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The Washington Consensus should be overthrown by the climate crisis

The Washington Consensus should be overthrown by the climate crisis

Azeem Ibrahim/ Director, Newlines Institute for Strategy and Policy

Groups such as the G-7 are putting proactive Governance back on the agenda

Azeem Ibrahim

19 November 2021, 11.40 am

Last modified: November 19, 2021, 11.56 am

Azeem Islam/ Director, Newlines Institute for Strategy and Policy

“> Azeem Ibrahim/ Director, Newlines Institute for Strategy and Policy

Azeem Islam/ Director, Newlines Institute for Strategy and Policy

The G-7 is a group composed of Canada and France, Germany and Italy. It represents between 30% to 45% of global gross domestic product. It is perhaps the most powerful diplomatic forum in the world and can still set the global agenda and possibly tilt the global trajectory toward shared democratic and economic liberal values. 

After this month’s United Nations climate summit (known as COP26), the G-7 is now ready to take on the challenge of moving beyond Washington Consensus’ economic and political model. This was their global strategic vision for the 1980s through the 1990s. 

This model is characterised in part by the reduction of the state where possible and the elevation deregulated global markets. The G-7 is now moving towards a radical new approach to international democratic economic governance, despite the danger of climate crisis.

The G-7 leaders in June called the new approach the “Cornwall Consensus”. It advocates public-private partnership, public investment, proactive state governance in domestic markets, and intergovernmental collaboration among the G-7’s top democracies and friends. 

The Washington Consensus ideology has created systemic economic inequality worldwide and within nations, which has undermined legitimacy of long-standing institutions in some the most established democratic cultures in the world.

These efforts have never been more crucial, as COP26 demonstrates. The goal is to deliver better outcomes that markets alone in areas such as climate, labor standards, and supply-chain resilience.

The 2008 financial crisis had barely impacted the West and the world was still reeling from the turmoil in the United States. Covid-19, which cruelly exposed fragilities in the global economy, left the West struggling to recover. 

Leaders of the G-7 nations now agree that laissez faire markets don’t produce the kind of economic outcomes or political stability and resilience we need to deal with the coming climate crisis.

The Washington Consensus ideology has created systemic economic inequality worldwide and within nations, which has undermined legitimacy of long-standing institutions in some the most established democratic cultures in the world.

It has led to crucial supply chains moving to cheaper offshore locations, resulting in systemic shortages in medical supplies in the middle of the worst public healthcare crisis in a century. Its influence has mostly negated some progress on climate goals made in Western countries by providing an ideological justification of the most harmful practices, and shifting them to other areas of the globe.

After two years of disruption caused by pandemics, the G-7’s focus this year has been “resilience”. This is a natural choice. The Washington Consensus has seen a significant shift in its focus to the understanding that building resilience requires active, state led governance both at home and abroad. 

G-7 is moving away from unregulated globalization and unbridled economic growth to focus on managed cooperation to ensure economic stability and integrity of supply chains.

The Covid-19 catastrophes have shown the need for change. The West’s achievements in developing and deploying Covid-19 vaccins is the only real success story of the past decade. 

The highest clinical efficacy of Western-developed vaccines is due to their transparent and rigorous testing procedures. They also have the highest levels worldwide of trust.

These vaccines may be branded as Western private companies, but Western governments have been inconsistent with their rigidly orthodox approach regarding intellectual property. 

All of the Western-developed vaccines that rely on many technologies were possible only because of decades of state investment in basic research. They were also only possible because governments intervened to support the producers with de facto blank cheques. 

The most successful vaccination campaigns in comparable developed nations have been found in countries such as South Korea and Japan where the state played an active role in coordinating the deployment of vaccines and also subsidizing the costs of immunization.

The West was able to successfully develop a variety vaccines that were optimal for different deployments thanks to free market competition. And private companies absolutely enabled the scaling of vaccine production to meet public needs—at least in the West. 

Without the central role of coordinating public-good efforts, neither the multitude of technologies behind the vaccines or the remarkable deployment effectiveness seen in Western countries would have been possible.

However, the most serious failures to respond have been made by states that were unwilling to act. This is most evident in the uneven distribution of vaccines towards rich and powerful countries while many poorer countries struggle to find the doses they require at the end 2021. 

Caption: There is now a shared consensus among the G-7 leaders – dubbed the “Cornwall Consensus” – that laissez-faire free markets do not deliver the kind of economic outcomes that we need in the face of the looming climate crisis. Photo by Reuters

“> Caption: There is now a shared consensus among the G-7 leaders - dubbed the “Cornwall Consensus” - that laissez-faire free markets do not deliver the kind of economic outcomes that we need in the face of the looming climate crisis. Photo: Reuters

Caption: There is now a shared consensus among the G-7 leaders – dubbed the “Cornwall Consensus” – that laissez-faire free markets do not deliver the kind of economic outcomes that we need in the face of the looming climate crisis. Photo by Reuters

It also shows the adverse health outcomes in both vaccine-rich and vaccine-poor countries where the leadership refused—for political reasons—to impose precautionary health measures such as social distancing and compulsory mask-wearing.

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The state has a role in improving economic activity and ensuring stability and resilience for all citizens. This is more than a role. It is a responsibility. The pandemic was most successful in countries whose governments took this responsibility seriously. The outcomes of countries whose governments failed this responsibility were poor.

This is not about ideology. It is not about authoritarian or democratic political structures or left- and right-wing ideologies. After overcoming its initial impulses to cover up the outbreak, China managed to contain the virus very effectively. 

Equally, New Zealand, Taiwan, South Korea, Japan, and the Nordics, excluding Sweden—among the most democratic countries in the world—also had some of the best coronavirus-management outcomes. The best countries did well were those where the government was effective and trusted by its citizens to act in collective public interest.

These lessons are being sought by the G-7 to be applied to wider economic and political needs. Empiricism is preferred over ideology. These lessons should be applied to climate change.

Many solutions to climate change’s existential threat will be market-based. However, the private sector and the markets in which they operate must be pushed towards greater, more sustainable and inclusive goals. The government must ensure that supply chain infrastructures are secure and resilient against natural and human-caused threats, and that they are diverse and reliable.

Governments must ensure sufficient levels of investment to reach the green transition in the shortest time possible and ensure that the global push to achieve it is not weakened through countries cheating at or undermining the global rules for trade and labor standards. 

The government must ensure that the green transition’s benefits are shared equally among all those who work towards it, within and beyond borders. It seems unlikely that democracy or international cooperation can withstand another polarization of wealthy and poor as per the Washington Consensus.

The Cornwall Consensus may be an ambitious political project but it must be. The challenges facing the West over the next 50 years are so immense that only proactive engagement from Western governments can ensure our way of living, our democracies, as well as the health, wealth and well-being our children. While there is much work to be done, we are now on the right track.


Azeem Ibrahim He is a columnist for Foreign Policy, a research fellow at the Strategic Studies Institute at U.S. Army War College and a director at The Newlines Institute for Strategy and Policy.


Disclaimer: This article was first published on Foreign Policy. It is now available under a special syndicatation arrangement.



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