Three decades ago, the British economist John Williamson he coined the phrase “Washington consensus” to describe a collection of free, pro-globalization market ideas that American leaders (among others) promoted around the world.
Now, however, a new tag is in the air: the “Cornwall consensus”.
Don’t laugh. It’s really the title of one advice note circulated in front of G7 leaders meeting in Cornwall on Friday. Written by a committee of academics and policy makers from each of the seven countries, it sets an “ambitious agenda to move forward better from the pandemic.”
U document it contains some vague and grandiose-sounding ideas, such as “greater equity and solidarity in global health responses.” But it also makes more detailed proposals, such as the creation of a “Data and Technology Council” assimilated to the “Financial Stability Board” to monitor the global internet and a “CERN (European Organization for Nuclear Research)” for climate technology. “.
However, the memorandum suggests that the G7 company’s recent fiscal agreement should herald a new phase of Western collaboration along new ideological lines.
What should investors conclude? Many might be fooled. After all, G7 meetings tend to be purely ceremonial matters, and accompanying memoranda are like ritual symbols. And the proposals of the “Cornish Council” are, however, unlikely to be adopted in the near future, however sensible they may be.
But it would be foolish for any firm, or investor, to ignore this ritualistic manifestation. As anthropologists often point out, symbols count, even when they appear “empty” or divorced from reality, as they reflect and reinforce group assumptions about how the world should work. Thus, this last appointment offers a provocative snapshot of the thought of how these assumptions change.
This matters, especially since some investors and corporate executives are struggling to respond to the zeitgeist change, having begun their careers when the Washington consensus reigned supreme. We humans are still creatures of our cultural environment, yet we treat our beliefs as if they were the “natural” way of thinking.
There are five key points to note here. First, Western leaders now fear political forks. Thirty years ago, politicians such as Margaret Thatcher and Ronald Reagan said for sure that the globalization of the free market would benefit everyone. Today’s leaders are concerned that the fruits of the free market are unequivocally distributed triggering a popular (and even populist) reaction. “Inclusion” is one of the new buzzwords.
After all, G7 leaders now recognize that globalization and free market competition create vulnerabilities and efficiencies. Previously, they hoped that the company’s individual incentives would create an optimized cross-border supply system. Now they know that global supply chains are threatened by a problem of collective action, since companies tend to concentrate activity on nodes that make perfect sense for each individual, but create disruption if they break down. “Resilience,” then, is another watchword.
Third, the G7 debate is being pursued by a fear of China. Beijing is not mentioned by name in the Cornwall consensus note. But there are many calls to diversify global supply chains, not only for advanced technology, but for medical and mineral equipment as well. Lately, Western governments have accepted that it was a terrible strategic mistake to allow global chip production to be concentrated in central Taiwan. They don’t want to repeat the mistake.
Fourth, there is a subtle, yet profound, reset of the relationship between business and government. In the Washington consensus, companies were considered as independent actors in competition with each other, without state participation. Now the whole point is about “partnership” between government and business.
Free enterprise is always praised, but “partnership” is the framework for tackling the great societal challenges of today, whether it’s the hunt for a vaccine, climate change or technological competition with China.
Finally, the economy is redefined, in. Biden White House and elsewhere. Instead of a strict focus on refined quantitative models, there is now an emphasis on issues treated earlier as simple “externalities” – the environment, say, or health or social factors.
Cynics (or free market enthusiasts) might say that all of this reflects only a temporary left-wing blow in American politics, or a short-term reaction to the pandemic.
Possible, but not suspicious. After all, what drives this ideological change is not only Covid-19, but also the rise of China, the threat of climate change, and the evaporation of Western hubris around the free market ideas that follow. the collapse of the Soviet Union. And the followers of this new dispensation can be found across the political spectrum. After all, it was a conservative British government that organized the advisory group that produced the Cornwall consensus memorandum.
So if you love or hate the new zeitgeist, you can’t ignore it. History shows that when intellectual hypotheses change, they do so in slow, elliptical pendulum oscillations that can last a long time. And sometimes ritual artifacts count deeply. This Cornwall consensus meme can be one.