International Law for a Fragile World: Economic Risk – Global Markets, Debt, and Resilience in Law (Part II)

[Dr Sergey Sayapin is Professor of Law at KIMEP University (Almaty, Kazakhstan) and Distinguished Visiting Global Scholar at the NUS Centre for International Law (2025)]

The discussion in Part I of this blog post has examined how contemporary economic interdependence generates structural vulnerabilities within financial systems, sovereign debt, and global production networks. Yet the significance of economic fragility extends well beyond these domains. The modern economy no longer constitutes merely one sector of global governance alongside others – increasingly, it provides the infrastructure through which diverse forms of risk are transmitted, amplified, and transformed into systemic crises.

Economic Risk as a Transmission Mechanism

Climate change illustrates this dynamic with particular clarity. Extreme weather events damage infrastructure, disrupt agricultural production, interrupt supply chains, reduce productivity, and impose substantial fiscal burdens on affected states. These economic consequences, in turn, constrain public investment, increase borrowing, weaken social protection, and intensify migration pressures. What begins as ecological disruption thus evolves into fiscal instability, development challenges, and political strain: climate risk is therefore transmitted through economic systems before generating wider social and geopolitical consequences.

The COVID-19 pandemic followed a remarkably similar trajectory. Initially understood as a public health emergency, it rapidly evolved into a multidimensional crisis affecting labour markets, international trade, public finances, education systems, and long-term development. Likewise, technological disruptions increasingly exhibit systemic economic effects – a large-scale cyberattack targeting financial institutions, payment systems, energy infrastructure, or major logistics networks would almost certainly extend far beyond the immediate technical incident, disrupting commercial activity, public services, and financial confidence across multiple jurisdictions. Political instability operates in similar fashion: economic insecurity fuels social discontent and institutional distrust, while political uncertainty simultaneously discourages investment, weakens growth, and increases financial volatility. In each case, the economic system becomes the principal medium through which disruption spreads.

These examples point to a broader transformation in the nature of global risk – contemporary crises are increasingly compound rather than isolated. They do not unfold sequentially within discrete sectors but cascade across interconnected systems, generating feedback loops that amplify their overall impact. The resilience – or fragility – of economic systems increasingly determines whether localised disturbances remain manageable or escalate into broader systemic crises. This presents a significant institutional challenge: international law continues to organise governance largely through sector-specific regimes governing trade, finance, development, climate, health, cybersecurity, and international security – yet contemporary risks rarely respect these institutional boundaries. As vulnerabilities become increasingly interconnected, governance remains comparatively fragmented, producing a widening mismatch between the architecture of global risk and the architecture of international law itself.

Responding to this transformation requires more than improved coordination among existing institutions – it calls for a more integrated conception of risk governance. Shared risk assessments, coordinated resilience planning, and institutional mechanisms specifically designed to anticipate cascading vulnerabilities would represent important first steps. More fundamentally, international economic law must increasingly be understood not as a specialised branch of international regulation but as one of the principal frameworks through which systemic resilience is organised. In other words, the governance challenge is no longer simply economic – it is increasingly one of governing interconnected fragility across the international legal order.

From Crisis Management to Resilience Governance

Resilience should not be understood as the elimination of risk. Such an objective would be both unrealistic and undesirable in an economy driven by innovation, investment, and openness. Rather, resilience refers to the capacity of economic systems to absorb shocks, adapt to changing circumstances, and continue performing their essential functions without catastrophic breakdown. It shifts legal attention from prediction to preparedness, from optimisation to adaptive capacity, and from post-crisis reconstruction to the governance of vulnerability before crises emerge. In this sense, resilience complements rather than replaces traditional objectives of growth and efficiency by recognising that prosperity ultimately depends upon the ability of institutions and societies to withstand disruption.

This shift is already visible in a number of emerging practices. Following the global financial crisis, macroprudential regulation increasingly sought to address risks affecting the financial system as a whole rather than individual institutions alone. As was discussed in Part I of this blog post, after the COVID-19 pandemic, many governments reconsidered long-standing assumptions regarding just-in-time production, introducing policies to diversify supply chains, establish strategic reserves of essential goods, and strengthen domestic manufacturing capacity in sectors such as semiconductors, pharmaceuticals, and critical minerals. Likewise, innovative financial instruments – including catastrophe bonds, disaster clauses in sovereign debt, and debt-for-climate swaps – reflect growing recognition that economic governance must anticipate recurrent shocks rather than merely respond to them after the fact. These initiatives remain partial and fragmented but they illustrate an important conceptual transition: resilience is gradually becoming an organising principle rather than an exceptional policy response.

For international economic law, this transition has significant implications. Surveillance mechanisms developed by international financial institutions could evolve beyond their traditional focus on macroeconomic indicators to incorporate measures of systemic vulnerability, including climate exposure, supply-chain concentration, technological dependence, demographic change, and institutional capacity. Trade law may increasingly need to reconcile commitments to market openness with carefully calibrated measures designed to enhance resilience in strategically important sectors. Development finance could move beyond financing economic growth alone by investing more systematically in adaptive infrastructure, public health systems, digital resilience, disaster preparedness, and other forms of long-term societal capacity. Similarly, debt sustainability assessments might evaluate not only a state’s ability to service existing obligations but also its ability to invest in the resilience necessary to withstand future shocks.

