The writer, a former cabinet secretary and national security adviser, is chair of the G7 Economic Resilience Panel
Globalisation has seen the greatest increase in prosperity in human history. The innovation rewarded by competitive market economies is driving the digital revolution, extraordinary progress in life sciences, and much of our response to climate change and the wider environmental, social and corporate governance agenda.
Just a year ago, we didn’t know whether there would be even a single successful vaccine against Covid-19. Within months, through public-private partnerships, we had approved, produced and deployed a range of safe vaccines, effective against both the original virus and new mutations.
But vaccine distribution remains uneven, and until recently vaccines produced in developing countries, where vaccination rates are low, were being exported to wealthy countries which are now rolling out booster programmes. And not everyone has benefited from rising prosperity: inequality within many wealthy countries has increased. Moreover, while most global markets and supply chains functioned well through the 2008-09 financial crisis and at the height of the pandemic, strains arose in some critical sectors, including essential household goods and medical supplies in the UK.
Future resilience is already under pressure because of ageing populations, the debt burden, the scale and scope of the green transition, cyber security threats and adapting to the effects of climate change, which are already locked in even if COP26 delivers firm commitments. The other big factor is China. The global system has never before had to accommodate an economy of this size and structure, and the Chinese government is determined to achieve market dominance in the technologies of the fourth industrial revolution.
Over the next few decades, the most significant risks are not another single source crisis like the pandemic, but some combination of adverse environmental, geopolitical and socio-economic events. For example, the drought in Taiwan has exacerbated the current shortage of semiconductor microchips, just as China’s approach has become more aggressive.
These factors have outpaced global economic governance. How should we respond? Not by pulling up the drawbridge. Resilience is delivered not by protectionism or nativism but by diversification, mutual dependence and public-private partnerships within open and integrated global markets.
For most of 2021, I have chaired a G7 panel tasked with addressing these questions. The panel’s key “Cornwall consensus” recommendation argues for a step-change in global economic governance. That starts with collective G7 action to identify and manage emerging risks, to co-operate better in global institutions, to respond collectively to economic risks or coercion, and to ensure that national policies to protect economic security are not deployed against allies.
On that basis, we examined how G7 governments should address the long-term issues central to economic and social resilience, including the wider social-economic factors which underpin it such as public health, economic inclusion and environmental management. There are three main themes — investment, standards and governance — which we illustrate in proposals to tackle emerging monopolies in the refining of critical minerals, the shortage of semiconductors and the regulation of digital/data — the oil, steel and electricity of the modern economy.
The G7’s wider legitimacy and competitive edge against our authoritarian adversaries lie in our readiness to represent the collective interests of emerging and developing economies, as well as our own. So we can and must lead the effort to build a global economic system that is resilient, inclusive, sustainable and reflects the democratic values for which we stand.
Source: Economy - ft.com
