Why in News?
Pratap Bhanu Mehta writes: If the G-7 wants to truly exercise more leadership, it will have to convince the world that all its new principles are not simply ruses to serve only the interests of the developed world.
Syllabus—GS2: Important Global groupings
- The Cornwall summit of the G-7 hosted by the UK is expected to help determine the shape of globalization.
- There has been discussion for the possibility to push for global coordination on minimum corporate taxation & clamping down on tax havens.
What is Group of 7 or G-7?
- The Group of Seven (G7) is an informal club of wealthy democracies consisting of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
- The heads of government of the member states, as well as the representatives of the European Union, meet at the annual G7 Summit.
- The G7 represents 58% of the global net wealth & more than 46% of the global gross domestic product (GDP) based on nominal values, and more than 32% of the global GDP based on purchasing power parity.
Why is this relevant now?
- Since the 2008 financial crisis, the conventional wisdom of the West has been in terminal decline.
- But due following factors G-7 has gained much traction:
- The rapid rise of China,
- Deepening divisions within the West during the Trump regime,
- The chaotic response in the West to the COVID-19 pandemic.
Significance of Cornwall Summit:
- The summit seeks to redefine the broader relationship between states & markets in three-way:
- Firstly, Breaking away from the Neoliberalism notion that pushed states in the direction where the market leads or states step only where there is a market failure.
- This relationship resulted in four deleterious consequences:
- It provided a misleading picture regarding economies vibrant.
- It led to a sense of loss of collective control over the economic future.
- It led to great inequality.
- It created new forms of corporate power in fields like Technology.
- Now the summit aim is to reassert the state’s control over the terms in which the market operates.
- Secondly, global groupings like G-7 act as a political steering committee for global capitalism.
- However, until now their most useful roles were required only during/aftermath of a financial crisis that needs global financial coordination.
- There was no attention to the systemic vulnerabilities due to supply chain distribution that globalization might create.
- Though these vulnerabilities can be addressed through domestic action but global rules seemed to constrain them.
- The COVID crisis showcased all of these vulnerabilities.
- Finally, in the geopolitical context, two geopolitical cold wars that cast a shadow on the G-7 are:
- First is China, At times when the geopolitical tensions with China rising, greater coordination & unity of purpose amongst the G-7 will become more important.
- Second is a more diffuse threat of authoritarian disruption, where the forces that want to subvert democracy are now at the heart of many western democracies including the US & Europe.
- Greater global disarray strengthens the possibility of giving political succor to these political tendencies.
- It is important to demonstrate that the G-7 countries are part of a functional democratic civilization.
- Even after reassuring the directional change, many of the central distributive conflicts that beset globalization are likely to continue.
- The talk of global public goods works only in a context where the advanced economies themselves experience the globalization vulnerabilities.
- For instance, in the proposal for the coordination of taxation, closing off taxes heavens & preventing a global race to the bottom may be difficult because
- The US, Swiss & Singapore are amongst the highest on the Financial Secrecy Index.
- So the visible corporate tax rate or taxing at the point of sales may just be the window dressing the global tax problems that allow countries to hold on to their privileges.
- Also on climate change, there is a lot of encouraging talk of ambitious targets, investment-led transformations.
- There is also going to be a renewed focus on the labour standards & linking them to trade.
- The main issue of this it may repeat a pattern of regulation serving to preserve the dominance of advanced economies.
- There is also the absence of discussions on finance in the new global economic order talks.
- Rather than finance, trade liberalization & the winners & losers it produces get are more political attention.
Way Forward: –
According to Tax Justice Network 2020 report, the US, Netherlands & UK are the top 3 nations responsible for tax losses inflicted on other countries.
It is reassuring to watch the G-7 in the right direction, but if it wants to exercise true global leadership it has to convince the world that all its new principles, resilience, inclusion & public goods are not just to serve the interests of the developed world.
The commitment of G-7 to provide one billion vaccine doses is a welcome step but whether this crisis-driven commitment will translate into an enduring & just framework for providing global public goods remains to be seen. Illustrate with example.