That critical instant is hypothesised to occur
at a specific point in the trajectory of the rising power relative to the in-
cumbent, before parity. Under these assumptions, Realist theory predicts
the likelihood of world fragmentation is maximised at the point of power
transition.
This model’s structure of cause and effect can be alternatively described.
Although not just “might makes right”, the Power Transition model hews
to Thucydides’s description that “the strong do what they will; the weak
suffer what they must”.3
A related but logically distinct structure is represented by Hegemonic
Stability Theory (Keohane, 1984; Kindleberger, 1973): the model here asks
what can hold together the world’s cross-section of nations when each of
those nations is continually buffeted by exogenous shocks. Examples of
such disturbances include the collapse of consumer and investor confidence
so that unemployment rises, in turn worsening a vicious cycle of recession-
ary tendencies; macroeconomic instabilities or financial crises; and natural
disasters in specific nations. In the model, global stability is maintained
by having a hegemon—a nation with sufficient concentration of power and
resources—capable of serving as benevolent banker, consumer, lender, and
security officer of last resort.
Yet a third example is represented by the hypothesis that nations raise
their security stance when they notice competitors doing so. Whether the
initial impetus was indeed taken with a goal of offense or, alternatively just
for defense, the hypthesis is that under uncertainty, the potential responder
will just follow suit. This is called the Security Dilemma, with the possi-
bility of a vicious cycle of tit-for-tat responses (Jervis, 1976; Tang, 2009).
In Security Dilemma too, unipolarity implies stability: a Great Power that
is far and away superior to all others would not see need to respond, and
so the Security Dilemma spiral would not begin.
3
I have translated this to say the strong do what they will, not just what they can,
which is how the statement appears in Strassler (1996, 5.88, Book Five). As a matter of
logic, both strong and weak always do what they can; it is impossible to do what one
cannot. Observing merely that the strong do what they can fails to provide meaningful
contrast to the weak suffering what they must.

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 2 WORLD ORDER AND ITS FRAGMENTATION

2.2 Multipolarity as Causal Variable

In all these quite different models, the distribution of power across nations
determines global outcomes. Indeed, in many conceptualizations of world
order, the power distribution across national players is the critical causal
factor for the dynamics of the international system.
The traditional social science language used to describe power distri-
bution follows probability theory: a unimodal, single-peaked distribution
of power and resources is called unipolarity, where there is marked concen-
tration around a single point. A bimodal or twin-peaked distribution is
bipolarity, with concentration around two distinct points. More generally, a
multi-peaked distribution of power across nations is multipolarity. In Power
Transition, Hegemonic Stability, and Security Dilemma theories, as well as
many others, unipolarity, bipolarity, and multipolarity all have different
predictions for the stability of world order.
From a perspective of egalitarianism, it might seem desirable to have the
world multipolar or even, in the limit, displaying a uniform distribution of
power with each nation representing a peak as much as any other. For world
order, however, many models predict that it is, instead, unipolarity—the
most unequal distributions of power—that allows world order to be least
fractured and most stable.
Hegemonic Stability Theory displays this most clearly. There, the rank-
ing of nations by power—just a single feature of the distribution of power—
is the critical determinant of world order. When the system’s degree of
multipolarity rises, the gains from the hegemon providing global public
goods declines. The gains that the hegemon draws from providing for the
entire community of nations are shared more and more with others, equi-
tably. At the margin, the incentive to provide for the entire system falls.
Thus, the forces for hegemonic stability declines, and thus the potential for
fracture and instability increases.
As previously already discussed, Power Transition theory takes ranking
and the competition over it to be the system’s causal driver. While the ri-
valry to be lead nation is most visibly consequential, that contest between
nations at ranks 1 and 2 extends seamlessly to nations at ranks n and n + 1
for all n. The greater the power to affect world outcomes, the more im-
pactful and destabilizing will be this rivalry across the distribution. Thus,
here again, multipolarity destabilizes world order.

8
 2 WORLD ORDER AND ITS FRAGMENTATION

For easy description hereafter, unipolarity, bipolarity, and yet other

forms are usefully considered as just different values along the axis of polar-
ity, i.e., they are simply different degrees of multipolarity. The conclusion
from this quick overview can be stated succinctly: Multipolarity is causal
for world order, with the degree of multipolarity determining the stability
of the international system.

2.3 Multilateralism as Outcome Variable

If the degree of multipolarity is causal for world order, then the degree of
multilateralism is one of its outcomes.
In common language and practitioner usage, multilateralism is under-
stood to be that feature of the international system, covering primarily
trade and security relations but potentially others as well, that assures ap-
propriate fair and equal treatment across nations. Thus, multilateralism is
when there is a sufficiently dense combination of the following three ele-
ments: (1) an inclusive and level playing field for cross-country engagement,
including notably an equal-access open trading system; (2) a nondiscrimi-
natory, rules-based order; and (3) a default expectation of collaboration on
addressing international challenges.4
An important implication of multilateralism is the most-favoured-nation
(MFN) idea, extending the concept from its traditional usage in trade,
where treatment by one nation of another under favorable terms calls for
immediate extension of such treatment to all nations. A second key conse-
quence of multilateralism is it enhances every individual nation’s security
because a threat to any one nation activates rules and collaboration that
bring together all, thus raising collective security in defence of the threat-
ened member. The critical part of this, as with MFN, is anonymity, i.e.,
that there is no a priori identification of either the threat or the targeted
victim. The principles of multilateralism apply anonymously and fairly to
both unknown antagonist and unknown target. Finally, a third significant
implication is that large nations don’t take advantage of smaller ones by
dint of might and power. Logically equivalent, multilateralism can also
be taken to comprise three differently-stated principles: (1) indivisibility
4
This conceptualisation of multilateralism is that more typical both in ordinary lan-
guage and in international relations scholarship. Although related, it is distinct from how,
in economics, we refer to “multilateral institutions”, e.g., Maggi (1999), where what is
meant is, in essence, dealing with more than two parties, i.e., is more than bilateral.

