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The Cornwall Consensus is here


Three decades ago, the British economist John Williamson He coined the phrase “Washington Consensus” to describe a set of free-market and pro-globalist ideas that American leaders (among others) were promoting around the world.

Now, however, there’s a new tag in the air: the “Cornwall Consensus”.

do not laugh. This is really a title advisory note It was distributed ahead of the G7 leaders meeting in Cornwall on Friday. Written by a panel of academics and policy makers from each of the seven countries, it sets out an “ambitious agenda to get ahead of the pandemic.”

The document It contains some pretty vague ideas, such as “more equity and solidarity in global health responses”. But it also makes more detailed proposals, such as creating a “Data and Technology Council” modeled after the Financial Stability Board to oversee the global Internet and a “CERN (European Organization for Nuclear Research) for climate technology.”

Either way, the memo notes that the recent G7 corporate tax agreement should herald a new phase of Western cooperation along new ideological lines.

What should investors conclude? Many may laugh. After all, G7 meetings tend to be purely ceremonial affairs, and the notes accompanying them are merely ritual symbols. In any event, the “Cornwall Consensus” proposals are not likely to be adopted in the near future, however plausible they may seem.

But it would be foolish for any business or investor to ignore this ritual offer. As anthropologists often point out, symbols are important, even when they seem “empty” or disconnected from reality, because they reflect and reinforce the group’s assumptions about how the world works. As such, this latest note offers a snapshot of how these assumptions are changing.

This is important, especially as some investors and corporate leaders struggle to respond to the changing zeitgeist, having started their careers when the Washington Consensus prevailed. We humans are always creatures of our cultural environment, yet we treat our beliefs as if they were a “natural” way of thinking.

There are five main points to note here. First, Western leaders today fear political massacres. Thirty years ago, political figures such as Margaret Thatcher and Ronald Reagan considered that free market globalization would benefit everyone. Today’s leaders worry that free-market fruits are so unevenly distributed that they provoke a popular (and indeed populist) backlash. “Inclusivity” is one of the new buzzwords.

Second, G7 leaders now also acknowledge that globalization and free market competition create weaknesses and efficiencies. Previously, they hoped that individual incentives for companies would lead to an improved cross-border supply system. They now know that global supply chains are threatened by the problem of teamwork, because companies tend to focus activity in nodes that make perfect sense to everyone, but wreak havoc if they fall apart. Hence, “flexibility” is another buzzword.

Third, the G7 debate is haunted fear of china. Beijing was not mentioned by name in the Cornwall consensus note. But there are multiple calls for diversification of global supply chains, not just for advanced technology, but for medical equipment and metals as well. In hindsight, Western governments have admitted that it was a huge strategic mistake to allow global chip production to focus in the center of Taiwan. They don’t want to repeat the mistake.

Fourth, there is a subtle, but nonetheless profound, reset of the relationship between business and government. In the Washington Consensus, corporations were seen as independent actors competing with one another, without state interference. Now all the talk is about a “partnership” between the government and the business sector.

Entrepreneurship continues to be lauded, but “partnership” is the framework for addressing today’s great societal challenges, whether it’s the search for a vaccine, climate change, or technology competition with China.

Finally, economics is redefined, in Biden White House And in other places. Instead of a narrow focus on polished quantitative models, there is now a focus on issues previously treated as mere ‘externalities’ – the environment, for example, or health or social factors.

Pessimists (or free-market enthusiasts) might say that all of this only reflects a temporary leftward tilt in American politics, or a short-term response to the pandemic.

Maybe, but I don’t think so. After all, this ideological shift is driven not only by Covid-19, but also by the rise of China, the threat of climate change and the evaporation of Western arrogance around free-market ideas that followed the collapse of the Soviet Union. Adherents to this new order can be found across the political spectrum. It was a conservative British government, after all, this Organizer The advisory group that produced the Cornwall Consensus Note.

So, whether you love or hate the new zeitgeist, you can’t ignore it. History shows that when intellectual assumptions change, they do so in slow swings of an elliptical pendulum that can last a long time. Sometimes the ritual artifacts are very important. It may be one Cornwall consensus note.

gillian.tett@ft.com



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