G7 countries should invest $1 trillion per year for a strong and sustainable economic recovery from pandemic
LONDON 10 MAY 2021
The G7 countries should collectively invest about $1 trillion each year over the next decade to ensure their economies recover fully from the COVID-19 pandemic and to make the transition to sustainable, inclusive and resilient growth, according to a new report that was requested by the UK Prime Minister ahead of the G7 Leaders’ Summit in June 2021.
The independent report, published today (10 May 2021), on ‘G7 leadership for sustainable, resilient and inclusive economic recovery and growth’ has been prepared by Professor Lord Nicholas Stern, I.G. Patel Professor of Economics and Government at the London School of Economics and Political Science (LSE), with a team from the LSE.
The report calls for the G7 countries (Canada, France, Germany, Italy, Japan, United Kingdom, and United States) “to lead a globally coordinated recovery, driven by sustainable investment and innovation by both the private and public sectors”.
It adds: “This programme of investment, involving sustainable infrastructure development, the preservation and restoration of nature, and greater focus on innovation and skills, can provide strong economic multipliers to increase activity and jobs in the shorter run, and unleash discovery and productivity growth in the medium term”.
Among the priorities for policies and finance identified in the report is to “set a collective goal to raise annual investment by 2% of GDP above pre-pandemic levels for this decade and beyond and improve the quality of investment to support a strong recovery and transformation of growth. For the seven countries, this would amount to an additional investment of around $1 trillion per year from now until 2030. That investment, if well executed, would have high returns in terms of productivity, new opportunities and the environment.”
The report highlights the importance for the G7 to create “a supportive but prudent macroeconomic framework that enables a strong recovery in investment, while at the same time responsibly managing debt and deficits over the medium term, including through enhanced international tax cooperation”.
It points out that the G7 Summit in Carbis Bay, Cornwall, in June 2021 “provides a crucial opportunity to set specific priorities and targets as part of an integrated global agenda”.
The report recommends further strong action by the G7 in response to the COVID-19 pandemic by ensuring “a timely, effective and global roll-out of vaccines and treatments based on principles of common humanity, mutual responsibility and self-interest. An immediate priority is closing the $20 billion funding gap of COVAX and providing adequate support to developing countries so that effective vaccines and treatments would be available everywhere no later than the end of 2022.”
It notes that the world is confronting “an interwoven set of challenges: the devastating health and social costs of the pandemic; the diminished prospects for economic growth and employment against a backdrop of rising public debt; the mounting threats of climate change, environmental degradation and biodiversity loss; growing inequality that has been exacerbated by the pandemic; and disrupted education for 90% of the world’s children.” The report adds: “A failure to act on any of these dimensions will weaken progress on the others”.
The report makes the case for “structural policies that set expectations and a clear sense of direction. These must include making faster progress on carbon pricing, the phasing out of fossil-fuel subsidies, introducing supporting regulations that accelerate the drive to net-zero emissions, valuing natural capital, and building climate and environmental resilience into all policies.”
It also draws attention to the importance of “an urgent, concerted and enhanced international effort to tackle the debt, fiscal and financing constraints of emerging market and developing countries”. It calls for the G7 to “act strongly to alleviate the debt constraints of low-income and vulnerable countries. This could include extending the Debt Service Suspension Initiative, requiring comparable treatment of the private sector and tackling over-indebtedness by strengthening the G20 Common Framework for Debt Treatments, reprofiling and reducing the cost of official debt, and considering the potential of debt-for-nature and debt-for-climate swaps.”
The report indicates that the G7 should “make a collective commitment to double climate finance” ahead of the COP26 United Nations climate change summit due to take place in November in Glasgow.
It concludes: “The G7 has the opportunity now to chart a clear course of action for the next three years, working closely with the Italian G20 Presidency and reaching out to the G7 and G20 presidencies that will follow in 2022 and 2023. 2021 can be a turning point towards a more prosperous and sustainable future.”
The report ‘G7 leadership for sustainable, resilient and inclusive economic recovery and growth’ can be accessed here.
For more information about the report and interviews with the author, please call Bob Ward on +44 (0)7811 320346 or email firstname.lastname@example.org
Notes to Editors:
Professor Lord Stern of Brentford is I.G. Patel Professor of Economics and Government, Chair of the Grantham Research Institute on Climate Change and the Environment, Chair of the ESRC Centre for Climate Change Economics and Policy, and Chair of the India Observatory at the London School of Economics and Political Science. He has been a member of the UK House of Lords since 2007, where he sits on the crossbenches. He was previously Head of the UK Government Economic Service at Her Majesty’s Treasury between 2003 and 2007, where he led ‘The Economics of Climate Change: The Stern Review’, which was published in 2006. He was also Senior Vice-President and Chief Economist of the World Bank between 2000 and 2003. Further details about Lord Brentford can be found here: https://www.lse.ac.uk/granthaminstitute/profile/nicholas-stern/