The COVID-19 pandemic submerged the world for more than a year now, and global infection numbers are still rising. There are huge differences in the ability of governments and societies to cope with the pandemic: while Europe and the Americas remain epicentres of the disease, there are signs that infections are now also picking up across the African continent.
In an interesting turn-of-tide in discussion, the IMF calls for more public expenditure and higher taxation of the wealthy. The IMF states that economic recovery is possible in 2021 but dependent on both, access to vaccines and other medical interventions, and continuous effective policy support. Policy support needs to cushion the effects of the economic contraction, to decarbonize energy systems and economies, and for intensified multilateral cooperation to ensure universal access to vaccines and therapeutics and adequate financial liquidity of highly indebted countries.
While the IMF focusses on the dual challenge of recovery and decarbonisation, the G20 has committed to implementing the 2030 Agenda as a whole since 2016. All of this means a full agenda for the G20 (and the G7), domestically and globally. In this piece, I want to discuss the advantages and difficulties of such an integrated approach to recovery and transformation, and what the G20 can do for implementing it effectively.
Why choose an integrated approach towards recovery and sustainable development?
In 2020, the argument for integrated approaches was that states faced a dual challenge: they had to react immediately to the social and economic emergencies of the Covid-19 crisis, and invest into the long-term transformation of social and economic infrastructures and consumption habits towards sustainability. This transformation encompasses the reduction of poverty and inequality as much as climate neutrality, the transition to a circular economy and the protection of biological diversity and natural habitats. Integration of the two agendas was not only timely –so many years had been lost with sterile debates and negotiations – but was also needed because public and private budgets are limited. Sequential or disconnected parallel processes cannot be afforded.
Today, one year after, this has not changed; yet, tonality in the debate is different. Covid-19 and its socio-economic consequences will stay with us much longer than anticipated due to the lack of domestic effectiveness and insufficient efforts at multilateral cooperation. Viruses don’t negotiate; if left to “their business”, they mutate. Thus, public budgets and political institutions are under extraordinary pressure and policymakers are having a hard time understanding that wrong decisions lead to irreversible costs in terms of infections and deaths. Adequate decisions are those informed by a variety of scientific disciplines and careful ethical considerations.
Economic recovery is one important aspect of coping with the pandemic – but just one. Living with the virus requires to adjust the ways in which we live and work, we take care of children, youth and the elderly, the sick and the vulnerable in order to enhance social and institutional resilience, domestically and globally. These broader dimensions of coping are reflected in the 2030 Agenda; decarbonisation is but an important part of it. If these adjustments are designed to last, they can support further transformation processes. Citizens expect governments to do what they can to cope with the pandemic; they demand reliable conditions for public and private life. Naturally, the process of coping creates experiences both with failure and with other, alternative ways of doing things. These experiences raise societal expectations. And alternative experiences can also raise readiness for reform and further change; the population might be more ready for transformation than some decision-makers dare to believe.
It depends on the quality of crisis management now whether in retrospect from 2050 the Covid-19 pandemic will just seem a short episode, compared with the structural transformation process we will hopefully have substantially progressed on by then. Huge impacts on personal lives and expectations, on the economy and on public budgets will shape the next decades. This is why it is so important to get the pandemic under control as quickly as possible and in ways that do not obstruct efforts to create sustainable and attractive futures on this planet. Recovering and transforming have to be integrated processes, and cannot come one after the other.
How can the integrity of public and private investments towards recovery with sustainable transformation be achieved?
Governments need a clear understanding of where to direct public investments to, and how to align private decisions and investments with a sustainable recovery. A clear and reliable strategy and communication helps. Governments should use their national strategies for SDG implementation and decarbonisation plans for these purposes, link these with public budgets so that funding resources are clear and adequate, monitor their implementation with the support of independent scientific commissions, learn from successes and failures, and invest in clear and regular communication around it – with the general public, with stakeholders in the economy, in society and in academia, and with subnational levels of government.
This will allow for reliable framework conditions for private investors (and households) and make uncertainties manageable. One example is dynamic carbon pricing, another one public support for new infrastructures and for new technologies. Work on sustainable finance by central banks and finance ministers, globally, in the G20 and the European Union is crucial.
Equally, clear and reliable strategies, investments in improved social safety nets (e.g. universal health coverage), in economic infrastructure and transparent communication and accountability help to protect and increase cohesion within society and trust in political institutions. This are vital resources for coping with crises and for sustainable transformation and decarbonisation processes.
What can the G20 do?
These tasks are universal and all countries are confronted with them. Still, the resources needed for accomplishing them are very unequally distributed – be they financial, human, technological, knowledge, cultural or social. Securing fiscal space for low-income countries and middle-income countries under stress is vital for controlling the pandemic, for recovery and sustainable transformation. The G20 and the international community at large needs to define clear perspectives for mutual support over the next decade in order to enable public and private action towards these goals.
In principle, the G20 is a very good platform for making recovery converge with implementation of the 2030 Agenda, but its current form of organisation prevents it from using its full potential. The Global Sustainable Development Report published by the UN Independent Group of Scientists in 2019 distinguishes thematic entry-points for sustainable development, such as “human well-being and capabilities” and “sustainable and just economies” from policy-related levers for delivering change. In 2020 we analysed the workstreams of the G20 under the Saudi presidency, and we could see that most of the lever-related workstreams belong to the Finance Track, while all entry point-related workstreams fall under the Sherpa Track. For shaping recovery in a way conducive to sustainable development, both tracks need to work closely together to ensure that transformative policy objectives (often owned by the Sherpa track) are equipped with the levers of adequate financial, fiscal and economic policies (owned by the finance track). The G20 is particularly strong on finance, fiscal and economic policies. However, it needs to expand its political and financial clout to a second lever: science, technology and innovation (STI) policies, and gear it towards sustainable recovery and transformation. Sharing technologies and engaging in joint knowledge creation is vital for sustainable recovery and transformation. Scientific cooperation by G20 members is primarily motivated by strengthening competitiveness. In the 21st century, much more funding is needed for scientific cooperation that envisages the global common good.
The priorities of the Italian presidency of the G20 – grouped under the keywords people, planet, and prosperity taken directly from the 2030 Agenda – are a very good first step for enhancing the collective capacity of the G20 towards integrating recovery and sustainable transformation measures.
In this context, the Development Working Group (DWG) can play an important role in the Italian presidency: it is grouped in the Sherpa track, and it has been tasked in 2016 to coordinate and inspire the G20’s work for sustainable development across all working groups. The Italian presidency has planned four DWG meetings; the first one took place just before the first meeting of finance ministers and central bank governors, while the last meeting will be back-to-back with the meeting of finance and central bank deputies. Timing offers great potential for coordination and even cooperation, on the broader theme of shaping recovery towards sustainable development, and for ensuring that the G20 engages in expanding fiscal space of developing countries, in particular of least developed countries. For realising the potential, national delegations to the DWG need to include representation beyond development departments.
Furthermore, the DWG needs to be ambitious. It should go beyond updating the G20 Action Plan on the SDGs as it has done annually since 2017, and focus on fresh action in the aftermath of the Covid-19 pandemic. The perspective needs to be how to enhance universal implementation of the SDGs, expanding the horizon beyond instruments of development cooperation, and understanding implementation of the 2030 Agenda as what it is: a universal task that includes cooperation relations across all countries, with the G20 strength to go beyond the boundaries of North-South and South-South cooperation and their instruments.
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