17 June 2022

The New Economy and the SDGs (1)

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“Amid record high food insecurity in crisis-hit Syria, UNDP and humanitarian partners join efforts to increase access to affordable bread for vulnerable Syrians.” “Amid record high food insecurity in crisis-hit Syria, UNDP and humanitarian partners join efforts to increase access to affordable bread for vulnerable Syrians.” https://www.undp.org/arab-states/press-releases/amid-record-high-food-insecurity-crisis-hit-syria-undp-and-humanitarian-partners-join-efforts-increase-access-affordable

This two-part post/essay is my way of introducing (and articulating for myself) one of the main themes of my present book project – human flourishing as defined by the United Nations’ Sustainable Development Goals (SDGs, 2015-2030). These 17 goals are breathtakingly comprehensive (see my 2018 post “Ending Hunger” on this). They range from those more traditional development goals like poverty and hunger eradication, improved healthcare and education, job creation and economic growth to more specific ones like “clean water and sanitation,” “affordable and clean energy,” “sustainable cities and communities,” “responsible consumption and production,” “life below water,” and “life on land.” But even beyond this, some of these goals target good governance, both within states and between states in the international arena. In the following bullets, I’ll quote some of the wording of the United Nations Development Programme (UNDP) for the SDGs that require some form of government intervention:

 

    • Goal 5 - Gender equality: research in the last few decades has demonstrated that the best way to promote development is to empower women. Among other things, this entails giving “women equal rights [to] land and property, sexual and reproductive health, and to technology and the internet.” The section ends with the hopeful sign that more women are in public office, but much more remains to be done in that area.
    • Goal 9 - Industry, innovation and infrastructure: with still 90 percent of the developing world without access to the internet, states will have to invest a lot more in this kind of infrastructure. Additionally, “Technological progress is also key to finding lasting solutions to both economic and environmental challenges, such as providing new jobs and promoting energy efficiency. Promoting sustainable industries, and investing in scientific research and innovation, are all important ways to facilitate sustainable development.”
    • Goal 10 - Reduced inequalities: income inequality has increased everywhere, but it’s lowest in Europe and highest in the Middle East. Political action is needed within nations: “These widening disparities require sound policies to empower lower income earners, and promote economic inclusion of all regardless of sex, race or ethnicity.” And political action is needed on a global scale: “This involves improving the regulation and monitoring of financial markets and institutions, encouraging development assistance and foreign direct investment to regions where the need is greatest. Facilitating the safe migration and mobility of people is also key to bridging the widening divide.”
    • Goal 13 - Climate action: here again governance is key, with political leaders pushing back against the fossil fuel industry, setting bold goals for developing clean energy and finding ways to subsidize this transition in developing nations.
    • Goal 16 - Peace, justice and strong institutions: on a global scale, this is obviously just as necessary for human flourishing as it is difficult to actually achieve. Arguably, the UN, as a more neutral arbiter, has a better chance of achieving peace, and partly because it was designed to work on this in a comprehensive way: “The SDGs aim to significantly reduce all forms of violence, and work with governments and communities to end conflict and insecurity. Promoting the rule of law and human rights are key to this process, as is reducing the flow of illicit arms and strengthening the participation of developing countries in the institutions of global governance.”
    • Goal 17 - Partnerships for the goals: in my reading about international relations these days, I see the US leveraging its economic and military hegemony to further its national interests, sometimes in line with its stated ideals of extending the “international liberal order” (human rights, democracy, rule of law, etc.), and many times in contravention of these ideals (like when it sides with dictators like Egypt’s Sisi, or the Saudi crown prince MbS, while turning a blind eye to the continuing war in Yemen; or its tacit support of Israel’s ongoing and illegal military occupation of the West Bank and Gaza, etc.). On the other side, China and Russia are the two powers, which in different ways oppose this US hegemony and pursue their own expansionist policies in opposition to “the liberal order.” In light of all this, this last SDG makes perfect sense: it’s the United Nations saying it needs more support, both in funding and in cooperation, in its work to achieve these development goals: working to make international trade fairer, “promoting investment for the least developed,” enhancing “North-South and South-South cooperation in order to achieve all the targets.” I believe the UN does have a crucial role to play, today perhaps more than ever.

 

With these goals in mind, I will look at two related issues in this first installment. The first is about the “new economics” in the title, based on a November 2021 piece in Foreign Affairs by Felicia Wong, who is president and CEO of the Roosevelt Institute. Then I point out some obvious parallels between the “new economics” and the SDGs.

 

What are “the new economics”?

In her piece, “The New Economics,” Felicia Wong describes this new convergence of economic thinking as the Cornwall consensus that could potentially replace the Washington consensus of the 1980s.