9
 2 WORLD ORDER AND ITS FRAGMENTATION

of interests; (2) reciprocity; and (3) commitment to peaceful resolution of

disputes (Kahler, 1992; Ruggie, 1992).
All else equal, multilateralism is obviously highly valued by small states.
By its striving for a level playing field, multilateralism privileges, at the
margin, those with less power over those with more, those that are small
over those large.

2.4 A World Order Equality Paradox

Multipolarity and multilateralism jointly form a paradox in world order. If
high concentration of power, i.e., unipolarity, makes for stability in world
order, why is strong multilateralism—i.e., diffusion of privilege away from
the powerful—to be expected for the international system? Some act of
conscious intervention must be present if a stable unipolar world order is
to be made multilateral. Inequality in cause would not otherwise imply
equality in outcome.5 Indeed, it was at the height of US-centered unipo-
larity, that in the view of some observers, peak multilateralism emerged:

Multilateralism, international governance of the “many,” was de-

fined by the United States after 1945 in terms of certain prin-
ciples, particularly opposition to bilateral and discriminatory
arrangements that were believed to enhance the leverage of the
powerful over the weak and to increase international conflict.
Postwar multilateralism also expressed an impulse to univer-
sality (John Ruggie’s “generalized organizing principles”) that
implied relatively low barriers to participation in these arrange-
ments.
(Kahler, 1992, p. 681)

Conversely, therefore, as the world grows more equal and control over re-
sources rises in non-traditional global centers of excellence, will the decline
5
Stiglitz and Rodrik (2024) suggest that the equality implicit in late 20th-century mul-
tilateralism was more in name than in reality. In their view the multilateralism of that
time was designed with sufficient logical backdoors to allow the US to continue to project
its unipolar hegemonic wishes. But compared to the current state of the world, with the
strongest endorsers of that brand of multilateralism now withdrawing their support, the
Stiglitz-Rodrik argument highlights even more the paradox I indicate here when multipo-
larity threatens even faux multilateralism.

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 3 ECONOMIC INTERDEPENDENCE

in unipolarity—the rising degree of multipolarity—lead now to instability

and fragmentation?

3 Economic Interdependence
US-China rivalry is the most obvious driver for current fragmentation of
world order. But to understand how its lessons might extend beyond the
specifics of this period of history, it is important to unpack the underlying
cause and propagation mechanism. Moreover, this US-China competition is
not taking place in isolation. From the discussion in Section 2, this specific
US-China fragmentation needs also to be considered against the backdrop
of a general rise in multipolarity.
US-China geopolitical rivalry today is regularly compared to the Cold
War of the mid 20th century. Such language is suggestive of the same
deep geopolitical and security concerns as then experienced. During the
Cold War, the US-Soviet arms race saw the Soviet Union build its nuclear
weapons, army, and air force to where Soviet military capabilities matched
those of the US. This was from a starting point with the Soviets and the
US just coming out of co-equal combat against the Nazis in World War 2.
It was therefore relatively easier for the Soviet Union to do. In the Cold
War, the US (and the West more generally) contended with an alterna-
tive political system actively promoting communism to replace democracy
and capitalism. Across the emerging world, the Soviet Union sought influ-
ence, supported regimes that threatened their neighbors, and encouraged
communist insurgency movements that destabilized nations. There is little
question that in the Cold War the West’s security and way of life were
under threat.
Today, however, these same Cold War characteristics are more difficult
to document credibly in US-China relations. The US is, without question,
the world’s most powerful military force in every measure, including in
strategic alliances, advanced technology, and global extent. Even if its
military expenditure is rapidly rising, China comes nowhere close to the US
in aggregate defense spending, force projection (whether aircraft carriers or
anything else), and aircraft technology. With China having four times the
population of the US, its annual military spending remains under a third.
The situation is significantly different from that in the Cold War between
the US and a highly militarized, post World War 2 Soviet Union.

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 3 ECONOMIC INTERDEPENDENCE

China remains communist in name but its economic system draws in-
spiration from capitalism. The last four decades of China’s economic devel-
opment has been driven by massive flows of foreign capital into a manufac-
turing sector that operates to exacting global standards on its production
outputs, and that seeks to maximise profit, not promote socialist ideals.
True, China’s economy is not entirely free market, but in this, China is not
markedly different from many Western economies. A significant fraction of
China’s markets are arguably more competitive than those in many democ-
racies, both emerging and mature and both West and East. Many Chinese
companies routinely suffer losses and go under. If, in business, Chinese in-
dustry practice were to replace the West’s, Western workers might well find
it disconcerting, but not because those practices threatened the Western
way of life in favour of bloated lazy socialism. Instead, the opposite.
As did the Soviet Union, China seeks influence across the world. But
in this, China is exactly like all other nations, democracies or otherwise.
Unlike with the Soviet Union, however, there is no credible evidence that
China wants international communism to replace democratic capitalism.
To be sure, China’s military rapid-modernization, influence operations,
retaliatory economic sanctions, actions in the South China Sea, and cy-
berhacking activity obviously attract concern worldwide (e.g., BBC, 2023;
Kolstad, 2020; Mozur and Buckley, 2021; Wong, 2024). Equally unhelpful,
however, has been US arbitrariness and inconsistency on key international
agreements. While the US draws on the principles underlying the 1982
United Nations Convention on the Law of the Sea (UNCLOS) and insists
on Freedom of Navigation access to the South China Sea, it refuses to be-
come an UNCLOS signatory (Beckman, 2022). The US’s official agreement
with China includes the One China Policy that “ ‘acknowledges the Chinese
position that there is but one China and Taiwan is part of China’ and that
the PRC is the ‘sole legal government of China’ ”. However, the US will
now and then test its own stated policy by insisting that acknowledgement
differs from agreement, and acting as if it viewed Taiwan as a separate
sovereign state (Maizland, 2024).
This veering between positions shows up most sharply and most recently
in the US approach on industrial policy. The US targeted sharp criticism
through the 1980s at East Asia’s leading economies—Japan, South Korea,
Taiwan, Singapore—as they engaged in state policies to help reposition
their industry landscapes. Japan-bashing (White, 1985) was only the most

