The climate crisis should be the fatal blow to the Washington Consensus

Groups like the G-7 put proactive governance back on the agenda

Azeem Ibrahim

November 19, 2021, 11:40 a.m.

Last modification: November 19, 2021, 11:56 AM

Azeem Ibrahim / Director, Newlines Institute for Strategy and Policy

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Azeem Ibrahim / Director, Newlines Institute for Strategy and Policy

The G-7, a group of leading industrialized nations made up of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, represent between 30 and 45% of world GDP. This makes it perhaps the most concentrated diplomatic forum in the world, still capable of setting the global agenda and potentially pushing back the global trajectory towards shared democratic and economically liberal values.

Following this month’s United Nations climate summit, known as COP26, the G-7 takes up the challenge of moving beyond the Washington Consensus economic and political model that underpinned its vision global strategy from the 1980s until recently.

This model is characterized by the prescribed shrinkage of the state to the extent possible and the rise of deregulated world markets. Today, however, under the threat of the climate crisis, the G-7 is moving towards a radically different approach to international democratic economic governance.

The new approach, which G-7 leaders dubbed the ‘Cornwall Consensus’ in June, calls for public-private partnerships, public investment, proactive state-led governance in domestic markets, and intergovernmental cooperation between the main democracies of the G-7 and their friends and allies.

The Washington Consensus ideology has produced systemic economic inequalities globally and within nations themselves, which has undermined the very legitimacy of long-standing institutions in some of the world’s most entrenched democratic cultures. .

As the COP26 proves, these efforts have never been so important. The goal, fundamentally, is to achieve better results than expected from markets alone, in areas ranging from climate change to labor standards and supply chain resilience.

The Western world had barely recovered from the 2008 financial crisis and was still reeling from the political upheavals in the United States when Covid-19 struck, cruelly exposing the weaknesses and fractures of the global economy.

There is now a shared consensus among the leaders of the G-7 countries that free laissez-faire markets do not deliver the kind of economic outcomes, nor the kind of economic and political stability and resilience that we do. need in the face of the looming climate crisis. .

The Washington Consensus ideology has produced systemic economic inequalities globally and within nations themselves, which has undermined the very legitimacy of long-standing institutions in some of the world’s most entrenched democratic cultures. .

This has helped shift critical supply chains to cheaper offshore locations, leaving us with systemic shortages of medical supplies amid the worst public health crisis in a century. And its influence has largely reversed the progress some Western countries have made on climate goals by providing ideological justification for the most damaging practices and shifting them to other parts of the world.

This year’s G-7 emphasized “resilience,” an understandable choice after two years of pandemic-induced disruption. The most significant change from the Washington Consensus is the shared understanding that building resilience requires active state-led governance, both nationally and, more importantly, internationally.

The G-7 is moving away from pursuing unbridled economic growth through deregulated globalization, towards managed cooperation to ensure economic stability, the integrity of supply chains and the international management of health and environmental crises.

The disasters linked to Covid-19 have highlighted the need for change. The West’s only great achievement over the past decade has been its success in developing and deploying vaccines against Covid-19.

Vaccines developed in the West have the highest clinical efficacy and, due to the transparent and rigorous testing regimes in which they have been developed and approved, they also enjoy the highest levels of confidence in the world.

But while these vaccines are named after private Western companies, Western governments have blundered with their strictly orthodox approach to vaccine intellectual property from a global public health perspective.

And all the vaccines developed in the West, based on many different technologies, were only possible thanks to decades of state investment in basic research, and they could not be manufactured so quickly and at the same time. scale than they were because governments stepped in to support manufacturers with de facto blank checks.

In addition, the most effective vaccination campaigns among comparable developed countries have taken place in such countries, such as Japan and South Korea, where the state has retained an active role in coordinating and managing vaccine deployment. , while subsidizing the costs of vaccination.

Certainly, free market competition has absolutely played a role in the successful development of a number of different vaccines in the West, optimal in different types of deployments. And private companies have absolutely made it possible to increase vaccine production to meet the needs of the public, at least in the West.

But neither the myriad of technologies that underpin vaccines nor the astonishing deployment efficiency seen in most Western countries would have been possible without the state playing the central role of coordinating efforts for the public good.

Conversely, the most glaring failures to meet the public health demands of the pandemic have occurred when states have been reluctant to act, most visible in the uneven distribution of vaccines to rich and globally powerful countries, while even by the end of 2021, many poorer countries are struggling to find the doses they need.

Caption: There is now a shared consensus among G-7 leaders – dubbed the ‘Cornish Consensus’ – that free laissez-faire markets are not producing the kind of economic results we need in the face of the climate crisis imminent. Photo: Reuters

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Caption: There is now a shared consensus among G-7 leaders - dubbed the 'Cornish Consensus' - that free laissez-faire markets are not producing the kind of economic results we need in the face of the climate crisis imminent.  Photo: Reuters

Caption: There is now a shared consensus among G-7 leaders – dubbed the ‘Cornish Consensus’ – that free laissez-faire markets are not producing the kind of economic results we need in the face of the climate crisis imminent. Photo: Reuters

It also shows the adverse health effects in vaccine-rich and poor countries where leaders have refused – for political reasons – to impose precautionary health measures such as social distancing and compulsory mask wear. .

The state has a role to play in improving the performance of economic activity and ensuring the continuity and resilience of all citizens. It is not just a role but a responsibility. Countries whose governments have taken this responsibility seriously have done their best during the pandemic. Countries whose governments have failed to do so have lagged behind in their results.

And taking on these responsibilities is not a question of ideology. It has nothing to do with authoritarian versus democratic political structures, nor with left or right ideals. China has finally acted very effectively to contain the virus after overcoming its initial impulse to cover up the outbreak.

Likewise, New Zealand, Taiwan, South Korea, Japan and the Nordic countries except Sweden, among the most democratic countries in the world, have also achieved some of the best management results. coronaviruses. The most successful countries were those where the government acted and its citizens trusted it to act in the collective public interest of all.

The G-7 seeks to draw these lessons so that they can be applied to broader economic and political needs, placing empiricism above ideology, and this is remarkable. Above all, they should apply these lessons to the fight against climate change.

Many solutions to the existential threat posed by climate change will be market-based, but the private sector and the markets in which they operate must be oriented towards broader, more sustainable and more inclusive goals. Governments must ensure that the supply chains critical to the green transition are diverse and reliable, and in particular that the digital information infrastructure is secure and resilient against human and natural threats.

Governments must ensure adequate levels of investment to achieve the green transition on time and ensure that global pressure to achieve it is not weakened by countries cheating and undermining global trade rules and labor standards .

Governments must ensure that the dividends of the green transition are distributed fairly among all who work on it, both within companies and across borders. It seems unlikely that democracy and international cooperation can survive another polarization between rich and poor of the kind seen under the economic orthodoxy of the Washington Consensus.

The Cornwall Consensus is an ambitious political project, but it must be. Such is the magnitude of the challenges that the Western world will face over the next half century that, for the peoples of the world, only a proactive engagement by Western governments can maintain our way of life, our democracies, and our health, wealth and well-being. -being our children. Much work remains to be done, but we are finally on the right track.


Azeem Ibrahim is a columnist at Foreign Policy, professor-researcher at the Strategic Studies Institute of the US Army War College and director of the Newlines Institute for Strategy and Policy.


Disclaimer: This article first appeared on Foreign Policy and is published under a special syndication agreement.

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