The ‘Cornwall consensus’ is right here

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Three a long time in the past, the British economist John Williamson coined the phrase “Washington consensus” to explain a group of free-market, pro-globalisation concepts that American leaders (amongst others) have been selling around the globe.

Now, nonetheless, a brand new tag is within the air: the “Cornwall consensus”. 

Don’t giggle. That’s actually the title of an advisory memo circulated forward of the G7 leaders assembly in Cornwall on Friday. Written by a committee of teachers and policymakers from every of the seven nations, it units out an “formidable agenda to construct ahead higher from the pandemic”. 

The document incorporates some imprecise and grandiose-sounding concepts, corresponding to “better fairness and solidarity in world well being responses”. But it surely additionally makes extra detailed proposals, such because the creation of “a ‘Knowledge and Expertise Board’ akin to the Monetary Stability Board” to supervise the worldwide web and a “CERN (European Group for Nuclear Analysis) for local weather expertise”.

Both approach, the memo means that the latest G7 company tax accord ought to herald a brand new part of western collaboration alongside new ideological traces.

What ought to buyers conclude? Many may scoff. In spite of everything, G7 conferences are typically purely ceremonial affairs, and the accompanying memos mere ritual symbols. And the “Cornwall Consensus” proposals are, in any case, unlikely to be adopted within the close to future, nonetheless smart they appear.

However it might be silly for any enterprise, or investor, to disregard this ritualistic show. As anthropologists usually level out, symbols matter, even once they seem “empty” or divorced from actuality, since they mirror and reinforce group assumptions about how the world ought to work. As such, this newest memo presents a thought-provoking snapshot of how such assumptions are altering.

This issues, notably since some buyers and company leaders are struggling to reply to the altering zeitgeist, having began their careers when the Washington consensus reigned supreme. We people are all the time creatures of our cultural setting, but we deal with our beliefs as in the event that they have been the “pure” solution to assume.

There are 5 key factors to notice right here. First, western leaders immediately worry political pitchforks. Thirty years in the past, political figures corresponding to Margaret Thatcher and Ronald Reagan took it as a right that free-market globalisation would profit everybody. At this time’s leaders fret that free-market fruits are so inconsistently distributed that it’s sparking a well-liked (and certainly populist) backlash. “Inclusion” is among the new buzzwords.

Second, G7 leaders additionally now acknowledge that globalisation and free-market competitors create vulnerabilities in addition to efficiencies. Beforehand, they hoped that particular person company incentives would create an optimised cross-border provide system. Now they know that world provide chains are threatened by a collective motion downside, since companies have a tendency to pay attention exercise in nodes that make excellent sense for every particular person, however create havoc in the event that they break. “Resilience”, due to this fact, is one other buzzword.

Third, G7 debate is haunted by a fear of China. Beijing shouldn’t be talked about by identify within the Cornwall consensus memo. However there are a number of calls to diversify world provide chains, not only for superior expertise, however for medical gear and minerals too. Belatedly, western governments have accepted that it was a horrible strategic mistake to permit world chip manufacturing to be concentrated within the hub of Taiwan. They don’t wish to repeat the error.

Fourth, there’s a delicate, however nonetheless profound, reset underneath approach of the connection between enterprise and authorities. Within the Washington consensus firms have been thought to be impartial actors competing with each other, with out state involvement. Now all of the discuss is of “partnership” between authorities and enterprise.

Free enterprise remains to be lauded, however “partnership” is the framework for dealing with the massive societal challenges of the day, whether or not it’s the hunt for a vaccine, local weather change or tech competitors with China.

Lastly, economics is being redefined, in Biden’s White House and elsewhere. Rather than a slim concentrate on refined quantitative fashions, there may be now an emphasis on points beforehand handled as mere “externalities” — the setting, say, or well being or social components.

Cynics (or free-market lovers) may say that every one this merely displays a brief leftward lurch in American politics, or a short-term response to the pandemic.

Presumably, however I believe not. In spite of everything, what’s driving this ideological shift is not only Covid-19, but in addition the rise of China, the specter of local weather change and the evaporation of the western hubris round free-market concepts that adopted the collapse of the Soviet Union. And adherents of this new dispensation will be discovered throughout the political spectrum. It was a Conservative British authorities, in any case, that organised the advisory group that produced the Cornwall consensus memo.

So whether or not you’re keen on or hate the brand new zeitgeist, you can not ignore it. Historical past exhibits that when mental assumptions change, they achieve this in sluggish, elliptical pendulum swings that may final a very long time. And typically ritualistic artefacts matter deeply. That Cornwall consensus memo could also be one.

gillian.tett@ft.com

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