- The White House has announced that it wants to build a more inclusive economy with the G7.
- These include measures such as distributing billions to vulnerable countries and introducing a minimum tax.
- However, combating an unfair and exclusive economy is a major challenge.
- Check out Insider’s business page for more stories.
In between roasting marshmallows and serenaded with sea shanties At the annual G7 summit, President Joe Biden will focus on building a “fairer and more inclusive” world economy, according to a White House fact sheet published as part of the summit.
It’s a huge order, but the White House’s statement that the world economy needs to become more equitable and inclusive is an admission that the pre-pandemic status quo was not.
The G7 is a big deal. The gathering of leaders from seven prominent member countries includes Inside reports from Thomas Colson, Heads of State and Government from Canada, France, Germany, Italy, Japan, Great Britain and the USA meet in person, together with heads of state and government from Australia, the EU and South Korea. The communiqué written by these leaders ideally reflects the common priorities of the world’s largest economies.
In 2018, former President Donald Trump became as is known, not endorsed the group’s communique and went into a tweetstorm about Canadian Prime Minister Justin Trudeau.
The specific guidelines of the 2021 Summit include the global minimum taxthat would prevent a “race to the bottom” of multinational corporations. Instead of fleeing from one country to another with lower tax rates, these companies would find a minimum tax everywhere.
Also on the table is up to $ 100 billion to countries in need to support things like vaccines and “enable greener, more resilient economic recovery in vulnerable countries.” This money should come from the International Monetary Fund. The G7 also wants to broadcast 1 billion vaccine doses to the rest of the world, with Britain pushing for it vaccinate the whole world.
But the White House statement that precedes the official G7 communiqué is more symbolic than a political prescription and amounts to a promise to transform the world’s economy into a better one. Can this promise be kept?
How do you increase inclusivity?
Implicit in the goals of the G7 is the recognition that some have been left behind by the economy of the past few decades. Raising a global minimum tax rate could support industrialized countries; according to a report by a ONE panel, these countries generally have a higher corporate tax rate, which means a higher overall rate would benefit them.
The open view of global inclusivity also shows how unevenly the pandemic hit. Institutions like the IMF – which had previously tended to cut costs and cut government spending – came to support of increased taxes on rich and corporate to offset the devastation caused by a pandemic and a level playing field between economies.
At the time, the IMF said that “more work is needed to forestall the COVID-19 pandemic, provide flexible but targeted assistance now, adjust when a recovery is established, and lay the foundations for a greener, fairer and more lasting recovery” although some governments have been able to “shore up” their economies.
“Until the pandemic is brought under control, however, fiscal policy must remain flexible and supportive,” said the IMF.
Big governments may stay here, but how far can it actually go?
Another statement by the White House – that G7 governments will provide political support to the world economy for as long as necessary to create a strong, balanced and inclusive economic recovery “- means that the big government may be back forever.
The 2008 financial crisis brought back major government intervention – though perhaps not enough to completely heal financial wounds, some say – but the response to the pandemic era has solidified its central role.
How Insider Ben Winck reported, the US has massively changed its attitude towards spending, spending $ 5 trillion in incentives since the start of the pandemic, or tripling what the country spent after the Great Crisis
In particular, proposals like the global minimum tax go hand-in-hand with national proposals domestically to raise the US corporate tax rate to cope with massive spending on things like Child care and education.
But while Biden called loudly For more inclusive economic policies, particularly with regard to taxes, political realities can jeopardize the concept of an inclusive economy. Biden already has signaled his readiness step back from this corporate tax hike to pass a bipartisan infrastructure bill.
And even if the G7 were to sign something like a global minimum tax, this particular measure still has a long way to go before it becomes a formalized policy. It could even be sunk in the USA from the GOP – Show the limits of such rhetoric, even if it is revealed in political goals.
In other words, being fair and inclusive are great things to say that are much harder to do.