Global Governance and Systemic Risk in the 21st Century

Recent decades of globalisation have created a more interconnected, interdependent and complex world than ever witnessed before. While global policy has focused on facilitating integration, the implications of growing interdependence have been largely ignored. While the acceleration in global integration has brought many benefits, it has also created fragility through the underlying production of new kinds of systemic risks. The paper conceptualises systemic risk in the 21st Century and examines the challenges it poses to global governance regimes. The 2008-2009 financial crisis illustrates the failure of even sophisticated global institutions to manage the underlying forces of systemic risk, and this is symptomatic of institutional failure to keep pace with globalisation. The lessons from the financial crisis highlight the real threat of systemic risk to other 21st Century challenges, but more importantly, they expose the profound shortcomings of global institutions to manage global systemic risks in the future. The failure of the most developed and best-equipped global governance system, finance, to recognize or manage the new vulnerabilities associated with globalisation in the 21st Century highlights the scale and urgency of the challenge.