12
 3 ECONOMIC INTERDEPENDENCE

visible manifestation of this. But at least one could make the case that when
these Asian economies undertook industrial policy, it was to improve their
productivity, upgrade their skills and human capital, and develop their
economies. Inadvertently, these waves of Asian industrial policy raised the
level of competition and sharpened efficiency. On the other hand, US in-
dustrial policy today—the CHIPS and Science Act, the Inflation Reduction
Act—can too often come across as initiating a race to the bottom, rather
than to the top, and seem designed to inflict damage to competitors as
much as to raise American productivity.6
All such actions test the boundaries of rules-based order. But they are,
in the main, not confined to just US-China rivalry nor to states having
different values and political systems. All states with capability engage
similarly. For example, the US’s National Security Agency (NSA) has been
documented as follows:

Through a program called PRISM, the NSA was able to demand

access, under Section 702 of the Foreign Intelligence Surveil-
lance Act (FISA) Amendment Act of 2008, to data of non-US
citizens stored at most of the American technology giants, in-
cluding Google, Apple, Facebook, and Microsoft. This gave
the NSA the ability to collect and analyze the e-mails, texts,
chats, phone calls, Facebook posts, tweets, and documents of
people worldwide. Through a process the NSA calls upstream
collection, it taps directly into the cables and networks pass-
ing through the United States. Huge amounts of data traveling
across AT&T, Verizon, and other networks are copied, and then
the data of non-US citizens is selected for analysis based on
certain government criteria.
(Segal, 2016, p. 21)

Just as informative as fact is attitude. When the US was accused of spying

on then German Chancellor Angela Merkel, the response by an American
commentator was not to deny but to suggest that those angered were either
naive or disingenuous:
6
To be clear, this does not deny the benefits that industrial policy can potentially bring
both the nation and the global community (Juhasz, Lane, and Rodrik, 2023). Instead,
the criticism here points to industrial policy as economic statecraft, not industrial policy
as economic policy.

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 3 ECONOMIC INTERDEPENDENCE

Countries have a justified interest in informing themselves about

the goings-on and prospective developments around the world,
including in friendly countries. (Braw, 2021)

None of this is to suggest “two wrongs make a right” or that geopolitical

and security concerns are out of place. Given the range of competing
arguments, it helps to be clear about the relative strengths of the different
forces at work, not least for properly calibrating the tradeoff between the
benefit and cost of disrupting world order.

3.1 Not another Cold War: China Shock

If US-China rivalry is not drawn from the same roots as the Cold War, are
there nonetheless understandable legitimate considerations for geopoliti-
cal competition? There are indeed such concerns, with—in my view—the
clearest and most compelling being simply just economic competition.
Nowhere in writings on the Cold War, even those as magisterial and
encompassing as Westad (2017) say, is there expressed the idea that the
Soviets were “taking American jobs, hollowing out American industry, steal-
ing America’s intellectual property.” Such charges simply never featured
in the list of grievances between the US and the Soviet Union. They are,
however, high among the factors driving US-China rivalry today. I will
hereafter refer to this configuration of concerns (and other related economic
developments) as the China Shock.
This is important because there are observers who argue that, even con-
ditional on all the security and geopolitical concerns previously mentioned,
further fragmentation of world order—complete decoupling of US-China
trade relations, for instance—remains unlikely. The title “The Price of
Fragmentation” of the IMF Managing Director’s article (Georgieva, 2023)
makes clear the concerns over the magnitude of the global costs of world
fragmentation: seven percent of global GDP, “the combined GDP of France
and Germany and more than three times the size of the entire sub-Saharan
African economy” (Georgieva, 2023, p. 135). Such an aggregate concern is
rightly the domain of any institution that represents the entire community
of nations. As Aiyar et al. (2023) put it, “the benefits of globalization and
multilateralism are worth preserving”. This, appropriately, is an accurate
description of the collective outcome.

