Interview with Larry Summers, Charles W Eliot University professor and president emeritus at Harvard University
Myriad pressing issues will challenge the G20, both now and in the future, explains Larry Summers, Weil Director of the Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School, in this interview
How can the G20 best support the economic recovery currently under way in some of its major members?
The single most important thing the G20 can do to sustain recovery is do a better job of containing COVID-19, preventing its spread to the maximum extent possible and pre-empting further evolutions of the virus. Without success in those things there will be very substantial breaks in interconnections in the global economy, and the threat to the emerging markets that collectively comprise nearly half of global gross domestic product will be enormous. The most important kind of global economic cooperation needed at this moment is global public health cooperation.
There is a need for very strong efforts to support developing countries and to develop and improve debt architectures. So far, because of very low interest rates and investors’ risk-on approach, there has been less interference with the flow of capital to emerging markets than expected. That is not something we can take for granted, so it is urgently important to strengthen debt architectures.
It is important for countries to act with a view to sustainability in a macroeconomic sense. I’m concerned that the United States may be headed into a situation where the inflation will exceed target levels and create problems. I would prefer more attention in the industrialised countries to the risk of overheating, given the possibility of demand shocks from very strong policy responses to COVID-19 and the inevitable supply damage.
How should the global community, led by the G20, mobilise tens of billions of dollars for a new Global Health Threats Fund to prevent the tens of trillions of losses that failure to do so would cost?
I was privileged with Tharman Shanmugaratnam and Ngozi Okonjo-Iweala to chair the High Level Independent Panel on financing the Global Pandemic Preparedness and Response to advise the G20. I learned a few things. One, I was reminded of just how grave these problems are. Over the next quarter century, I expect more human suffering associated with pandemics than there will be associated with climate change — and that is not to deny the harms of climate change but to highlight that coronavirus risks have been rising at 8% a year and are only a small part of total risks, given situations such as Ebola, AIDS and influenza. The potential risks are enormous.
Two, we saw both positively and negatively the difference that effective collective action can take. The fact that we have vaccines within a year rather than five years is an enormous human achievement that puts us in a far better place than we would have been without that scientific achievement. Nonetheless clearly more could have been done to address the problem sooner. Better apparatuses could exist to distribute the fruits of remarkable scientific progress to more places more effectively. And there have been huge gaps in personal protective equipment and testing capacity that we would be well off avoiding.
It’s clear, if you perform the most elementary cost-benefit analysis, that trillions have been spent – and trillions more have been lost. Lost human life cannot be priced but can be thought of having an economic consequence in the trillions of dollars. Even if an outlay of tens of billions of dollars would reduce the probability of those multitrillion dollar losses by a relatively small percentage, they would pay for themselves many times over. So having an effective fund directed at prevention and that is well governed so resources are deployed quickly and effectively is to my mind probably the highest priority facing the international community.
What should the G20 leaders at Rome do to control the climate emergency we now face?
They should give impetus to the Glasgow Climate Summit and to setting ambitious long-run targets. More importantly, they should make common cause on eliminating coal and phasing out fossil fuel subsidies. That commitment was made at the 2009 Pittsburgh Summit but has not yet been lived up to. I very much hope that it will be. At the same time, they should look to substantially energize the international financial institutions, which can do much more to provide green finance. The World Bank is a very substantial underperforming asset for the global community in terms of its potential to reorient itself towards issues of sustainability, grow its scale in line with the global economy and foster public-private cooperation on green infrastructure.
How successful do you think the G20 Rome Summit will be?
I would count myself a cautious optimist. I can’t imagine a better chair than Mario Draghi, given his experience with multilateralism, and his international and financial experience and wisdom.