A British economist three decades ago On Williamson He coined the term “Washington Consensus” to describe a collection of free-market, pro-globalization ideas promoted by American leaders (among others) around the world.
But now there is a new label in the air – “Cornwall Consensus”.
Do not laugh. That’s really the name Advisory memorandum circulated on Friday before the G7 leaders’ meeting in Cornwall. Written by a committee of academics and policy makers from each of the seven countries, it sets out an “ambitious agenda to move better beyond the epidemic.”
In: document: contains some vague, lavish ideas, such as “greater justice, solidarity in the global health response.” But it also offers more detailed proposals, such as the creation of a Financial Stability Council like the Data Technology Council to monitor the World Wide Web and the CERN (European Organization for Nuclear Research) climate technology.
In any case, the memorandum suggests that the recent G7 corporate tax agreement should signal a new phase of Western cooperation in line with new ideological lines.
What should investors conclude? Many can be ridiculed. After all, G7 meetings tend to be purely ritualistic, and the accompanying memoirs are merely ritual symbols. And the Cornwall Consensus proposals, in any case, are unlikely to be accepted in the near future, no matter how reasonable they may seem.
But it would be foolish for any business or investor to ignore this ritual display. As anthropologists often point out, symbols are useful, even when they are “empty” or divorced from reality, as they reflect and reinforce group assumptions about how the world should work. As such, this latest memo offers a thought-provoking photo of how such assumptions change.
This is especially true as some investors and corporate executives struggle to respond to the changing shock that began with their careers when the Washington Consensus reigned supreme. We humans are always the creatures of our cultural environment, yet we treat our beliefs as if they were a “natural” way of thinking.
Here are five key pointers in moving forward. First, Western leaders today are afraid of political bases. Thirty years ago, politicians like Margaret Thatcher and Ronald Reagan acknowledged that the globalization of the free market would benefit everyone. Today’s leaders are angry that free-market fruits are so unevenly distributed that it provokes a popular (ապես truly populist) backlash. “Inclusion” is one of the new words.
Second, G7 leaders acknowledge that globalization and free market competition create vulnerabilities as well as efficiency. In the past, they hoped that individual corporate incentives would create an optimized cross-border supply system. They now know that global supply chains face the problem of collective action, as businesses tend to focus on the nodes that make perfect sense to each individual, but if they are broken, they wreak havoc. Therefore, “endurance” is another vocabulary.
Third, the G7 debate is being pursued fear of ChinaBeijing is not mentioned in the Cornwall Consensus Memorandum. But there are many calls to diversify global supply chains, not just with advanced technology, but also with medical equipment and minerals. With delay, Western governments acknowledged that it was a terrible strategic mistake to allow global chip production to be concentrated in the Taiwan node. They do not want to repeat the mistake.
Fourth, there is a subtle, yet profound recovery in the relationship between business and government. In the Washington Consensus, companies were seen as independent actors competing with each other without state involvement. Now all the talk is about the government և business partnership.
Free enterprise is still being praised, but the “partnership” is the framework for meeting the great challenges of that society, be it vaccine hunting, climate change or technological competition with China.
Finally, economics is redefined in Biden White House փոխարեն Elsewhere, instead of focusing on subtle quantitative models, the focus is now on issues that were previously viewed as merely “external” – environmental, say, or health or social factors.
Inns (or free market enthusiasts) may say that this only reflects the temporary left of American policy or the short-term response to the epidemic.
It is possible, but I doubt it. After all, this ideological shift was motivated not only by Covid-19, but also by China’s rise, the threat of climate change, and the evaporation of Western cities around free market ideas that followed the collapse of the Soviet Union. And the followers of this new economy can be found across the political spectrum. After all, it was a British Conservative government organized the advisory group that drafted the Cornwall Consensus.
So whether you love or hate a new shocking professional, you can not ignore it. History has shown that when mental assumptions change, they do so with slow, elliptical pendulum swings that can last a long time. And sometimes ritual artifacts are very important. That Cornwall Consensus Memorandum may be one.