A New World Will Spring from the Ashes of the Pandemic
Member of UEF Federal Committee, former President of UEF Italy
The affirmation of the multilateral option in 2019 European elections and in 2020 American Presidential elections, marks a significant retreat of sovereignism, populism and nationalism. A new political cycle has begun, triggered by the peril caused by the COVID-19 pandemic.
The lesson governments have drawn from the pandemic is that global issues need global solutions and that there is no exit from the emergency without a genuine common action. The immense task they have to address is to vaccinate the world. There is no alternative. “Where the danger is, also grows the saving power,” famously asserted Friedrich Hölderlin.
The turning point started in 2020 with Next Generation EU, the European recovery Plan. It represents a true paradigm change. The heads of state and government, having opposed for thirty years the increase of the EU budget beyond the ceiling of 1% of GDP, have suddenly been convinced by the pandemic to substantially increase the budget resources to an amount that can reach the figure of EUR 2400 billion and to finance it through a common debt to be refunded through European taxes.
Another extraordinary novelty is that the US, in tune with the EU, has decided an even stronger rescue plan, unprecedented in size and quality, with a budget of 1900 billion dollars intended to reduce inequalities and a “Build Back Better” plan with a budget of 4000 billion dollars, still to be approved by the Congress, to be spent in infrastructure and welfare provisions from paid leave to community college grants. This plan is clearly inspired by Keynes’ idea that public investment is the key driver of growth and job creation. Its goal is the improvement of the quality of life: large scale use of renewable energy would boost transport electrification and residential heating and reduce pollution; the universal access to broadband would accelerate the transition to knowledge society, improve the quality of education, increase the role of telemedicine and eHealth technologies. Of course, the environmental and digital transition is underway all over the world, but is particularly advanced in the northern hemisphere. A brilliant economist, Mariana Mazzucato, has compared this ambitious project to the Apollo Program which paved the way for the conquest of the moon and space exploration. I venture the hypothesis that the era of neoliberal globalization is passing. On the other hand, the bad management of the pandemic has shown the weakness of political leaders like Trump, Bolsonaro and Modi and the limits of the idea that national borders provide a protection against the impact of globalization.
Biden has substantially changed the traditional approach to development funding following the recommendation of a UN high level panel, which suggested to adopt a global minimum corporate tax on foreign earnings of multinational companies, in order to significantly reduce tax elusion. To convince the majority of the OECD countries, the G7 summit reduced the level of the proposed tax to 15%. It is an interim step towards a global agreement. The goal of the tax is to shift the competition between states from the amount of the corporate tax aimed to attract foreign investment to the quality of the investment in education systems, healthcare, social security and social services.
The lesson learnt by the COVID-19 pandemic is that it is impossible to address global issues with national policies and structures. Taxation of multinational activities represents a big step forward in the direction of governing globalization. The global institutions should be strengthened, in order that they can correct global markets distortions and failures, and be democratized in order to let citizens participate in decision-making at the international level.
At the same time, it is worth quoting the opinion of Raghuram Rajan who suggested that the way towards the revival of democracy is strengthening the power of local communities through the articulation of public institutions at local level. Therefore, in order to overcome the limits of national democracy, it is necessary to transfer decision making powers not only at international (regional and global) level, but also at local level according to the multilevel federal model of government.
It is not meaningless that the promoters of the above-mentioned turning point are democracies. The North Atlantic area is not only the pivot for Biden’s initiative to summon a summit of democracies and create a larger alliance of democracies, it is also the area where the barriers to free movement of goods and capital have been removed and is therefore the framework where an area of monetary stability, similar to the European Monetary System, with fixed but adjustable exchange rates, can be established, which is necessary to avoid monetary wars. In order to pursue this objective, the dollar as a world reserve currency should be replaced by the special drawing rights (SDR), i.e. a multicurrency system.
The retreat of the American power in the world also involves the strategic and military sphere. Therefore, the US should rebalance its relationship with the EU in the direction of the strategic autonomy of the EU and a US-EU equal partnership.
Lastly, the EU’s relations with Russia and Africa are to be considered.
The EU is in a position to improve mutual understanding with Russia and revive Gorbachev’s grand design of the European Common Home. It should remove sanctions, start negotiations aimed at the enlargement of NATO to Russia and the adoption of a common security system in the perspective of stretching it to China and the rest of the Asian continent, including stabilization of the relations with Turkey and Iran, and ultimately transforming it into the armed wing of the UN. The OSCE and the Council of Europe can give a crucial contribution to this design, as they associate several countries belonging to different world regions and cooperating in the areas of security, economy and human rights, which are the three baskets of the Helsinki process. It is to be considered that economic cooperation presupposes security and political stability and that the transition to democracy requires political stability and economic development. The EU can help Russia modernize and diversify its economy away from oil and gas and accompany it on the path of ecological and digital transition.
A development plan comparable with the Marshall Plan to address the root causes of Africa's economic backwardness is the highway to solve the problems posed by the imposing migratory flows which are heading towards Europe. At the same time, the Sahara desert is the potential source of solar energy, whose exploitation would require technological innovation and a huge amount of investment. The joint efforts of diplomacy are oriented in this direction. President Macron has recently summoned an emergency summit on the financing of African economies and pleaded for the funding of at least 100 billion dollars through the allocation of SDRs issued by the IMF to revive the continent’s economy, heavily impacted by the COVID-19 epidemic. An African monetary fund would enable the African countries to pool their financial resources in order that they can face the payment crisis they are confronted with.