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 3 ECONOMIC INTERDEPENDENCE

But policymakers in individual nations act not on concerns about that

collective outcome. Instead, they act only on concerns over their own
national well-being. Even if positively correlated, global collective and
inidividual national interests are not identical. Global costs might well be
large, but at the same time, each nation might feel it can free-ride and not
suffer for it.
To be clear, for national policymakers, Gopinath (2024) explicitly de-
scribes how they “undoubtedly face difficult trade-offs between minimizing
the costs of fragmentation and maximizing security and resilience.” But
yet other scholars such as Nye (2021), while not as explicit as the IMF,
go further and reckon that the solution to the optimization problem that
Gopinath describes will show sufficiently daunting weight on the costs of
fragmentation. Thus, Nye speaks of the deep economic interdependence
between the US and China and suggests further attempts to decouple the
two economies would engender “enormous costs”, presumably at the na-
tional level not just globally.
While the global price to fragmentation is almost surely significant, that
individual nations internalize those costs is, this paper suggests, doubtful.
Political debate in many Western economies, and most notably the US,
provide little evidence that there is explicit acknowledgement of the bene-
fits of economic integration. Instead, there is generalized concern about the
costs that advanced Western economies are having to endure for it. Thus,
the China Shock is viewed to be paramount by individual nation policy-
makers, even if all realize that that disturbance comes with a rise in the
well-being of the entire global economy. In each nation that latter change
is discounted as irrelevant.
A world with increased multipolarity is described as one where the “ben-
efits advanced economies derive from supporting global public goods, such
as international trade, are increasingly shared with other countries” (Gas-
par et al., 2018) This description is positive—it points out everyone wins.
However, it also says that in a perspective of relative gains, traditional cen-
tres of power lose from the improvement in equality across nations. The
change is not just general but geographically directional, and so ends up
magnifying geopolitical concerns. The measurable shift in the world’s eco-
nomic centre of gravity is eastwards (Quah, 2011), and diminishes the 20th-
century concentration of hegemonic power in the Transatlantic economies.
In the framework of Section 2, as the world has become more multipolar,

15
 3 ECONOMIC INTERDEPENDENCE

and thus more equal, the tendency towards instability in world order has
also grown.
In this analysis, it is the China Shock that has been behind the calls for
decoupling and de-risking actions against China. It is not the decoupling
or de-risking or the differences between them that matters; instead, it is de-
China that counts. The shock component rests foremost in the economics of
“taking our jobs, hollowing out our industry, stealing our intellectual prop-
erty”. Whether this is because the US is simply uncompetitive or because
China cheats—through its business practices, its state collaboration with
industry, and its manipulating the value of the Chinese RMB—relative to
its status as developing nation is a matter that remains still to be decided
based on evidence and international adjudication.7
There are likely two added dimensions to the China Shock that are
important to make explicit. First is that the decline in unipolarity has
been far more rapid than many expert observers expected. Allison et al.
(2021, p. 1) describe how as late as the turn of the millennium,

Time Magazine’s special issue Beyond 2000 asserted confidently:

“China cannot grow into an industrial giant in the 21st century.
Its population is too large and its gross domestic product is too
small.” With a per capita income at roughly the same level as
Guyana and the Philippines, most Chinese did not have enough
money to buy advanced technological products — let alone the
resources to invent them.

This was not just wishful thinking but the logical conclusion of a widely-
accepted view on how China’s economic foundations engaged with modern
production modalities:

... according to the dominant school of thought at the time,

as noted by China scholar William Kirby in the Harvard Busi-
ness Review, many believed “China largely a land of rule-bound
rote learners”. Advances in information technology could only
be made in free societies by free thinkers, not under an author-
itarian regime behind a firewall, the logic went.
(Allison et al., 2021, pp. 1–2)
7
The careful analysis in Autor, Dorn, and Hanson (2013) and the large ensuing litera-
ture provide important insights in this ongoing debate.

16
 3 ECONOMIC INTERDEPENDENCE

The second dimension is that this economic progress did not come
with the attendant political changes that, again, many expert observers
expected. In March 2000 then-President Clinton remarked that China at-
tempting to control the Internet would be like “trying to nail Jell-O to
the wall” 8 (Clinton, 2000). Political theories developed in, e.g., Fukuyama
(1992); Lipset (1959) led many to expect that China’s political system
would converge towards Western-style liberal democracy as its per capita
income rose and social and economic structures modernized. This failed to
take place.
My argument that the China Shock adds an economic dimension to
world fragmentation is consistent with but not the same as a number of
other important ideas about economic forces and disruptions to world order.
O’Rourke (2024) refers to an aversion to “import dependence” that can
emerge when nations are mistrustful of one another. Stiglitz and Rodrik
(2024) describe how, with unexamined capital market openness, “financial
indebtedness” can arise that can then lead to foreign interference. Yes,
these do suggest economic openness will not repair geopolitical and security
fracturing. However, these work because of a fear of ill-intent from one’s
trading partners. So, in these analyses, it is the risk of aggressive action by
the other nation that drives how trade affects international relations. In
contrast, my China Shock description kicks even when all ill will is absent
and the trading partner intends only good things for one’s own nation. In
that sense, the China Shock idea is far more dangerous: it applies even
when all appears to be otherwise safe.
Gowa (2015) describes how geopolitical considerations have, historically,
conditioned trade flows. Then one’s own trading bloc is populated mostly
with one’s allies, while trade across blocs is, by definition, with one’s an-
tagonists. Then the more inter-bloc trade there is, the more acute is the
perception that one is not self-sufficient, even together with one’s allies,
and thus the greater is the incentive to acquire by conquest what one’s al-
lies cannot provide. This too is a scenario where increased trade increases
fragmentation. The Gowa mechanism is not unrealistic but it does assume
that already drawn are the lines of fracture into blocs of allies and rivals.
8
Interestingly, Clinton also said at that same time to his American audience “Most of
the critics of the China WTO agreement do not seriously question its economic benefits.”
This, again, is the central part of my China shock emphasis: What was expected then
turned out to be so much at odds with the reality that unfolded.