Let me unpack that statement. Felicia Wong was chosen as the economist representing the United States to join representatives of the other six G-7 nations (UK, France, Germany, Japan, Canada and Italy) to draw up a report on “Global Economic Resilience” and thereby offer a series of proposals to the leaders assembling in Cornwall for the June 2021 G-7 Summit. The UK, by virtue of holding the rotating presidency that year, indicated that on its agenda was “building back better” from the Covid-19 crisis, promoting “inclusive growth,” “supporting the transition to net zero carbon and supporting resilience to climate change and other environmental challenges.” Felicia Wong and her six co-authors of that report were rewarded by their reports enthusiastic reception at the Cornwall summit. She calls it the “Cornwall consensus.”

By contrast, the Washington consensus (see here the Encyclopedia Britannica article on this) refers to a set of common policies that in particular the World Bank, the International Monetary Fund, and the US treasury adopted in the 1980s in order to manage the debt of developing nations, while helping them to “develop” economically. This was called the “neoliberal” approach, and it was the model adopted by Ronald Reagan and Margaret Thatcher in their respective economies as well. Its three pillars were free trade, privatization, and deregulation. By prioritizing multinational corporations over workers, corporate profits over protection of the environment, economic neoliberalism exacerbated the gap between rich and poor globally (see my treatment of these issues in an excerpt from the first chapter of Earth, Empire and Sacred Text, pp. 1-13). An easy way to summarize the neoliberal approach is the adage: “A rising tide lifts all boats” – which might work for tides and boats, but much less for the poor when tax cuts and deregulation are seen as the panacea for growing the economy.

In the US, it wasn’t just Republicans who held on to these ideas, but Democrats as well, particularly in the area of trade: “international policymakers privileged trade openness and volume above all, seeking to deregulate markets and support the market-oriented rules of the World Trade Organization (WTO).” President Obama, in his effort to “pivot toward Asia,” promoted the Trans-Pacific Partnership trade deal (PPP), which later presidential candidate Hillary Clinton claimed she no longer supported because it had caused too many businesses to either move to countries where labor was cheaper or simply shut down, as cheaper products were now flooding the American market. These were some of the issues candidate Trump was able to exploit on his way to the White House. Though his policies mostly did not help the working class, his turning US trade policies upside down did open the way for a fresh look at trade. Here is how Felicia Wong puts it:

 

“Trump’s victory and his administration’s hostility to trade deals broke the long-standing bipartisan consensus on trade, and the lesson was not lost on Biden. The new administration, although it has departed from many Trump-era policies, has continued to move away from trade expansion itself as a primary goal of economic policy. Biden’s economic advisers have made clear that the United States will not pursue the TPP or any other trade agreement, for that matter, until Congress passes major new domestic spending legislation and international negotiators rewrite trade rules to include protections for workers and the environment.”

 

The last G-7 common statement had been in 2016, before the Trump presidency. It was all about breaking down trade barriers between countries (i.e., against “protectionism”) and a good deal of hemming and hawing about climate change. The Cornwall declaration was completely different in tone and content, and it wasn’t just the pandemic that played into it. Wong writes that it offered a different conceptual framework altogether. Here are the main points:

 

    • “Unrestricted international commerce” is no longer an objective. Put otherwise, “trade liberalization should no longer be seen as an end in itself.” Research has shown that past trade agreements have mostly hurt workers across the board. Rather, governments should seek to build regulations into their trade agreements that achieve more sustainable production. She gives an example: “the United States and the EU recently announced plans for the Global Arrangement on Sustainable Steel and Aluminum, which will keep dirty metals out of their markets and produce common ways to measure the embedded emissions in these industries. Notably, the agreement makes no reference to WTO rules or processes. Rather, the two trading giants staked out a common vision and invited the rest of the world to join them. Japan and the United Kingdom reportedly are inclined to do just that.” Sustainability would also include lowering prices on medicines so that pandemics can be fought more effectively on a global scale. The same can be said about environmental sustainability.
    • The Cornwall consensus calls on governments to invest more heavily in “high-quality future growth,” like “supporting the energy transition, including public transportation infrastructure; high-quality education and training; and climate-focused research and development.” Instead of a focus on “immediate consumption,” states should increase the proportion of their budgets on this kind of public spending. The Washington consensus was always looking for ways to cut government spending, but economists see a direct causal line between those austerity measures and the breakdown of the supply chains that have sparked the current global inflationary crisis – exacerbated, no doubt, by the fallout of the pandemic.
    • Governments should also invest in new technologies that will allow industries to reduce their carbon emissions more rapidly. By helping to fund this kind of research and the launching of promising new technology, governments can not only speed up the needed technological innovation; they can “can work with communities in and around the new industrial facilities to ensure that they share in the gains.” Reducing inequality is a win-win for everybody, which leads to the last point.
    • The Cornwall approach calls for drastically overhauling “how top earners and corporations are taxed and regulated.” For too long, the superrich have had far too much influence on economic policy and, as a result, have found ways to almost completely avoid paying taxes. The same goes for quasi-monopolies like Amazon and Facebook, and European regulators have done a better job than American ones so far in holding them accountable. One of the economists that wrote this report, Thomas Philippon, “has found that decreased competition in many industries now costs the typical U.S. household more than $5,000 a year. This is at a time when nearly 40 percent of households struggle to pay for an unexpected $400 expense.”

