Sachs looks to Brazil for innovative leadership at G20

Jeffrey Sachs — Foto: Gabriella Marino/Divulgação

Jeffrey Sachs, a world-renowned economist and one of the pioneers of sustainable development, is optimistic about Brazil’s presidency of the Group of 20, which begins in December.

In an email interview with Valor, the Columbia University professor said he is confident that the country will show innovative leadership during this period, and sees the 2024 summit in Brazil as a historic opportunity for the United Nations’ Sustainable Development Goals (SDGs).

“The SDG concept was adopted in Rio (in 2012), so Brazil should be the champion of the SDGs,” says the director of the Center for Sustainable Development, who is participating this Tuesday in the seminar “Thinking 20, a Global Order for Tomorrow” in Rio, organized by the Brazilian Center for International Relations (Cebri), with the support of the City Hall of Rio, IPEA, FUNAG, BNDES, and Columbia University. The meeting is being held in the context of next year’s summit with members of the T20 (Think 20), one of the 12 engagement groups of the G20.

Mr. Sachs is critical of Brazil’s high interest rates, describing the Brazilian economy as “high potential, chronically underperforming.” To accelerate long-term growth, however, the Central Bank cannot act alone, he says, advocating a strategy driven by public investment.

The economist, who hailed President Luiz Inácio Lula da Silva’s inauguration earlier this year as a “new beginning for Brazil,” praises the government’s first environmental measures – such as slowing deforestation and partnering with Congo and Indonesia, also tropical countries – but is categorically opposed to oil exploration on the Equatorial Margin, as proposed by state-owned oil company Petrobras. “New oil projects are not a good idea, period, anywhere in the world,” he said.

Read below the main excerpts from the interview:

Valor: What is the role of G20 today and its real potential in the future?

Jeffrey Sachs: The G20 is the main venue for analysis, negotiation, and agreement over financial strategies for global sustainable development. It is a vital institution. It will be even more valuable if the African Union is admitted as the 21st member when the G20 meets in Delhi in September. In that case, another 1.4 billion people will be represented at the G20. As it now stands, the G20 includes approximately 80% of global output (measured at international prices) and 63% of global population. With the AU as an added member the output share would rise to 85% and the population share to 80%.

Valor: Tomorrow’s seminar in Rio is a T20 (Think 20) meeting. What can we expect from that?

Mr. Sachs: The T20 plays an important role in the G20 process, providing cutting-edge ideas to the G20 governments. I am confident that Brazil will be a highly innovative G20, thanks in large part to its effective think tanks.

Valor: What does the expansion of BRICS means for the global order?

Mr. Sachs: The BRICS is, to an important extent, the voice of the developing countries, or to put it more precisely, the voice of the countries not in U.S.-led military alliances. The U.S.-led military alliances include Canada, UK, European Union, Japan, Korea, Australia, New Zealand, and a few other nations. The BRICS are countries that want to be independent of U.S.-led military alliances, and want to be free of U.S. dollar dominance in international finance.

Valor: Has China gained more power with the expansion?

Mr. Sachs: China is an ancient civilization, a highly successful modern economy, and the largest economy in the world measured at international prices and second largest measured at market prices. Its recent success over the past 40 years is the result of solid economic management and public policy. China has become the leading trade partner of much of the world. For all of these reasons, China has defied the U.S. claim of hegemony or unipolarity. China gives more options to other countries. All of this is fine. We don’t need, and should not want, a hierarchical world in which one country is “on top.” Neither the U.S. nor China can be, should be, or should aspire to be, the world leader. We need a multipolar world bound by international law under the UN Charter.

Valor: Does Brazil win or lose with this expansion of BRICS?

Mr. Sachs: Brazil has certainly benefited by the decision of the BRICS to expand. The voice of the BRICS will be larger, and Brazil’s voice within the BRICS is very significant.

Valor: You have been a critic of the United States behavior in the international arena.

Mr. Sachs: The U.S. foreign policy aims for hegemony or unipolarity. This is a bad idea – it leads to perpetual wars by the U.S. The U.S. should engage in diplomacy, that is, working peacefully with other countries rather than trying to overthrow their governments or defeat them in war.

Valor: What kind of world are we heading to?

