This article is part of a series in which leading commentators and policymakers give their views on alleviating the devastating global slowdown
The writer is a former UK prime minister
When the G20 was called more than a decade ago to deal with the global financial crisis, we had to overcome US scepticism, G7 hesitancy, Chinese pressure to restrict its remit, and French pressure to broaden it. Such was the jockeying for places that not 20 but 23 national leaders attended the London summit. Their greatest disagreement was not over the $1tn stimulus but tax havens.
In the end, we agreed short-term fiscal targets, but not medium-term growth targets. Our plan to reframe global institutions for an age of global capital flows and supply chains also failed. But at least all realised that if we did not stand together, we would fall separately. It was the unanimous commitment to shared objectives, built on the rock of practical measures, that helped restore confidence where there had been none.
It is a confidence that G20 leaders must rebuild during today’s unique crisis. The crisis forced a dire trade-off. The more aggressively we confront the global medical emergency by shutting down workplaces, the worse the economic emergency, producing an even greater need for co-ordinated action to slow and reverse each national economy’s slide. Yet such is the mismatch between the need for international co-operation and our present willingness to undertake it, that the ambition of the G20 seems in inverse proportion to the enormity of our joint challenges.
As we face the coronavirus pandemic, the idea of individual self-isolation is now commonplace. But national self-isolation has also taken off. In the initial post-cold war era, the US acted multilaterally; now, in a more multipolar era, it acts unilaterally. This us-versus-them nationalism — “America first”, “China first”, “India first”, “Russia first”, “Brazil first” or “Turkey first” — has gone global. Yet even the most isolationist nation knows it is not enough to stop Covid-19 in one country: it must be stopped in all.
The G20 must underwrite and accelerate a concerted global effort to develop, manufacture and distribute vaccines and treatments. Every nation needs, almost simultaneously and at scale, testing kits, ventilators, cleaning chemicals and protective equipment. To achieve this, instead of dog-eat-dog bidding wars that encourage profiteering, the G20 should back the World Health Organization and the Global Fund’s efforts to co-ordinate and increase production and procurement of medical supplies. Over time, it must build a global stockpile and workforce. Tariffs and other protectionist barriers must go: nothing should prevent what is mass produced in and for one country from being mass produced for others.
In 2010, synchronised monetary, fiscal and anti-protectionist measures by the G20 quickly restored growth. Now, similar measures could maximise the impact of individual national policies well beyond the $2tn stimulus forecast by the OECD. The world would be far stronger and more stable if each systemically important central bank simultaneously intervened as radically as the US Federal Reserve. The IMF should also agree a new Special Drawing Right allocation to help address massive emerging market capital outflows.
That strength and stability could be even more effectively advanced by a co-ordinated fiscal stimulus — far more than the two per cent of global gross domestic product deployed in 2009. The EU and China must now match US and UK policies on this.
Fiscal policy is doubly important because issues of fairness loom large. The poorest and most vulnerable bear the greatest burden and will suffer most when debts have to be repaid. G20 fiscal action can avoid a second decade of austerity and lower the risk of further waves of populist nationalism.
Lastly, the G20 should tomorrow form a task force to co-ordinate the work of political leaders, medical experts and the heads of international institutions. If Africa’s rates of infection approach Asia’s, multilateral funds will soon be exhausted. The G20 should look afresh at fully funding the WHO; replenishing GAVI, the vaccination fund; and promise the World Bank extra resources. One cost-effective option is the new International Finance Facility for Education. As countries redirect investment to macroeconomic support and social safety nets, IFFED could assume an additional remit: training the 18m health workers developing countries need.
The G20 has yet to fulfil its potential as the world’s premier economic forum. Yet there are precedents. Out of the carnage of the second world war came the UN, the IMF, World Bank and the WHO. Out of this crisis must come reforms to the international architecture and a whole new level of global co-operation. This is an urgently needed public good for a world beginning to understand that it is more interdependent and fragile than ever before.
Source: Economy - ft.com
