The ‘Cornwall consensus’ is right here

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Three many years 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 snort. 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 lecturers and policymakers from every of the seven nations, it units out an “bold agenda to construct ahead higher from the pandemic”. 

The document incorporates some obscure and grandiose-sounding concepts, similar to “larger fairness and solidarity in international well being responses”. Nevertheless it 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 strains.

What ought to traders conclude? Many would possibly scoff. In any case, 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 could be silly for any enterprise, or investor, to disregard this ritualistic show. As anthropologists usually level out, symbols matter, even after 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 provides a thought-provoking snapshot of how such assumptions are altering.

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

There are 5 key factors to notice right here. First, western leaders at this time worry political pitchforks. Thirty years in the past, political figures similar to Margaret Thatcher and Ronald Reagan took it as a right that free-market globalisation would profit everybody. In the present day’s leaders fret that free-market fruits are so erratically distributed that it’s sparking a preferred (and certainly populist) backlash. “Inclusion” is without doubt one of 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 international 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”, subsequently, is one other buzzword.

Third, G7 debate is haunted by a fear of China. Beijing isn’t talked about by identify within the Cornwall consensus memo. However there are a number of calls to diversify international 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 international chip manufacturing to be concentrated within the hub of Taiwan. They don’t need to repeat the error.

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

Free enterprise continues to be lauded, however “partnership” is the framework for dealing with the large 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 slender concentrate on refined quantitative fashions, there may be now an emphasis on points beforehand handled as mere “externalities” — the surroundings, say, or well being or social elements.

Cynics (or free-market fans) would possibly 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 think not. In any case, 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 might 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 like or hate the brand new zeitgeist, you can not ignore it. Historical past reveals that when mental assumptions change, they accomplish that 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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