The End of the Third World?
Modernizing Multilateralism for a Multipolar World
B. Zoellick, President,The
World Bank Group
For decades, students of security and international
politics have debated the emergence of a multipolar
system. Its time we recognize the new economic
If 1989 saw the end of the Second World with
Communisms demise, then 2009 saw the end of what was
known as the Third World: We are now in a new,
fast-evolving multipolar world economy in which some
developing countries are emerging as economic
powers; others are moving towards becoming
additional poles of growth; and some are struggling
to attain their potential within this new system
where North and South, East and West, are now points
on a compass, not economic destinies.
Poverty remains and must be addressed. Failed states
remain and must be addressed. Global challenges are
intensifying and must be addressed. But the manner
in which we must address these issues is shifting.
The outdated categorizations of First and Third
Worlds, donor and supplicant, leader and led, no
The implications are profound: For multilateralism,
for global cooperative action, for power
relationships, for development, and for
The global economic crisis has shown that
multilateralism matters. Staring into the abyss,
countries pulled together to save the global
economy. The modern G-20 was borne out of crisis. It
showed its potential by quickly acting to shore up
confidence. The question now is whether this was an
aberration, a blip?
Will historians look back on 2009 and see it as a
singular case of international cooperation or the
start of something new? Some now view Woodrow
Wilsons attempt to create a new international system
after World War One as an opportunity lost that left
the world adrift amidst dangers. Will this be a
The danger now is that as the fear of the crisis
recedes, the willingness to cooperate will too.
Already we feel gravitational forces pulling a world
of nation-states back to the pursuit of narrower
This would be a mistake. Economic and political
tectonic plates are shifting. We can shift with
them, or we can continue to see a new world through
the prism of the old. We must recognize new
realities. And act on them.
What is Different? New Sources of Demand
What is different?
The developing world was not the cause of the
crisis, but it could be an important part of the
solution. Our world will look very different in 10
years, with demand coming not just from the United
States but from around the globe.
Already we see the shifts. Asias share of the global
economy in purchasing power parity terms has risen
steadily from 7 percent in 1980 to 21 percent in
2008. Asias stock markets now account for 32 percent
of global market capitalization, ahead of the United
States at 30 percent and Europe at 25 percent. Last
year, China overtook Germany to become the worlds
biggest exporter. It also overtook the United States
to become the worlds largest market for cars.
Import numbers tell a revealing story: the
developing world is becoming a driver of the global
economy. Much of the recovery in world trade has
been due to strong demand for imports among
developing countries. Developing country imports are
already 2 percent higher than their pre-crisis peak
in April 2008. In contrast, the imports of
high-income countries are still 19 percent below
that earlier high. Even though developing world
imports are about half of the imports of high-income
countries, they are growing at a much faster rate.
As a result, they accounted for more than half of
the increase in world import demand since 2000.
New Poles of Growth
The world economy is rebalancing. Some of this is
new. Some represents a restoration. According to
Angus Maddison, Asia accounted for over half of
world output for 18 of the last 20 centuries. We are
witnessing a move towards multiple poles of growth
as middle classes grow in developing countries,
billions of people join the world economy, and new
patterns of integration combine regional
intensification with global openness.
This change is not just about China or India. The
developing worlds share of global GDP in purchasing
power parity terms has increased from 33.7 percent
in 1980 to 43.4 percent in 2010. Developing
countries are likely to show robust growth rates
over the next five years and beyond. Sub-Saharan
Africa could grow by an average of over 6 percent to
2015 while South Asia, where half the worlds poor
live, could grow by as much as 7 percent a year over
the same period.
Southeast Asia has become a middle income region of
almost 600 million people, with growing ties to
India and China, deepening ties with Japan, Korea,
and Australia, and continuing links through global
sourcing to North America and Europe.
The Middle East region is an important source of
capital for the rest of the world, and increasingly
a business-service hub between Asia East and South
and Euro-Africa. Gross official reserves of the Gulf
Cooperation Council countries were over $500 billion
at the end of 2008, with estimates of sovereign
wealth fund assets of as much as $1 trillion. If the
Maghreb can move beyond historical fault lines, it
can be part of a Euro-Med integration linked to both
the Mideast and Africa.
In the Latin American and Caribbean region, 60
million people were lifted from poverty between
2002-2008 and a growing middle class boosted import
volumes at an annual rate of 15 percent.
Africa as a Potential Pole of Growth
Tectonic plates could shift further. Africa missed
out on the manufacturing revolution that lifted East
Asias economies out of poverty and into prosperity.
But Africa no longer needs to be left behind.
Today, in many African countries even small,
inexpensive items, such as soap or slippers, or
basic tools or consumer goods, are imported. If
Africans remove the barriers to producing these
goods domestically and to local entrepreneurship,
while creating conditions for outside investors to
shift production to Africa, then African development
could begin to look very different. Unlike past
failed efforts to favor import-substitution
interests behind protectionism, this approach can
capture benefits from regional integration within
What would it take? As a first step, the 80 percent
of Africans earning $2 a day or less need to earn
enough income so they will be able to buy basic
consum er goods. Agriculture is the main source of
jobs and an early opportunity to boost productivity
and income. To do so, investment is needed all
across the agricultural value chain: property
rights; seeds; irrigation; fertilizer; finance;
basic technologies; storage and getting product to
market. Since about two-thirds of African farmers
are women, we need to help them get legal and
property rights, and access to services.
With slightly higher incomes and living standards,
local manufacturers can target or customize for the
local market, and eventually for export.
To grow further, Africans need the things that
Europe and Japan needed after World War Two:
infrastructure; energy; integrated markets linked to
a global economy; and the conditions for a vibrant
private sector. These public goods will foster much
more than local manufacturing.
Todays shifts open new opportunities. As the global
crisis hit, some Chinese recognized that it was time
to move beyond toys and footwear; China could move
up the value chain, increase wages and consumption,
and expand its harmonious society. Chinese
companies, in turn, could move lower value-added
manufacturing elsewhere, including to Africa,
following Chinas resource developers and
Chinese companies can be encouraged to relocate
manufacturing for both domestic production and
export. These manufacturers bring know-how,
machinery, as well as access to marketing and
distribution networks. The World Bank is working
with Africans and Chinese to create industrial
Early investors are sensing the promise in Africa
and are not dissuaded by the risks after Lehman
Brothers and Greece, investors know developed
markets can be risky, too.
Changes in government policies can create
opportunities for private sector growth, which in
turn offers services to other entrepreneurs. In the
ten years to 2008, the private sector has invested
more than $60 billion in information and
communications technology in Africa; 65 percent of
Africans are now within reach of wireless voice
services, and there are 400 million mobile phones in
use in Africa.
IFC, the World Bank Groups private sector arm, is
helping catalyze this business revolution. A new IFC
equity fund has attracted $800 million from
sovereign wealth and pension funds to invest in
companies in Africa, Latin America and the
Economic Shifts Mean Potential Power Shifts
Increased income and growth in the developing world
means increasing influence. The old world of
fireside chats among G-7 leaders is gone. Todays
discussion requires a big table to accommodate the
key participants, and developing countries must have
seats at it.
Last years G-20 Summit at Pittsburgh recognized that
change. But it will take more than words on paper.
Woodrow Wilsons words on paper did not realize their
lofty ideals. Arranging a new sharing of
responsibilities among mutual stakeholders in
international systems will not be easy. But happen
it must. The failure of 1919 led to countries that
could not cooperate in 1929 and the start of a new
war in Europe in 1939.