Mr. Sachs: There are two possibilities. The first is a world of sustainable development, with shared prosperity, global peace, civilian use of high technologies, and protection of nature as well as people. The second is a world of division, with huge inequalities between rich and poor, global war, military uses of high technology, and the destruction of nature. Either outcome is possible. Only the first will save humanity from its worst possibilities.

Valor: You said in March that Brazilian interest rates were too high. The Brazilian Central Bank has just started to reduce its rate. Was it too late?

Mr. Sachs: Brazil has scope for rapid long-term growth based on a sound long-term financial strategy. This strategy should embrace a new approach by the Treasury, BNDES, and the Central Bank, working in a harmonized way. Within this context, the Central Bank can indeed cut interest rates. However, the Central Bank cannot achieve the overall results on its own. I believe that Brazil should aim for rapid long-term growth through a public-investment-led strategy, and should be ready to borrow more substantially from abroad, e.g., from the New Development Bank, the Gulf countries (new members of the BRICS), the Belt and Road Initiative of China, and the two Western-hemisphere regional development banks, the Inter-American Development Bank and the Latin American Development Fund (CAF).

Valor: How do you see the Brazilian economy today?

Mr. Sachs: High potential, chronically underperforming. The key to success is a focus on educational quality, scientific capacity, public infrastructure investment, green economy, digital economy, and global competitiveness. All of this requires higher public investment spending as part of an integrated plan.

Valor: Is the world taking real steps towards the SDGs?

Mr. Sachs: The world is failing so far. The U.S. government doesn’t even mention the SDGs, which is a sign of the poor functioning of the U.S. government. The SDG concept was adopted in Rio (in 2012), so Brazil should be the champion of the SDGs. Next year’s G20 in Brazil is therefore an historic opportunity.

Valor: What are your expectations for G20 previous meetings for 2024?

Mr. Sachs: The G20 countries need to keep their eye on the big picture: achieve the SDGs; decarbonize the world energy system; protect the Amazon and other vital ecosystems; and stop the wars through diplomacy. This is the big picture. It is the one that President Lula espouses globally. As a key country that has good relations with all regions of the world – North America, Europe, Africa, the Middle East, and Asia – Brazil has help to steer the world back from war and division, which is just getting the entire world deeper into crisis.

Valor: International investors have returned to the Amazon Fund. How do you assess the first months of the new government concerning Amazon and environment as a whole?

Mr. Sachs: The new government has slowed deforestation, begun to unite the region in an Amazon strategy, and united the Amazon countries with the other rainforest regions, the Congo and Indonesia. This is all a spectacular success in the first year of the government.

Valor: How do you see Petrobras’s oil project in the Equatorial Margin?

Mr. Sachs: New oil projects are not a good idea, period, anywhere in the world. We don’t need more oil. We need to use less oil, and keep the rest under the ground. Better to have a huge Amazon Fund creating truly pathbreaking approaches to sustainable development than potentially disastrous investments in outmoded technologies and energy sources.

Valor: In the past, you estimated a cost of 2% to 3% of global GDP to produce an entirely sustainable economy. Is it still valid? To what extent has the world increased investment in sustainability?

Mr. Sachs: Yes, an incremental 2-3% of global GDP translates into an incremental $2-3 trillion per year invested in education, healthcare, green energy, sustainable agriculture, urban infrastructure, and digital access. Such an increment would go far to end poverty and put the world on the path to sustainable development. First stop is to end the wars, starting with the war in Ukraine. These wars eat up trillions of dollars and solve no problems. Wars are due to political conflicts. They should be resolved politically, not by killing and destruction. The world currently spending around $2.2 trillion per year on the military, a tragic waste. The U.S. spends around 40% of the total, even though the U.S. is just 4% of the world population, and even though the U.S. has deep social crises right at home.

Valor: G20’s decisions don’t have the force of international law. To what extent can it contribute to global order?

Mr. Sachs: The G20 governments should cooperate on creating binding votes for peace and sustainable development in the key global bodies, including the UN Security Council, the UN General Assembly, the Bretton Woods institutions (World Bank and IMF), the regional development banks, and the UN agencies. Moreover, the G20 can directly commit to the financial resources to back the SDGs, the Paris Agreement, the Amazon Fund, and other key financial initiatives. In the future, the G20 should also agree to new forms of global taxation (on wealth, CO2 emissions, international financial transfers, international aviation, international ocean shipping, and others) to finance the global public goods to end poverty and save the environment.

Sachs looks to Brazil for innovative leadership at G20

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