- The White House has said it wants to build a more inclusive economy with the G7.
- That includes measures like distributing billions to vulnerable countries and enacting a minimum tax.
- Tackling an unfair and exclusive economy is a sweeping challenge, though.
- See more stories on Insider’s business page.
In between toasting marshmallows and being serenaded with sea shanties at the annual G7 summit, President Joe Biden will be turning his focus toward crafting a “more fair and inclusive” global economy, according to a White House fact sheet released as part of the summit.
It’s a hefty order, but the White House’s statement that the world’s economy needs to be fairer and more inclusive amounts to an admission that the pre-pandemic status quo was neither.
The G7 is a big deal. The gathering of leaders from seven prominent member countries includes, as Insider’s Thomas Colson reports, leaders from Canada, France, Germany, Italy, Japan, the UK, and the US meeting in person, joined by leaders from Australia, the EU, and South Korea. The communique drafted by these leaders ideally reflects the joint priorities of the world’s biggest economies.
In 2018, former President Donald Trump famously did not endorse the group’s communique and went on a tweetstorm about Canadian Prime Minister Justin Trudeau.
Specific policies at the 2021 summit include the global minimum tax, which would discourage a “race to the bottom” by multinational companies. Instead of fleeing one country for another with more favorable tax rates, those companies would find a minimum tax wherever they go.
Also on the table is sending up to $100 billion to countries in need to support things like vaccines, and “enable greener, more robust economic recoveries in vulnerable countries.” That money would come from the International Monetary Fund. The G7 also wants to send 1 billion vaccine doses to the rest of the world, with the UK pushing to vaccinate the whole world.
But the White House statement, ahead of the official G7 communique, is more symbolic than a policy prescription, amounting to a promise to change the economy of the whole world into a better one. Can that promise be kept?
How do you increase inclusivity?
Implicit in the G7’s goals is the recognition that some were left behind by the economy of recent decades. Increasing a global minimum tax rate could help prop up developed countries; according to a report from a UN Panel, those countries generally have a higher corporate rate, meaning a higher rate overall would benefit them.
The overt eye towards global inclusivity also shows just how unequally the pandemic has hit. Institutions like the IMF – which had previously leaned in to austerity and cutting down on government spending – have come out in support of increased taxes on the wealthy and corporations to offset pandemic devastation and level playing fields between different economies.
At the time, the IMF said that “further work is needed to get ahead of the COVID-19 pandemic, provide flexible yet targeted support now, adjust when a recovery is firmly in place, and set the stage for a greener, fairer, and more durable recovery,” although some governments have been able to “shore up” their economies.
“Until the pandemic is brought under control, however, fiscal policy will have to remain flexible and supportive,” the IMF said.
Big government may be here to stay, but how far can it actually go?
Another statement by the White House – that G7 governments will provide “policy support to the global economy for as long as necessary to create a strong, balanced, and inclusive economic recovery” – means big government is back, maybe for good.
The financial crisis in 2008 brought back big government intervention – although perhaps not enough to fully heal financial wounds, some say – but the pandemic-era response has entrenched its central role.
As Insider’s Ben Winck reported, the US has massively shifted its attitude toward spending, doling out $5 trillion in stimulus since the pandemic began, or triple what the country spent in the wake of the Great Recession.
Notably, proposals like the global minimum tax work in tandem with domestic proposals at home to increase the US corporate tax rate to offset massive expenditures in things like childcare and education.
But, while Biden has vociferously called for more inclusive economic policy, especially with regard to taxes, political realities may imperil the concept of an inclusive economy. Already, Biden has signaled his willingness to step away from that corporate tax hike to pass a bipartisan infrastructure bill.
And, even if the G7 does sign off on something like a global minimum tax, that particular measure has a long way to go before becoming formalized policy. It could even be sunk in the US by the GOP – showing the limitations of such rhetoric, even when it’s laid bare in policy goals.
In other words, fair and inclusive are great things to say, much harder to deliver.