When risk becomes reality
COVID-19 has taken a devastating human and economic toll. Now, the G7 must spare no ambition in leading an inclusive, sustainable and resilient recovery that addresses all current and future risk factors
In 2020, the world witnessed what happens when risks become reality. Confirmed cases of COVID-19 worldwide are now approaching 150 million with a devastating human toll of almost 3 million deaths. The measures needed to contain the virus have resulted in the largest annual fall in economic output since the Second World War, hitting the most vulnerable hardest, triggering large-scale job losses and driving a tragic rise in global poverty and extreme poverty.
The near-term outlook remains uncertain, with the recovery depending on the speed and scope of the most ambitious vaccination effort in history and a continued fiscal effort to implement ambitious recovery plans. The latest Interim Economic Outlook published by the Organisation for Economic Co-operation and Development projects global gross domestic product to bounce back by 5.6% in 2021 and 4% in 2022. Nonetheless, output and incomes in many countries are projected to remain below the level expected prior to the pandemic at the end of 2022.
The UK’s G7 presidency has rightly made ‘building back better, greener, stronger and together’ a central theme. The OECD actively supports the G7 agenda to lead an inclusive and sustainable global recovery while strengthening resilience against future shocks.
To build forward better, we must begin by learning the lessons of this crisis and previous ones. The OECD is working with the G7 to strengthen resilience, and has delivered a report for the G7 Resilience Panel on Fostering Economic Resilience in a World of Open and Integrated Markets. This work aims to promote coordinated actions to prevent the build-up of vulnerabilities, absorb shocks and rebound rapidly. Building resilience should focus on collective challenges, such as tackling climate change and shaping the human-centric and safe development of emerging technologies, and also fostering robust, responsive and shock-proof supply chains and promoting a sound global rulebook to underpin rules-based open markets. Resilience should also have a strong social dimension to address the vulnerabilities driven by inequalities, build back trust in the global economic system and foster public adherence to policy measures.
CLIMATE CONSEQUENCES
The UK has rightly put the climate crisis and biodiversity loss at the heart of the G7, building momentum towards the COP26 in Glasgow in November and a new global biodiversity framework at COP15 in Kunming in October. We urgently need to reduce our vulnerabilities to climate shocks through mitigation and to improve our adaptation as we face the consequences of climate change. We cannot afford to further lock in carbon-intensive technologies and continue inflicting environmental harm. Yet findings from the OECD’s green recovery database, which tracks the environmental impacts of recovery policies, reveal that although $323 billion has been allocated to green measures so far, this is outweighed by support to potentially environmentally harmful activities and it is still only around 2% of total COVID-19–related spending. Much more effort is needed. Policy guidance recently issued by the OECD to G7 leaders and to their finance and environment ministers supports the proposed G7 “Compact on Nature” and the ministers’ commitments, by providing actionable recommendations to incorporate nature-related considerations and risks into spending, investment, financial decision-making and trade. To drive the green recovery, OECD evidence points to the importance of putting a price on all sources of carbon emissions, eliminating environmentally harmful subsidies and resetting policy frameworks and financial incentives for the transition to net zero.
We also need to harness emerging and digital technologies, as well as innovations and research in the field of science and technology, as key drivers of an inclusive and sustainable recovery and as sources of productivity growth and resilience. This requires the right enabling policy frameworks, addressing areas as diverse as privacy, security, safety, access, governance and competition. As new technologies are developed, it is essential to build upon democratic and human-centric values and approaches, ensuring they are embedded from the outset. Tools such as the OECD AI Principles are showing the way with regards to artificial intelligence. The United Kingdom has also shown leadership in ensuring a multi-stakeholder dialogue through the Future Tech Forum, to be held in the autumn of 2021. Through such cooperation we need to share experiences and work collectively to address the vast cross-border flows of data generated by our hyper-connected societies, and encourage the interoperability of different data frameworks. The OECD is at the forefront of these policy discussions, providing evidence and expertise, as well as hosting platforms, such as the Global Partnership on AI, to advance cooperation, including in partnership with the G7 and G20.
The G7 has shown its capacity as an incubator for high-impact multilateral initiatives, from tax to climate change to women’s empowerment. The G7 must now spare no ambition in leading an inclusive, sustainable and resilient recovery founded on the shared values that unite all G7 and OECD members.