 

A very encouraging development in October 2021 was when at the invitation of the Organization for Economic Cooperation and Development (OECD), 126 countries came together to discuss the taxing of multinational corporations. An article on this gathering explain the backdrop:

 

“With budgets strained after the COVID-19 crisis, many governments want more than ever to discourage multinationals from shifting profits - and tax revenues - to low-tax countries regardless of where their sales are made.

Increasingly, income from intangible sources such as drug patents, software and royalties on intellectual property has migrated to these jurisdictions, allowing companies to avoid paying higher taxes in their traditional home countries.

The global minimum tax rate and other provisions aim to put an end to decades of tax competition between governments to attract foreign investment.”

 

The Biden administration wants to sign on to this, but so far, the relevant provision which is part of his “Build-Back-Better” bill is opposed by Republicans in Congress. What is ironic is that, as the Pandora Papers have demonstrated, “at least five U.S. states have become major offshore havens for international wealth, shielding the assets of national and global elites from public scrutiny and financial accountability.” Then Wong adds, “Biden, who spent 36 years as a senator from one such haven, Delaware, could take a strong stand by ending the practice.”

 

The challenges in applying this new economics

Felicia Wong isn’t naïve. Such policy changes threaten a myriad of entrenched corporate and private interests:

 

“In the United States and many other countries, the elements of a robust new political economic agenda are in place. Yet translating the new approach into new rules will require confronting the vestiges of corporate capture, when large private sector interests gain sway over government policy, a phenomenon that just in the last few months has impeded ambitious efforts to keep the cost of medicines down. In the United States, powerful interests in Washington have resisted the Biden administration’s effort to enable Medicare to negotiate drug prices to make them more affordable, and the German government has opposed relaxing WTO intellectual property rules to facilitate global vaccine access.”

 

What this means is that citizens who want to empower workers – or, level the playing field for disadvantaged classes, disproportionately black and brown – and factor climate change mitigation into the drive for economic growth, will have to become more active in local politics and do better in getting out the vote every two years in state and federal elections (see my two-part blog post on Heather McGee’s excellent book, The Sum of Us All). But, as Wong notes, another great obstacle for this truly democratic process to expand and make our economy more robust, resilient and fair for all, is the rise of populism. One of the “significant obstacles to putting the new ideas into practice” is “the threat of right-wing populism in the United States and elsewhere.” She explains:

 

“[This brand of populism] seeks to provide its own, inward-turning and often nativist alternative to the status quo. The appeal of a more nihilistic, less racially and religiously inclusive populism has only grown in the last five years and has gained ground in major political parties in many countries.”

 

In the American setting, this is what I was describing in my post about white supremacy. If you have been following the current hearings expertly researched and put together by the House Select Committee investigating the Jan. 6, 2021 attack on the Capitol, you have been given a front-row seat with a chilling view into what this kind of nationalist populism can lead to. An FBI mole planted among the Proud Boys, the most influential of the right-wing groups that led the assault on the Capitol, testified to the committee that they had every intention of killing Vice-President Mike Pence and Nancy Pelosi that day. The vice president was whisked away just in time to a secure location in the basement of the Capitol for over four hours, just 40 feet from the rioters. The riot could have ended much worse that day.

 

The new economics and the SDGs

Though without stating it directly, Wong infers that the new economics’ emphasis on “an inclusive economic vision” is likely influenced by and certainly parallel to the UN’s SDGs. The question at the heart of this new direction is a simple one: how can we build economic growth that empowers the working class and the poor more generally, and how can it be tailored to mitigate the worst-case scenarios of our changing climate, both now and for the next generations? How can we foster an economy that will in fact remain resilient in the face of all these challenges? The answer is that governments will have to take a more energetic and pro-active role in guiding nations toward achieving these goals, while working in tandem with civil-society NGOs and business partners.

In the next installment, I want to focus more on the role democracy plays in human flourishing. The SDGs are very explicit about that as well.