A New Global Economic Consensus

from Project Syndicate

The Washington Consensus is on its way out. In a report released this week, the G7 Economic Resilience Panel (where I represent Italy) demands a radically different relationship between the public and private sectors to create a sustainable, equitable, and resilient economy. When G20 leaders gather on October 30-31 to discuss how to “overcome the great challenges of today” – including the pandemic, climate change, rising inequality, and economic fragility – they must avoid falling back on the outdated assumptions that landed us in our current mess.

The Washington Consensus defined the rules of the game for the global economy for almost a half-century. The term came into vogue in 1989 – the year that Western-style capitalism consolidated its global reach – to describe the battery of fiscal, tax, and trade policies being promoted by the International Monetary Fund and the World Bank. It became a catchphrase for neoliberal globalization, and thus came under fire – even from its core institutions’ leading lights – for exacerbating inequalities and perpetuating the Global South’s subordination to the North. 

Having narrowly avoided a global economic collapse twice – first in 2008 and then in 2020, when the coronavirus crisis nearly brought down the financial system – the world now confronts a future of unprecedented risk, uncertainty, turmoil, and climate breakdown. World leaders have a simple choice: continue supporting a failed economic system, or jettison the Washington Consensus for a new international social contract. 

The alternative is the recently proposed “Cornwall Consensus.” Whereas the Washington Consensus minimized the state’s role in the economy and pushed an aggressive free-market agenda of deregulation, privatization, and trade liberalization, the Cornwall Consensus (reflecting commitments voiced at the G7 summit in Cornwall last June) would invert these imperatives. By revitalizing the state’s economic role, it would allow us to pursue societal goals, build international solidarity, and reform global governance in the interest of the common good.

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3 Comments

  1. This article was very informative to me, as I did not know that the G7 talks about and plans economic strategies and implements them into how they push their respective economies. With that being said, the article highlights how the current economic system that is practiced around the world where states have more power is very unequipped to handle spontaneous situations and provide a safety net for their countries citizens. Both in 2008 and 2020 with the Great Recession and the COVID-19 pandemic respectfully, states made decisions that many citizens had to feel the most of the brunt of the ramifications of those decisions, whether it be lockdowns or bank bailouts. The new economic strategy being proposed is the “Cornwall Consensus”, which advocates for deregulation and trade liberalization. If the new strategy’s main purpose is to have citizens have more of a say in their future when another unforeseen circumstance occurs that can drastically change the economy, that is a program that I have no problem getting behind and supporting.

  2. Economic crises have always been a problem since the beginning of our global economies. Normally one nation if not the whole world undergoes a major event that creates an economic downturn until a recovery process can begin. The article does compare the 2008 recession due to the housing bubble a lot to the 2020 pandemic and the recovery process. However, I do not think that the recovery process for the COVID pandemic recession will be similar to the 2008 recession. However, the article is pretty spot on in that the world economic system has indeed pretty much failed. The reason that I think that our governments have failed is that we do not have governments fit for running capitalism. I am not necessarily saying that capitalism is the problem, but I am saying that for capitalism to work, governments have to almost fully deregulate the economy, and only get involved in issues such as labor rights and monopolies. However, the world economy will never stimulate until lockdowns are over and businesses are open 100%. I’m not saying that the economy crashing is the worst situation for the world than opening up right now to 100% with not the whole world vaccinated yet, but I am saying this economy will never recover until we reopen. What people don’t understand about capitalism is that it succeeds on a national and international level based on Labor and production. People think the amount of cash flowing from place to place is more so the determiner of the economy. However, to keep countries from starving, what matters more is the production of certain vital resources more so than how much money we spend on Amazon each year. Plus at least for Americans, the national debt is a problem far too drawn down that has no peaceful solution to it. When we finally decide to start paying that debt, we will never see a day in our lives in my generation where that debt is mostly chopped down. Not to mention our spending is getting worse and worse since the beginning of the pandemic and it seems like we don’t understand as a country that spending plans are going to take a greater and greater toll on the economy. Even though unemployment reached record highs last year, that was not the true recession in my view. A true recession will come when the Fed finally has to raise interest rates to combat inflation in the very near future. At that point, we will see an economic depression, the lights of which the world has never seen before.

  3. I have always thought that in order to combat global issues like climate change, individual countries would have to work together on a large scale through international policies. An attempt for this is seen in the signing of the Paris Climate Agreement in 2015, which was a plan adopted by 196 parties to act as a global effort in combatting climate change. The Covid-19 pandemic however, rocked the entire world in a major economic shift. With international trade and technology allowing communication overseas at the most effective level it has ever been, it seems like an obvious statement to say that different nations need to solidify a common goal and agenda. That could happen with the new Cornwall Consensus. This consensus focuses on societal goals as a whole, unlike it’s counter Washington Consensus which pushes privatization. As a whole the Cornwall Consensus not only declares a “same page” basis among some of the most developed nations, but it establishes a set of goals that better society. I feel this is not just achievable, but also necessary. These issues of climate change, pandemics, and inequality stand a better chance of being minimalized with a global effort. The issue with the current system and the Washington Consensus is that it does not mention or push for private companies to have more restrictions that limit carbon emissions, harsh working conditions, or limited health benefits. Private companies are some of the largest contributors to the affects of climate change. It is not enough for one country to recognize a more sustainable agenda. Different countries contribute different amounts of emissions, some of the leading being: China and the US. In having a global agreement that forces collaboration on these issues-global communication, resources, and well-being will only increase.

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