17
 3 ECONOMIC INTERDEPENDENCE

In contrast, the China Shock mechanism is one that endogenizes those lines
of fracture, so a presumptive ally can turn into a geopolitical rival.
Finally, while the China Shock is the most relevant current develop-
ment, similar features had in the 1980s manifested for US-Japan relations
(Vogel, 1979; White, 1985). Then too surprise was expressed about how
determinedly and quickly Japan moved from dependence on the West, after
World War 2, to superior economic and technological achievement. Then
too did American policymakers make reference to geopolitics and security,
even with Japan obviously already democratic and firmly in America’s Pa-
cific Alliance. In an influential, widely-read piece on how Japan raced
ahead, White (1985) wrote:

But the more important thing that went wrong (. . . ) was almost
too simple to consider. If all people of the world were entitled to
equally free trade, then the cheapest producers would be those
who paid their people least, yet mastered world-class technol-
ogy. In other words, nations whose workers were grateful for
starvation wages could conquer the markets of countries like
America, whose workers demanded the world’s highest wages.

Economics says, of course, those other nations don’t have to pay exactly
starvation wages, just wages lower than in “countries like America”. White
warned that it wouldn’t be just Japan that mattered in this analysis but
“behind loom China and India, desperate as they are to raise their stan-
dards of living—at the expense of American standards, if necessary”. In
this reasoning is not just Japan that stands ready to compete against the
US thus but also China and India. Indeed, every single time in the article
White compared China with Japan, India is always mentioned alongside
the former. Given that China and India are, and were, the only two nations
with a workforce approaching a billion each, the juxtaposition is natural.
But what this analysis also highlights is that any nation—whether autoc-
racy or democracy—that ends up in the same economic position relative to
the US will come under the same scrutiny on its economic profile. Disap-
pointment, therefore, might lie ahead for those nations today—Vietnam,
India, Mexico—that imagine themselves benefiting from US-China conflict
by playing a strategy of being America’s “China plus 1”, i.e., seeking to
take up those parts of the global supply chain that China is now forced
to relinquish. There is every reason why “plus 1” nations could eventually

18
 4 NEW PRINCIPLES

become themselves the target of US-X rivalry, just as X has shifted from
Japan to China.
This Section has argued that, together with geopolitical and security
concerns fragmenting the world, economic considerations matter as well.
Moreover, those economic considerations cannot be relied on to provide
countervailing forces against world fragmentation. The Georgieva-Gopinath-
Nye emphasis on how economic integration raises the cost of fragmentation
is a global collective argument; it does not apply for policymaking in indi-
vidual nations.

4 New Principles
The reasoning from Sections 2–3 cautions that world fragmentation might,
with even higher likelihood, imminently worsen. The countervailing force
that some observers hope will emerge from considerations of economic inte-
gration is likely weaker than those of geopolitics and security. Alternatively,
whether or not the geopolitical and security considerations are genuine and
profound, what matters is their alignment of the centrifugal force now seen
to be emerging from economic relations.
The parameters of this challenge of global fragmentation therefore make
urgent the need for some mechanism that can help check the destabilizing
dynamics that are already in place.9 This section suggests four principles
to help reduce further world fragmentation. As the analysis will become
relatively abstract, it is helpful to set down first what those principles will
turn out to be.
The first principle: use nations’ self-interests: look for problem domains
where inadvertent cooperation arises, i.e., where nations even though only
looking out for just their self-interest end up, inadvertently, improving the
collective good. This is not to say nations are actively seek to draw down
the collective good to benefit themselves. Instead, it refers to when nations
are indifferent on matters outside their individual well-being: whether the
collective good rises or falls is not their concern. Inadvertent cooperation
occurs when collective well-being rises even though there is no conscious
attempt at collaboration. In Adam Smith’s words, “It is not from the
9
Recent work with goals and approach closest to the current paper are Rodrik and
Walt (2022), Stiglitz and Rodrik (2024), Tucker (2022), and Vines (2023), although our
formalisms and proposals end up quite different.

19
 4 NEW PRINCIPLES

benevolence of the butcher, the brewer, or the baker, that we expect our
dinner, but from their regard to their own interest.” 10
Second, divide and conquer: across those problems that world order sees
as challenge, some admit inadvertent cooperation (or come close); others
are zero-sum problems; yet others show epic fail features, i.e., have equilib-
ria under individual optimization that, for all nations, are unambiguously
strictly worse than other outcomes that are feasible but are not equilibria.
Prisoners’ Dilemma games are examples of these. Epic fail challenges are
not zero-sum problems; they are worse. Separating out these three differ-
ent kinds of global challenges help focus the design of guidelines and rules,
and thus help reduce the fragmentation of world order. Under certain con-
ditions, epic fail problems offer the possiblity of third party nudges, i.e.,
small side-payments, judiciously applied, can produce a large shift in the
equilibrium outcome, away from where everyone loses to where everyone
wins. Such nudges, therefore, represent an individual-centered way to solve
a collective action problem.
Third, if multilateralism does not emerge as an equilibrium for all the
nations in a particular world order, restricting membership might help.
Plurilateralism is a constrained multilateralism where within its member-
ship all the features of multilateralism apply, but that plurilateral member-
ship is only a strict subset of the entire community of nations. All nations
are free to join or leave a plurilateral system, but the requirement is that
those within must obey its rules while those outside are not permitted to
disrupt. By remaining open and inclusive in potential membership while
requiring certain codes of behaviour for those inside, a plurilateral system
can be effective in delivering a restricted multilateralism and, addition-
ally, can permit full-blown multilateralism to re-emerge when the larger
community sees benefit for all.
The remainder of this section provides an analytical framework, using
basic game theory, to illustrate the workings of these principles. The dis-
cussion will vary across a range of different payoff matrices to describe
alternative scenarios, and consider situations where side-payments enter
the frame. International Relations research has a long and fruitful his-
tory using such a methodology to provide a unified approach to different
Economists will recognise how if there is a price system this is just the Fundamental
10

Theorem of Welfare Economics.

