G20 leaders meeting in Rome must recognize that only public interest, not private profit, can cope with interconnected global crises.
In their recent communicated, the Finance Ministers of the Group of 20 (G20) admirably pledged to use “all available tools for as long as necessary to deal with the adverse consequences of Covid-19”, in particular for those most affected.
Since the pandemic developed, governments around the world have taken extraordinary steps to support their economies, forcing the shutdown of “non-essential” businesses, locking borders and unleashing a wave of economic and health measures. While not all responses have been as effective, a fundamental lesson has become clear: Governments, especially in rich countries, can organize unprecedented, large-scale interventions if necessary.
Eighteen months later, critical weaknesses persist. Global vaccine inequity perpetuates the pandemic. Economic instability and lack of fiscal space threaten another lost decade development for many low- and middle-income countries. Despite the escalation climatic disasters, alone 2 percent of the total budget response to Covid-19 and the recovery from the economic crisis that followed has been devoted to clean energy measures. Progress in tackling the overlapping global crises of Covid-19, economic instability and climate change has stalled.
As leaders of the G20 meeting in Rome this weekend, they will be keen to show their support for a more prosperous future. In doing so, there can be no delay in addressing a feature common to these challenges: the role of a few financial and pharmaceutical giants in hindering progress.
First, equal access to vaccines and a more mutual and cooperative global approach to research and manufacturing have been abandoned in favor of consolidating the supremacy of a few large pharmaceutical companies. Despite renewed commitments to donate vaccines, the waiver of intellectual property bonds proposed by South Africa and India to the World Trade Organization in October 2020, to support increased manufacturing of cheaper Covid-19 products, languish in diplomatic maneuvers.
Several G20 countries continue to block this potentially transformative initiative, effectively protecting the monopoly rights of pharmaceutical giants, whose vaccine success is largely due to significant public investment at the start of the crisis. In addition to causing human suffering and preventable loss of life, according to the International Chamber of Commerce, failure to provide global access to vaccines will cost the global economy dearly. $ 9.2 trillion.
Refusal to participate
Then, a sovereign debt crisis looms in the south of the planet, exacerbated by the pandemic and the refusal of private creditors to participate in negotiations for restructuring or debt relief. The G20 has bilateral payments suspended for low-income countries (LICs), delaying about $ 5.7 billion in payments in 2020 – developing country debt has grown by about $ 500 billion over the same period. This debt service suspension initiative is due to end in December but the G20 ‘Common Framework for Debt Treatments‘, intended to restructure debt with troubled countries, has yet to show signs of being operational, although launched over a year ago and with clear signs demand countries in debt and vulnerable to climate change for a major debt restructuring.
So far, G20 leaders have not mandated the participation of private bondholders and commercial creditors, despite say again supplications. This ensures the failure of debt relief initiatives. Private creditors include approximately a fifth of LIC debt and about three-quarters of middle-income country debt, continuing to collect repayments throughout the crisis while health care budgets have been exhausted. Without meaningful engagement from resisting creditors, the G20’s debt relief efforts will do nothing to stabilize global economic instability.
Major stumbling block
Finally, amid significant government commitments ahead of the United Nations Climate Change Conference (COP26) which opens tomorrow in Glasgow, private investment in carbon-intensive industries remains a major obstacle to rapid reduction in emissions.
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As the largest public lender to coal projects, China’s recent announcement to build no new coal plants abroad is rightly celebrated. However, private sector investors are responsible for about 82 percent of all the investments in coal in the world, therefore, government promises alone are not enough to eradicate emissions.
The recent release Production gap report of the United Nations Environment Program revealed that existing energy plans would lead to the production of approximately 240% more coal in the world by 2030 than what would be compatible with maintaining global heating at 1.5 ° C above. above pre-industrial levels. a Influence card study shows that even among climate focused Investment Funds more than half—Including those associated with large investment firms BlackRock and State Street — remain involved in fossil fuel companies and other big polluters.
Facilitate profit maximization
As evidenced by the pandemic, the state hasn’t necessarily shrunk – governments still largely control the legislature to take decisive action. But there is undeniable evidence that it was shaped to prioritize the facilitation of profit maximization and the free flow of capital around the world, encouraged by rankings such as the recently abandoned World Bank Doing Business Report.
Government action therefore focuses on “attracting investment” and improving “competitiveness” by reducing taxes, duties and standards, rather than pursuing productive investment policies that attack to inequalities and improve lives. A strengthened social safety net, labor rights, public services, industrial policy – all desperately needed in the face of the pandemic – are effectively reduced.
At the G20 meeting this weekend, leaders have the opportunity to build a new consensus to rebalance power towards public priorities and mutual prosperity, using regulatory tools to shape and influence private sector activity. to meet global challenges.
Positive and negative incentives
With the help of a vaccine intellectual property rights waiver, G20 governments that host pharmaceutical companies can use positive and negative incentives to encourage them to share their technology and know-how, ensuring a global vaccination campaign to end the pandemic.
The powerful creditor countries of the G20 could also force private creditors to participate in debt relief initiatives, using legislative safeguards against litigation in financial centers such as London and New York. Multilateral bodies such as the International Monetary Fund and the World Bank can help coordinate these efforts, with the ambition of establishing a multilateral debt settlement mechanism, having announced his intention deploy a green debt swap platform in time for COP26.
Likewise, private sector investments in fossil fuels are dominated by companies incorporated in G20 countries, whose governments can regulate this activity until non-existent and instead direct investments into renewable energy development. , with the support needed for fair and just transitions to fossil fuels. dependent economies.
If G20 members are serious about ending the pandemic, rebuilding a strong global economy and tackling climate change, they will need to use “all available tools” to address the power imbalance between the public and private spheres.
Nothing less than public health and the wealth of the world depend on it.