09 September 2019
[Image source: https://www.express.co.uk/news/world/1167396/g7-2019-date-when-is-g7-summit-who-is-in-g7-uk-usa-france-germany-eu-news]
The G7 took place a few weeks ago in Biarritz, France. The seven "leading" world countries came together to talk about the global economy. The Global Wellbeing Alliance, of which I am part of, submitted the following recommendations to the meeting, written by Amanda Janoo:
We sit at a moment of unprecedented crisis, as inequality between and amongst countries grows, breeding social and political unrest. For many of the G7 countries, affluence is not breeding happy and healthy societies but rather lonely and anxious ones. Concurrently, the rapid rate of biodiversity loss and climate change threaten our very existence. For too long, we have maintained a dogmatic faith that if we reformed our economies to maximize growth, universal prosperity would automatically follow. It is time to take a step back and really evaluate what we are trying to achieve, and then build economies that can actually deliver those achievements. It is time to redefine our notion of progress.
a) Adopt alternative progress indicators to GDP
The global obsession with Gross Domestic Product as a progress indicator has resulted in widespread confusion between means and ends. GDP growth is now pursued by all major economies as a measure of national success – as an end in itself – let alone the supposed means to make lives better for their citizens. The G7 itself exemplifies how GDP determines geopolitical power and influence on the global stage. This flies in the face of growing evidence that the costs of such a growth model often outweigh the benefits. In many instances, GDP growth is now accompanied with declining employment, rising poverty and devastating environmental impacts. WEAll urgently calls upon the G7 to abandon the objective of GDP growth and focus on developing economic policies to achieve real objectives that matter most to citizens, such as improving quality of life, reducing inequality, generating meaningful jobs and restoring our natural environment. G7 member states should plan for a post-growth future where human and ecological wellbeing are prioritized over GDP – where economies do not dependent on growth to meet the needs of their citizens.
b) Reform international economic organizations to promote wellbeing economies
Perhaps no one has suffered more deeply from our dubious notion of progress than the global south. For decades, international economic organizations including IMF, WB and the WTO have “encouraged” countries to adopt neoliberal and austerity policies4 with the promise that they too could achieve G7 economic status. The issue of course, is that the assumption that economic growth equates to development does not hold up (as seen by the many countries trapped in resource-based and jobless growth trajectories). It is time to officially abandon the “one-size-fits-all” economic policy prescriptions and provide space for self-determined development trajectories. WEAll calls on the G7 to promote reform of the international economic organizations to encourage locally-oriented and context-appropriate economic development practices. At this critical juncture in economic history, we must recognize that a rich suite of ideas that are better aligned with what people and planet need can be found in the so-called “less developed” world, where communities are able to achieve much higher levels of wellbeing with significantly less consumption and environmental impact. We must abandon the idea that development or progress is a one way street and create space for experimentation to identify systems of production and provision that can bring wellbeing to all. Changing our global production systems The rapid globalization of production and technology has brought unprecedented wealth but also new challenges. The world is now bound together through this tremendous economic machine and if we hope to a build more just and sustainable world, we must confront the new power and production dynamics strategically, together. Our current global production system is concentrating wealth into fewer and fewer hands, undermining democracy and threatening our planet. Economies are not simply systems of production and consumption, they are also systems of power: its creation and its exertion. As multinational corporations accumulate more and more wealth, their power and influence has also grown to levels that is politically unsustainable and ethically unacceptable. The G7 still has the capacity to reign in these global giants. We must no longer be concerned purely with what is being produced, but also once again consider how things are produced in order to build a more inclusive and sustainable economic system.
c) Binding code of conduct for MNCs
For too long, the global economy has allowed multinational corporations to accumulate unprecedented wealth and power. This has led to a “race to the bottom” among countries to adopt the lowest environmental, labour and tax standards to attract or appease these global giants. At this critical juncture in history, the world desperately needs more progressive legislation in order to build more just and sustainable economies. However, the capacities of countries to implement such legislation is consistently undermined by legislation such as the Investor State Dispute Settlement (ISDS) agreement that allows MNCs to sue governments for any laws that would infringe on their expected earnings. We call upon the G7 to support the working UN resolution (proposed by Ecuador and South Africa) on a Binding Code of Conduct for MNCs. If anyone can afford to be held to higher environmental, tax and labour standards it is MNCs. A binding code of conduct would not only create greater space for upholding democratic governance of economies, but also ensure more ethical production practices worldwide. If we have allowed for the development of a global legal system that allows corporations to sue governments, there is no reason why we should not have an arbitration system where people can sue corporations for unethical behaviour. d) Global Competition Regulation As already mentioned, the world is seeing production increasingly consolidated into the hands of fewer and fewer multinational corporations. Most industries are dominated by fewer than a handful of corporations. For example, MNCs now account for 80% of global trade each year, which means they control, every year, approximately 16 trillion dollars of production and trade around the world. The current level of conglomeration in our global economy is a severe threat to our economies, our societies and our environment. We learned this lesson before, that we could not allow single corporations to control the majority of production without dire consequences. This was what led to the historic creation of competition legislation. However, these regulations remain at the national level and clearly are not cutting-it, as we are seeing continuous mergers and acquisitions worldwide, that in 2015 reached, a volume of 4.6 trillion dollars, 1 which is approximately the GDP of Japan or Germany. MNCs now control too much of our global production and exchange and WEALL calls upon the G7 to initiate the creation a global competition regulation that would ensure that no single corporation could control more than a small percentage of global production and exchange. For most of history, wealth was generated through the production and exchange of real things and a social compact emerged that governments would re-distribute some of the wealth back to society for the betterment of all. The engines of growth have now shifted, with more and more wealth being generated by technology13 (e.g. information) and financial markets that transverse the world, beyond the redistributive mechanisms of the state. In order to combat widening inequality and devastating environmental degradation, we need new mechanisms to generate funds that can be used to combat the global challenges of our time. The following proposals would help to generate billions (and potentially trillions) of dollars that could be used to combat climate change and achieve the Sustainable Development Goals (SDGs).