20
 4 NEW PRINCIPLES

Trade Autarky
Trade (+100, +100) (+95, +90)
Autarky (+90, +95) (−100, −100)

Table 1: Inadvertent cooperation. In the standard Ricardian comparative advantage model,

trade is good for all even when each nation acts only on their own self-serving instincts.
No explicit coordination is needed. In the table, deviation by any nation into the Autarky
strategy inflicts self-harm, regardless what the other nation does. But correspondingly,
the Trade strategy is always preferred by the nation independent of the other nation’s
actions, i.e., Trade is a dominant strategy.

models11 (Axelrod and Keohane, 1985).

Following the discussion in Section 2 I will use the payoff matrices that
follow to describe the situation for the Great Powers. Throughout, I will
also refer to other nations: Since the players explicit in the game are the
Great Powers, the other nations are middle powers and small states, i.e.,
third nations. The situation for these fall outside the explicit accounting in
these payoff matrices but I will bring them into the discussion as needed.

4.1 Inadvertent Cooperation

Begin with the standard Ricardian comparative advantage scenario in Eco-
nomics, where trade makes everyone better off. Embedded in this scenario
is that any price-taking economy is better off unilaterally seeking free trade,
even if its trading partners don’t fully open their borders.
Table 1 presents a payoff matrix that illustrates the intuition underlying
inadvertent cooperation. In the Table, each nation will end up playing the
Trade strategy, regardless of expectation on what the other nation does.
Thus, although no explicit coordination mechanism is in place, the Trade
equilibrium emerges spontaneously.
The policy challenge, obviously, is that not every international engage-
ment in world order will come with a payoff matrix having the same es-
sential features as Table 1. For payoff structures close to but not allowing
11
Applying a framework of repeated games and deploying the folk theorem (Friedman,
1971) would uncover a richer and more elaborate discussion than is developed below.
Employing those ideas is reserved for future development: the current paper seeks only
the simplest frameworks possible to frame the forces relevant in these settings.

21
 4 NEW PRINCIPLES

inadvertent cooperation, a policymaker can seek to perturb the payoff en-

tries to bring about a desired outcome trade (or cooperation) outcome even
though nations seek only individual self-advancement. Thus, in variations
of Table 1 that would otherwise shift equilibrium towards Autarky and
away from Trade, what work (for small enough variations of the Table)
to induce inadvertent cooperation is to slightly penalise those strategies
that make Autarky a desirable strategy. It is in this spirit that Ruge and
Quah (2024) suggest issue-linkage international policies (Axelrod and Keo-
hane, 1985, p. 239), tying trade to considerations such as climate change
and inequality. Then, if a nation contemplates autarky, its inequality out-
come worsens through the international policies in place. This incentivises
trade but at a cost to the international authorities. Even if such policies
end up distorting away from untramelled free trade, at least they forestall
full-blown protectionism.

4.2 Epic Fail: A Zero-Sum Game isn’t Tragic

Define an epic fail game to be when every equilibrium outcome is for all
players worse than some other outcome, regardless whether the comparator
outcome is an equilibrium.
Contrast the epic fail idea, to be formalized in Table 3 to follow, with
the more familiar zero-sum game in Table 2, where every outcome has that
one nation gains only when the other nation loses.
Cross-nation interactions provide many examples of zero-sum games.
Power Transition—as described in Section 2—between the numbers 1 and
2 nations, by power rank, is a zero-sum game: number 2 only ever becomes
number 1, when number 1 loses its lead position. Indeed, extrapolating,
every situation where ranking matters is a zero-sum game. Along the same
lines, international relations engagements where relative (rather than abso-
lute) gains are what nations care (Powell, 1991) about are zero-sum games.
Territorial disputes are, by the logic of physical reality, zero-sum games. Fi-
nally, geopolitical rivalry that partitions world order into different spheres
of influence is a zero-sum game: bystander nations can below to one and
only one sphere. Selecting a sphere of influence means relinquishing mem-
bership in all others.
With zero-sum games, there is no room for compromise. No pertur-

22
 4 NEW PRINCIPLES

Silent Cheap Talk

Silent (0, 0) (−1, +1)
Cheap Talk (+1, −1) (0, 0)

Table 2: Zero-sum Game. Regardless of specific actions by different nations, whatever one
nation gains is exactly that the other loses. The contest imagined here is over the loyalty
of an unidentifed “Useful Idiot” (UI), who will work for any player but is easily swayed
by cheap talk. If both players play Silent the UI sitting in the middle between them
works half the time for one, half the time for the other. Normalize the payoffs when that
happens as (0, 0). If one player plies UI with Cheap Talk and the other player stays Silent,
the first player win over UI’s loyalty and services, and so gains +1 while the other player
loses UI’s services altogether, ending up with −1. Since there is only a single UI, what
one player wins is exactly what the other player loses. Equilibrium is (Cheap Talk, Cheap
Talk) but notice that the other diagonal entry (Silent, Silent) is not socially preferred to
the equilibrium. This is unlike an epic fail setting such as Table 3, where everyone can
agree Collaboration is preferred but is simply not reachable. Indeed, in this zero-sum game,
there is no other outcome preferred unanimously by everyone to the equilibrium (Cheap
Talk, Cheap Talk).

bation to the equilibrium outcome will result in an unambiguous gain.12

Thus, there is no purpose in attempting to intervene in such a scenario.
The principle here is just to leave be those nations intent on playing a
zero-sum game.
Despite its regular invocation to describe geopolitical challenge, a zero-
sum game such as that in Table 2 is not epic fail as the latter’s first condition
fails: there is no outcome where everyone gains. A zero-sum game might
imply equilibria where some nation reckons it should have done better. But
such a zero-sum outcome does not carry the social tragedy implied by an
epic fail.
Stiglitz and Rodrik (2024) invoke economic examples of Beggar-Thy-
Neighbor (BTN) policies to illustrate the harm of zero-sum thinking. Be-
cause BTN policies can be modelled more explicitly than I can with just
payoff matrices, Stiglitz and Rodrik (2024) can show behaviours that are
richer than just zero-sum possibilities. A BTN policy that diverts aggregate
demand, say, from a neighboring nation to one’s own, in a strict one-for-one
way, is of course zero-sum. However, a policy that harms one’s rival that
12
Indeed, every outcome in a zero-sum game, equilibrium or otherwise, is Pareto effi-
cient.

