When finance ministers and central bankers from the world’s 20 largest economies meet in Venice this week, they must seize this crucial opportunity to make headway on the world’s biggest challenges: ending the pandemic worldwide, rallying a global effort to contain climate change and securing a solid economic recovery everywhere on the planet.
On all three counts, time is running out. The failure to commit to a plan to end the pandemic by vaccinating all the world’s adults, such as the one costed at $50bn by the IMF, is unconscionable but also self-defeating. As long as the pandemic is uncontained anywhere, new and potentially vaccine-resistance virus mutations are a risk everywhere.
Strong recoveries are under way in many countries but they, too, are vulnerable to economic troubles elsewhere. Big build-ups in debt, necessary to safeguard jobs and businesses during lockdowns, leave behind fragile financial systems and balance sheets. Rich-country policy normalisation, meanwhile, poses risks to emerging economies (and if premature, to rich countries themselves). As for climate change, policy is still playing catch-up with the scale of the carbon transition most leaders now fortunately admit is required.
If speed is of the essence, so is co-operation between rich and poor countries, without which none of these problems can be addressed adequately. Even if the leaders of the G7 largest high-income countries had made serious commitments to face up to these challenges — which they have not — it would not suffice on its own. On vaccination, climate change and recovery, the emerging world has its own role to play.
Hence the importance of a common approach at G20 level. The biggest political problem to overcome is a lack of trust between the rich and emerging worlds. This has good reasons: while it is understandable that rich countries’ leaders look after their own people first, they show little sign of appreciating just how yawning the gap between rich and poor countries really is.
More than half of adults in most high-income countries are partly or fully vaccinated; many poor countries remain in the single-digits. Rich countries are belatedly forging ahead with ambitious climate plans — including potential punitive trade measures for those that do not follow suit — but have not made good on a decade-old promise of $100bn a year to fund poor countries’ climate transitions. And poor and middling countries cannot afford the sort of generous rescues rich countries have put in place for their economies.
Restoring trust requires all sides to come together, but rich countries can catalyse this process by putting real money behind their promises to build back better. It will not cost them much. The IMF’s estimated cost of ending the pandemic outright is a mere one-thousandth of rich countries’ annual economic output. The promised climate funding for poor countries is of the same minuscule order of magnitude.
There is no reason to delay either; nor to resist any longer the proposal to issue new special drawing rights, the international reserve asset. To do any good, new SDRs must be made available to poorer countries at favourable terms — not allocated to each country by economic weight as is the norm. This would not cost rich countries a penny, involving as it would the creation of new reserves.
The G20 was forged to co-ordinate the global response to the Asian and global financial crises. Today’s triple challenge is deeper than both. The forum — the closest we have to a world government — must prove its mettle again.