mazzucato29_Getty Images_global consensus Getty Images

A New Global Economic Consensus

Now that the COVID-19 pandemic has highlighted the deficiencies of economic deregulation and market liberalization, a new policymaking paradigm is emerging. But its success depends on concrete reforms and the creation of new mission-driven institutions.

LONDON – The Washington Consensus is on its way out. In a report released this week, the G7 Economic Resilience Panel (where I represent Italy) demands a radically different relationship between the public and private sectors to create a sustainable, equitable, and resilient economy. When G20 leaders gather on October 30-31 to discuss how to “overcome the great challenges of today” – including the pandemic, climate change, rising inequality, and economic fragility – they must avoid falling back on the outdated assumptions that landed us in our current mess.

The Washington Consensus defined the rules of the game for the global economy for almost a half-century. The term came into vogue in 1989 – the year that Western-style capitalism consolidated its global reach – to describe the battery of fiscal, tax, and trade policies being promoted by the International Monetary Fund and the World Bank. It became a catchphrase for neoliberal globalization, and thus came under fire – even from its core institutions’ leading lights – for exacerbating inequalities and perpetuating the Global South’s subordination to the North.

Having narrowly avoided a global economic collapse twice – first in 2008 and then in 2020, when the coronavirus crisis nearly brought down the financial system – the world now confronts a future of unprecedented risk, uncertainty, turmoil, and climate breakdown. World leaders have a simple choice: continue supporting a failed economic system, or jettison the Washington Consensus for a new international social contract.