e) Citizens wealth funds
The rise of new technologies and what is often called the Fourth Industrial Revolution has created a lot of new wealth, much of it reliant on the work of governments in terms of the funding for education, theoretical research and much applied research. At the same time, as this wealth is created for those benefiting from the new technologies, addressing the substantial global problems will require major new expenditures. We have to find a way of matching the two. One mechanism to do this is via sovereign wealth funds. There are many already in existence that show a way to ensure collective benefit from the wealth generation – with the Norwegian sovereign wealth fund probably being the best example. Citizen Wealth Funds at country level could fund universal basic income schemes, universal basic services and infrastructure. A global Citizen Fund could address climate change and other environmental issues that impact across national boundaries. Both of these could be funded by one of several options: for example, states could take a small equity stake in all new companies; there could be a modest annual tax on all companies or a windfall tax on technological breakthroughs; there could be more taxing of exploitation of natural resources or wealth. WEAll calls on the G7 to recognize that technological development must benefit society as a whole and not just the select few and this requires a strategic tax and redistribution system.
f) Ban off-shore bank account funds
Due to lack of global economic coordination and oversight, it is now estimated that at least 10% of the world’s GDP is held in offshore bank An important milestone of this shift in the global economy was in 2016 when the 5 most valuable companies (by market capitalization) all became technology companies (e.g. Apple, Alphabet, Microsoft, Amazon and Facebook). Which means that there is currently at least 8 trillion dollars is being held in off-shore accounts to avoid taxation, with some estimating as much as 32 trillion dollars. It is the ultra-rich (e.g. 0.01%) who utilise these offshore mechanisms, making it a significant factor in the rise of economic inequality we are seeing worldwide. While some regulatory efforts have been made by supranational organisations such as the OECD and the G20 to reduce tax evasion, they have not yet been sufficient to reduce this predatory practice. Following the release of the Panama Papers, Nobel Laureate Professor Joseph Stiglitz argued that economic leaders (e.g. the US and EU) have the power and anti-money laundering tools to ensure compliance with global transparency standards. It is an issue of will. Therefore, WEAll urges an official ban of all off-shore banking and calls upon the G7 to use their collective intelligence to extract all money currently held within these institutions and put that money directly into a climate change or SDG fund.
g) Financial Transaction Tax (Tobin Tax or ‘Robin Hood’ tax)
The global economic crisis of 2008/2009 illustrated the devastating costs of our global interconnected. Global financial markets now move at lightning speed, generating immense wealth and at the same time immense universal vulnerabilities. France and Germany (and INGOs such as Oxfam) have been pushing for a global financial transaction tax, but have not succeeded in gaining substantial traction. WEAll stands in support of this policy agenda that would tax international financial transactions, particularly speculative currency exchange transactions. This policy would not only function to reduce financial volatility, but a mere tax of .05% could generate hundreds of billions of dollars that could be used to combat climate change or be linked to the achievement of the SDGs. These bold ideas are fully feasible given the wealth and power of the G7 countries. During World War II, the Army Corp of Engineer’s had a motto: “the difficult we do immediately, the impossible will take a little while.” There are moments in history when paradigms shift. We are at this moment and if the G7 promotes these policies, we would be well on our way to achieving the “impossible”: a global economic system that ensures the wellbeing of people and the planet.
You can find the full document here
.About the author
Amanda Janoo is an Economic Policy Expert and Advisor to governments and international development organizations. Her work aims to enhance the capacities of governments to craft goal-oriented economic policies for a more just and sustainable world. Prior to founding Economic Policy Consulting LLC, Amanda worked as a consultant for the UN supporting governments to develop industrial policies for structural transformation. As a Fulbright Scholar, Amanda researched the relationship between international trade and employment generation. She has worked throughout Africa, Asia and Europe supporting greater economic self-determination and empowerment.
Special thanks to Katherine Trebeck, Lisa Hough-Stewart, Stewart Wallis and Justine Braby for their invaluable contributions to this article.