Macroscope | To bridge divide at heart of US-China tensions, start with global rethink of public sector’s role

A new World Economic Forum report points the way towards achieving a synthesis between ‘market’ and state-controlled economies

It is not advocating a return to socialist planning or rejection of market forces but upgrading public institutions to better work with the private sector to tackle serious socioeconomic challenges

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Protesters in Davos, Switzerland, on May 22 ahead of the annual WEF meeting. Better public-private coordination is needed to tackle collosal challenges, ranging from climate change and pandemic preparation to infrastructure shortages and supply chain repair. Photo: Bloomberg

Published: 4:45pm, 10 Jul 2022Updated: 8:54pm, 10 Jul 2022

The oracle has spoken not from Delphi in ancient Greece but from modern-day Switzerland, home to the World Economic Forum (WEF). It has uttered words of wisdom in calling for a “new vision” of how the public and private sectors can work together to save the global economy.

This is absolutely essential if the world is to meet its monumental socioeconomic challenges. The WEF call also goes to the heart of the divide between market and state capitalism that is largely responsible for the growing tensions between the United States and China.

A “new narrative on the role of the public sector is needed, away from that of burdensome bureaucracy to one of market co-creator”, suggests a June report by the Network of Global Future Councils, established by the WEF to review prospects for creating “new, inclusive and sustainable markets”.

What is remarkable about this exercise of bringing together what the WEF calls “nearly 1,000 top thinkers” from among policymakers, businessmen, economists and others around the world is its mould-breaking analysis of the potential benefits of upgrading public sector entities.

The WEF report goes so far as to suggest that public investment in the global economy should become the “investment of first resort”. This is not a call to abandon the private sector (or financial markets) but to invest aggressively in the public sector so it can fulfil its full potential.

Yet the opposite has been happening. Advanced economies have progressively disinvested in the capabilities of their public sector in recent decades instead of acknowledging that only the combined efforts of public and private sectors can achieve broader and better economic growth.