23
 4 NEW PRINCIPLES

either does not bring one benefit or actually does self-harm (as long as it
harms one’s rival more) is also BTN: only, the outcome is not zero- but
negative-sum. Such a potentially epic-fail outcome leads to the next class
of possibilities that I turn to now.
A Prisoners’ Dilemma game is an example of epic fail. In Table 3 the
equilibrium, where both nations play Confront, is worse than the non-
equilibrium outcome, where both play Collaborate.
Conversely, however, there are epic fail games that are not Prisoners
Dilemma games. This is because epic fail specifies fewer restrictions on non-
equilibrium and equilibrium outcomes than do Prisoners’ Dilemma games.
Over-fishing a common resource, for instance, is an epic fail game but is
not a Prisoners’ Dilemma.13 Failing to act on the global climate crisis is a
significant example of epic fail: all can agree unanimous mitigation would
be an unambiguous social improvement, but if everyone else is already
taking the right action, then one nation’s continuing to burn fossil fuels
benefits itself.
In the epic fail game of Table 3 the unique equilibrium has payoff proper-
ties strictly worse than another outcome that is feasible. However, gridlock
at the bad unique equilibrium keeps nations there, since those nations seek
to advance their self-interest individually, in the absence of an explicit co-
operation mechanism. In such situations, small nudges can dramatically
shift the equilibrium. In the matrix of Table 3 describing payoffs to the
Great Power nations, a side-payment of 1.1% (say) from other nations to
the two Great Powers in favour of Cooperate will shift equilibrium away
from Confront.
Epic fail characterises many of the most important issues live in inter-
national policymaking. It is epic fail situations where there is greatest need
13
When there is a finite common resource, fishing inflicts a negative externality on all
other fisher-folk. We say over-fishing because that negative externality is not internalised
when the individual works out the optimal amount of fishing to be done. Epic fails can
occur even when equilibrium is not unique whereas the Prisoners’ dilemma has a unique
equilibrium that is clearly the worst outcome for everyone. While this precision in logic
is important, more critical for the purposes of this paper, however, is that the Prisoners’
Dilemma game conveys the wrong message for the geopolitical rivalry situation of interest.
In Prisoners’ Dilemma the cooperative outcome sets both prisoners free. That is good for
the prisoners but not particularly so for the rest of society overall, i.e., the international
community in our setting. Much better is to use a language that shows the desirability of
the win-win outcome.

24
 4 NEW PRINCIPLES

Cooperate Confront
Cooperate (+100, +100) (−101, +101)
Confront (+101, −101) (−100, −100)

Table 3: Epic Fail. This game relabels the payoff structure of the classical Prisoners’
Dilemma game to highlight that (Cooperate, Cooperate) is not that undesirable social out-
come where, in the usual interpretation, both prisoners get away unpunished. Here, that
outcome is actually good for society overall as much as it is for the two players. The
unique equilibrium in the game is (−100, −100) with both nations playing Confront, while
the (+100, +100) Cooperate outcome, that is both feasible and better for everyone, is not
an equilibrium.

for some institution or mechanism to solve the collective action problem.

One leading example is techno-nationalism where each nation seeks to
get ahead and ends up duplicating costly experiments, and where no one
shares research ideas. Scientific progress is faster and more assured with
scientists “standing on each others’ shoulders”. But in epic-fail techno-
nationalism, that does not happen.
A second example is industrial policy (Juhasz, Lane, and Rodrik, 2023).
Industrial policy can take a form as previously practiced in East Asia in the
late 20th century, seeking advantage through the state promoting advance-
ments in the nation’s industrial productivity. Competitors can then either
exit or remain, but do the latter only by their actually improving their
own productivity. The end-consumer benefits from this kind of industrial
policy.
Alternatively, industrial policy can take a form that seeks only rela-
tive gain under geopolitical rivalry, undertaking even self-inflicted harm—
perhaps by engaging in extremely costly inefficient production activity—so
long as the national rival suffers more.
Finally, wars often result in epic fail outcomes. The list of Pyrrhic
victories is long in military history, ranging from Roman times (the original
Pyrrhic victory at the 279BC Battle of Asculum, of which Plutarch wrote
“If we are victorious in one more battle with the Romans, we shall be utterly
ruined”) through the Battle of Coral Sea in World War 2 and specific battles
in the Vietnam War. But epic fail is not just about Pyrrhic victories. US
President John F. Kennedy’s inaugural address spoke of how “only when
our arms are sufficient beyond doubt can we be certain beyond doubt that

