World leaders met for the Group of Seven (G7) Summit 2021 determined to beat Covid-19 and build back better. The route forward they identified builds on the Wealth Economy approach of the Bennett Institute.
The G7 left Cornwall promising to continue to support our economies "for as long as is necessary, shifting the focus of our support from crisis response to promoting strong, resilient, sustainable, balanced and inclusive growth into the future. Once the recovery is firmly established, we need to ensure the long-term sustainability of public finances to enable us to respond to future crises and address longer-term structural challenges, including for the benefit of future generations.”
The communiqué, published by the G7 following the Summit, included references and quotations from a fiscal paper drafted by Dimitri Zenghelis, Bennett Institute for Public Policy, with Nick Stern, Grantham Research Institute, about Fiscal responsibility in advanced economies through investment for economic recovery from the Covid-19 pandemic. This drew on research by the Bennett Institute’s Wealth Economy team on Public debt, public wealth and economic dynamics.
The economists called for an investment in inclusive and resilient growth as the best way to restore prosperity and address public sector indebtedness after the pandemic, even if it means a temporary rise in the level of public debt/GDP.
“Public investment is the key to building a resilient, inclusive and sustainable recovery and this will be funded through additional public sector debt. Our approach is to apply a macroeconomic lens to show why investing in sustainable, inclusive and resilient growth is the best way to restore prosperity and address public sector indebtedness after the pandemic, even if it means a necessary temporary rise in the level of public debt to GDP,” says Zenghelis.
“But this is about more than public money. It concerns a range of policies including pricing carbon and scarce resources, supporting early stage R&D and imposing standards and regulations to incentivise behavioural change and steer investment in the sustainable economy. It also requires institutional reforms, such as increased localism and devolution, the creation of national or regional investment banks with strong sustainability mandates and new long-term policy frameworks such as the UK Climate Change Act. Such institutional change can boost policy credibility and manage and reduce policy risk, thereby galvanising private investment at scale.”
The work is based on the Wealth Economy approach at the Bennett Institute. Researchers call for investment in productive, sustainable and resilient physical, human, social, intangible and natural capital in regions that need it most in order to generate sustainable prosperity. Investment in comprehensive wealth includes locking into low emission infrastructure, securing the skills, jobs and ideas necessary for the 21st century economy, while recognising the need to enable those affected by change to participate in the new economy.
The Wealth Economy team members are: Matthew Agarwala, Yamini Cinamon Nair, Diane Coyle, Saite Lu, Annabel Manley, Julia Wdowin and Dimitri Zenghelis.
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