Shift in Global Order Boosts Role of Development Institutions

The current era marks a definitive end to the stable, post-Cold War global order that thrived on globalization and multilateralism. The third decade of the 21st century is defined by a confluence of unpredictable global shocks that are fundamentally reshaping the geopolitical and economic landscape.

The COVID-19 pandemic disrupted supply chains, while Russia's full-scale invasion of Ukraine has irrevocably altered Europe's security architecture. Events in the Middle East and escalating global trade tensions have permanently introduced a heightened risk factor into the functioning of states and their economies.

This new epoch is characterized by geo-economic competition, where trade, capital, and technology are direct extensions of power politics and key weapons in the struggles between major powers and their blocs. Critical resources, including capital markets, breakthrough technologies, data infrastructure, and control over key value chains, are now central to this rivalry, according to scholars like Edward Fishman.

Consequently, entities capable of allocating long-term strategic capital are gaining paramount importance. State and multilateral development institutions are expanding their roles, serving as vital components of national defense and resilience financing. They are shifting from mere growth stimulators to essential tools for bolstering economic security. This is exemplified by the European Investment Bank's broadened mandate to support the security and defense sector, aligning with NATO's new goal of increasing defense spending to 5% of GDP by 2035.