Importantly, resilience is not merely a technical objective. Decisions concerning which vulnerabilities deserve protection, which sectors receive priority during crises, and how the costs of adaptation should be distributed are inherently political and normative choices. A government that invests in flood defences rather than fiscal consolidation, strategic reserves rather than short-term efficiency, or climate adaptation rather than debt repayment is making choices about the values that economic governance ought to serve. At the international level, similar questions arise regarding development assistance, debt restructuring, climate finance, technology transfer, and access to critical resources. Economic resilience therefore raises questions of justice no less than efficiency, requiring international law to address not only the management of risk but also the equitable distribution of vulnerability and adaptive capacity across societies and between states.

Ultimately, resilience governance does not represent a departure from the objectives of international economic law but their evolution. The post-war legal order sought to secure prosperity by reducing instability. The emerging challenge is to secure prosperity under conditions in which instability can no longer be regarded as exceptional. In a world characterised by compound risks and cascading crises, the legitimacy of international economic law and institutions will increasingly depend not only upon its capacity to promote growth, trade, and investment but also upon its ability to anticipate systemic vulnerability, strengthen adaptive capacity, and enable societies to remain economically and institutionally resilient in the face of persistent uncertainty.

The Future of International Economic Law

The architects of the post-war economic order sought to prevent a recurrence of the instability that had helped produce some of the twentieth century’s greatest catastrophes. Their institutions proved remarkably durable and, in many respects, successful. By facilitating monetary cooperation, supporting economic reconstruction, promoting development, and progressively liberalising international trade, they contributed significantly to decades of unprecedented global economic growth. Yet they were designed for a world in which crises appeared episodic, geographically contained, and ultimately recoverable. Their principal task was to restore stability after disruption and enable markets to return to equilibrium.

The contemporary global economy presents a fundamentally different reality. Instability no longer arises primarily from isolated economic failures or exceptional external shocks. Rather, it increasingly emerges from the normal operation of highly interconnected systems whose complexity generates vulnerabilities that accumulate gradually before manifesting themselves in sudden and often cascading crises. Financial markets, sovereign debt, global production networks, digital infrastructure, and critical supply chains have become so deeply intertwined that disturbances originating in one domain rapidly propagate across others, frequently interacting with environmental, technological, public health, and geopolitical risks. Economic fragility is therefore no longer simply one category of global risk – it has become one of the principal mechanisms through which global risks are transmitted, amplified, and transformed into systemic crises.

The central question is no longer how international economic law can facilitate ever deeper integration but how it can govern the vulnerabilities that integration itself has produced. A legal order designed primarily to facilitate market integration and restore stability after crises can no longer rely exclusively upon the assumptions that shaped its post-war foundations. The continued importance of openness, liberalisation, and international cooperation is not in question – rather, these foundational principles must be complemented by an equally systematic commitment to resilience. The success of international economic law should increasingly be measured not only by its capacity to promote growth and efficiency under normal conditions but also by its ability to reduce systemic vulnerability, strengthen adaptive capacity, and preserve the functioning of essential economic systems under conditions of persistent uncertainty.

Making resilience a foundational principle of international economic law requires corresponding changes in both its substantive rules and its institutional architecture. International economic institutions must become more integrated in their approach to understanding and governing risk. Financial instability, climate change, public health emergencies, technological disruption, and geopolitical conflict can no longer be addressed through isolated institutional mandates. Shared risk assessments, coordinated resilience planning, interoperable early-warning systems, and closer cooperation among international financial institutions, development banks, trade organisations, and specialised agencies would represent important steps toward governance better suited to an era of compound and cascading risks. The challenge is no longer simply to improve cooperation among institutions but to recognise that many contemporary risks transcend the conceptual boundaries upon which those institutions were originally constructed.

Ultimately, the evolution of international economic law reflects a broader transformation occurring throughout the international legal order. As global risks become increasingly interconnected, the traditional separation between economic, environmental, technological, health, and security governance becomes progressively less tenable: the resilience of financial systems depends upon climate adaptation; economic stability depends upon robust public health systems; secure digital infrastructure underpins financial markets and international trade; food and energy security increasingly shape geopolitical stability. In this environment, resilience is no longer merely an economic objective – it is emerging as a foundational principle of international governance itself. The central task of international economic governance in the twenty-first century is therefore no longer simply to restore stability after collapse. It is to anticipate vulnerability before collapse occurs, reduce systemic exposure before disruption cascades across borders, and strengthen the adaptive capacity of states, markets, and societies before crises become inevitable. International economic law was once designed to govern transactions in an increasingly integrated global economy. Its next stage of evolution must be to govern the fragility that integration itself has produced. Whether it remains capable of fulfilling its foundational promise of promoting a stable and prosperous international order will depend not upon its ability to react more effectively to future crises but upon its capacity to prevent them by making resilience an organising principle of global economic governance.

Photo by Kyle Glenn on Unsplash