25
 4 NEW PRINCIPLES

they will never be employed”. The modern prospect of deadly wars ends
up elevating spending on weapons to make sure those weapons are never
in fact used: This is an epic fail outcome.
These different examples—from techno-nationalism through military
Pyrrhic victories and modern international conflict—engender different mag-
nitudes of gains and losses. Sufficiently large expenditures make it impos-
sible for outside policymaker intervention, especially if the situation has
arisen from Great Power rivalry. Otherwise, however, third nations—those
that are not Great Powers themselves—can contemplate coming up with
sufficient side payment to nudge the Great Powers out of debilitating and
harmful gridlock.
An example of this is the Ottawa Treaty or, more fully, the 1997 Conven-
tion on the Prohibition of the Use, Stockpiling, Production, and Transfer
of Anti-Personnel Mines and on their Destruction (International Commit-
tee of the Red Cross, 1998). World War 2 saw the first widespread use
of landmines, as a way for fighting forces to restrict the mobility of the
enemy. However, landmines are also indiscriminate, enduring, and victim-
actuated: they kill or maim typically in peacetime after the war is over,
and inflict fatality or injury to mostly civilians, many of whom turn out
to be children. The epic fail equilibrium has combatants deploy landmines
across an arena of conflict, but which then lapses back to just an ordinary
landscape—which is when landmines then do the greatest harm. The di-
rect combatants are caught in gridlock, unwilling to unilaterally stop. Yet,
by continuing in that equilibrium, not only do they self-harm but innocent
third parties are caught up in the violence.
What smaller powers—Canada and other small states, NGOs, interna-
tional humanitarian organizations—did was initiate a process to ban such
anti-personnel landmines. Without directly confronting those nation states
deploying landmines and without having any enforcment mechanism, but
instead only by intangible incentives of approbation and consensus, this
Ottawa process eventually signed up over 150 nations to the treaty’s ban.
In 2014, US President Barack Obama broadly accepted the treaty’s terms,
stopped acquiring landmines, and prohibited their use outside the Korean
Peninsula. President Donald Trump, however, reversed this policy in 2020.
Two years after that, President Biden overturned Trump’s policy change.
Although the situation on landmines continues to evolve, the Ottawa
Treaty provides a concrete example of smaller states nudging Great Powers

26
 4 NEW PRINCIPLES

away from an epic fail gridlock.

Finally, there could well arise circumstances where a combination of
zero-sum intractability and overly-costly epic fail gridlock makes systemic
improvement impossible. Subsets of nations might then find it optimal to
drop out altogether of that world order, even if it had originally provided
the multilateralism that they needed. Those nations might, thus, still find
valuable the old order’s norms, rules, and principles. It is just that the be-
haviour of some of the original members makes cross-country engagements
impossible. In this case, a plurilateral fork of the original order might be set
up by amenable subsets of nations. This is when as much of the original
multilateralism is preserved but now applies only to a restricted willing
subset of the original order.
In the case of the World Trade Organization (WTO), such plurilateral
subsetting has indeed emerged. Because the WTO Appelate Body had not
been functioning, with the US blocking appointment of new members, in
March 2020 sixteen WTO members drew on Article 25 of the WTO Dispute
Settlement Understanding to set up an alternative Multi-Party Interim Ap-
peal Arbitration Agreement (MPIA) empowered to resolve WTO disputes
for its restricted membership. Plurilateralism thus provides a constantly-
evolving grouping where members work under that restricted-membership
multilateralism. Those who disagree are free to leave the group; those
not in the group are not permitted to disrupt the workings of the group.
Plurilateral arrangements are otherwise open and inclusive, and are set up
explicitly to allow melding in of the larger multilateral order whenever the
latter is again ready.
A less formalized alternative subsetting has also emerged under the label
of minilateral forking. Minilateralism seeks collaboration on only a restricted
set of critical issues, without requiring its membership to share values or
ideology. The International Solar Alliance comprises 121 nations and works
to advance the use of solar energy. China’s Belt and Road Initiative (BRI)
is viewed by some to be a form of minilateralism.
This last BRI example highlights, however, a potential drawback of
minilateral subsets. BRI has, obviously, been a source of international ten-
sion and world fragmentation under the current US-China rivalry. Mini-
lateral solutions to world fragmentation can themselves be a force for yet
further fragmentation. By having more restrictive memberships focused on
special, critical challenges, minilateralism can jeopardise the possibility of

27
 5 CONCLUSION

the international system taking on yet larger global challenges.

In comparison with complete multilateral approaches, plurilateral and
minilateral arrangements exemplify the principle of not letting the perfect
be the enemy of the good. Their ready pragmatism stands in sharp relief
to historical examples where dogged pursuit of ideals produced far worse
outcomes. O’Rourke (2024) describes how, even as some nations went off
the Gold Standard, others stubbornly continuing on it led to either the rise
of right-wing populist demagogues, such as in Germany when the economy
languished lower for longer, or the use of ever more beggar-thy-neighbor
protectionist policies: “Ironically, persisting with a monetary institution
thought to symbolize a commitment to an open international economy
deepened the breakdown in international trade”.

5 Conclusion
This paper has described world order and its relation to multipolarity as
cause and multilateralism as effect. It has described how the geopolitical
and security forces for fragmentation are now reinforced, not held back, by
perceptions on how economic integration operates.
In such circumstances, urging the nations of the world to cooperate will
not help to reduce world fragmentation. Without clarifying underlying
causes, little is available by way of tools to help keep world order from
becoming ever more disorderly and fragmented.
This paper has described a convergence in fragmentation drivers and
proposed three guiding principles to help reduce further world fragmenta-
tion. First, provide mechanisms for inadvertent cooperation, where nations
looking out for their own self-interest while oblivious to the collective good,
nonetheless will help advance that collective good. Second, divide up the
challenges confronting world order into those where inadvertent coopera-
tion is possible, those that are zero-sum games, and those that produce
epic fail outcomes. Zero-sum challenges are intractable, and there is no
point further deliberating over them. Epic fail outcomes admit the pos-
sibility of third-party nudging, so states other than Great Powers—states
that are Third Nations, in the language of Armstrong and Quah (2023)—
might be able to exercise agency and nudge world order away from further
fragmentation.

28
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