Bold action to build back better
From making strong commitments and taking concrete action, to recasting economic models and addressing the megatrends exposed by COVID-19, there are many actions the G20 and its partners can take to recover from the pandemic and build a better world
The COVID-19 pandemic has turned from a public health crisis with no parallel in living memory into the deepest peacetime recession in a century. Global output in the second quarter of 2020 was more than 10% lower than at the end of 2019. Global trade declined by over 15% in the first half of 2020. Between December 2019 and April 2020 the steep fall in the number of people working was 14 times the total decline from peak to trough during the global financial crisis a decade ago. The Organisation for Economic Co-operation and Development projects that global gross domestic product will decline by 4.5% this year – leaving lasting, asymmetric scars, particularly on already vulnerable groups, such as the low-skilled, youth, migrants, women and those in non-standard and informal jobs.
Developing and least developed countries are experiencing devastating compounded effects on supply and demand, falling international trade and plunging commodity prices. Many countries, from least developed, to low- and middle-income countries, are struggling to manage their debt repayments, risking default. In 2020, external private finance inflows to developing economies could drop by $700 billion and remittances will likely fall by well over $100 billion. By 2021, COVID-19 could push 150 million people into extreme poverty, reversing decades of progress.
Whatever it takes
Born at the leaders’ level in 2008 to respond to the global financial crisis and the premier forum for global economic governance, the G20 is again demonstrating its capacity to address systemic shocks. Under Saudi Arabia’s presidency, at the Extraordinary Virtual Summit on 26 March G20 leaders pledged a ‘whatever it takes’ approach, putting the crisis at the core of their priorities and announcing fiscal stimulus packages exceeding $5 trillion to “counteract the social, economic, and financial impacts of the pandemic”. Since then, G20 governments’ fiscal stimulus has grown to about $12 trillion.
Achieving consensus during a crisis is not easy. However, the G20 has agreed several important outcomes to steady the global economy. These include the G20 Action Plan on COVID-19, agreed by the G20 finance ministers and central bank governors, which helped preserve the liquidity and stability of the global financial system and provided lifelines to countless workers and businesses. It launched the Debt Service Suspension Initiative, which grants a debt-service standstill to the poorest countries to help them concentrate on fighting the COVID-19 pandemic. The G20 agreed to refrain from imposing unnecessary trade barriers, with about 70% of COVID-19–related trade measures implemented by G20 countries being trade facilitating, and to improve conditions for digitalising business models and promote the enhanced resilience of G20 economies. G20 members and others have also pledged more than $21 billion for global health and the response to the pandemic.
However, international coordination, including within the G20, could have been swifter and more effective. More progress is needed on global health, particularly on pandemic preparedness, vaccines and treatments. In trade, despite commitments to keep emergency trade restrictions “focused, proportional, transparent and temporary”, the pandemic has exacerbated pre-existing trade disruptions and tensions and led to the disorderly implementation of export restrictions. A standstill on protectionist measures would have been, as in 2008, a very positive signal to the business community. It was disappointing that G20 members could not do it this time.
Message of unity
As leaders convene in November, they must send a powerful message of unity, solidarity and cooperation, and launch collective, bold actions to build back better.
First, strong commitments and concrete action are needed to strengthen pandemic preparedness and ensure that global public goods, such as vaccines and treatments, are based on rigorous scientific criteria and distributed according to countries’ needs, including the least developed countries.
Second, economic models should be recast to foster resilience. G20 leaders need to keep global value chains open according to the rules of the international trading system, with a reformed World Trade Organization at its centre. The G20 should also emphasise actions that enhance the resilience of our societies, reduce people’s vulnerability and buck the trend of rising inequality: this requires empowering people, enhancing access to opportunities and training, and widening economic participation, including by reducing gender inequality. Extending social protection to all, especially the most vulnerable, is critical for recovering and mitigating the effects of future shocks.
Third, the global community needs to address the megatrends exposed and even hastened by this crisis, such as digitalisation. Global consensus-based solutions are needed to uphold fair competition and taxation in the digital economy. Leaders must also ensure that access to technology and its benefits is inclusive so digitalisation drives growth with people’s well-being at its centre.
Finally, the pandemic has exposed the interconnections among climate change, biodiversity and human health. The massive stimulus packages and investment plans designed to drive the recovery should accelerate the transition towards a low-carbon economy and protect and nurture biodiversity and ecosystems conservation.
The common thread is that building back better can only be achieved through stronger multilateral dialogue and international cooperation, whether on trade, taxation, climate change, pandemics or achieving the Sustainable Development Goals. As we look ahead to the Italian and Indian G20 presidencies, the OECD will continue to support the G20 every step of the way.
