The world financial crisis has served as a quick and efficient catalyst to the G-20. The first three G-20 summits of chiefs of state, in Washington, London, and Pittsburgh, will be remembered for advancing multilateralism and coordinated global action. But the G-20 remains very much a work in progress – and one that needs much work to succeed, as its most recent summit in Toronto demonstrated.
The G-20 summit in Washington in 2008 was the first at which the member countries’ chiefs of state met since the group’s creation in 1997. The G-8 was no longer an appropriate vehicle for global economic governance, given the need to stabilize financial markets around the world. The voices of countries such as China, India, and Brazil had to be heard if a coordinated response to the crisis was to be found. With the financial crisis worsening, the London summit in 2009 agreed to unprecedented fiscal and monetary stimulus and backed a stronger, more coherent regulatory and supervisory framework worldwide. In view of the G-20’s success, the Pittsburgh summit recognized it as the main forum for international economic cooperation.
This recognition raised expectations for the G-20 and granted it the prestige that it deserved: it is the only forum in which world powers and emerging countries sit as equals at the same table. The premise is clear: as the crisis made more evident than ever, the interdependence of countries is inescapable. In the face of today’s global challenges, the only possible response must be global. There is no possible alternative. But the imprecision of the agreements reached at the summit in Toronto in June has left political leaders with a bitter taste in their mouths.
Two clearly defined gaps stand out as causes of discord. The first is transatlantic divergence over how best to assure a return to solid growth. The United States favors continuing economic stimulus, while the European Union prefers fiscal consolidation. The other source of dissension is disagreement over a bank tax. The US, the EU, and Japan are in favor, while emerging countries, as well as Canada and Australia, are opposed.
While an agreement has been reached (2013 has been set as the year to reduce budget deficits by half; 2016 to stabilize sovereign debt), consensus is not headed in the right direction. It is not a question of stimulus versus deficit. Both are necessary. Even respecting the idiosyncrasies of each context, there is still sufficient common ground for more precision in the agreements. The same can be said for transparency, accountability, and regulation of the bank tax. I know very well that this is not an easy task, but it is essential for world leaders – not markets – to lead reforms.
Moreover, a custom has been repeated that should be changed. Obviously, holding a G-8 summit just before a G-20 summit, as happened in Canada this June, simply serves to prolong maintenance of separate clubs, which is unsustainable. The G-20’s role should increase further in importance, owing to emerging countries’ share of global GDP – projected to reach 60% in 2030 – and to the global nature of the challenges of the twenty-first century. If we want to make progress on global governance problems we will have to work together on getting through this economic crisis and on other essential issues, such as nuclear non-proliferation.
The problem is that, despite the clear need for multilateralism, there is a risk of a relapse into bilateralism due to a lack of global leadership. The attention of US President Barack Obama is centered on matters of great importance, such as the Middle East, his evolving strategy in Afghanistan, and the struggling American economy. The same is true of the EU, where attention – and action – has been centered in recent months on defending the euro and resolving the economic difficulties on the Union’s periphery.
Meanwhile, the emerging powers continue to lean toward bilateralism and are aligning themselves with other countries. Lack of agreement on the United Nations Security Council resolution against Iran does not help coordination and cooperation within the G-20, either.
Summits should be well prepared and provide a forum to debate today’s great global issues. Coherent, well-defined, and precise proposals would produce results that are more acceptable to all. But just as important as making decisions is explaining them well. A G-20 summit is not something that happens every day. It is a global event. Especially in a time of crisis that has caused so much suffering, its decisions must be explained to the public clearly and without cacophony. People’s anguish demands this effort, and it was lacking in Toronto.
The world remains in a very delicate transitional phase, and it is not clear yet in which direction the G-20 will lean. The main challenge now is to continue using the “geometry of 20” to build instruments of world governance. Although the economic storm has become less intense, it hasn’t calmed yet. So there remains much to do. With countries headed toward growth at different speeds, global strategy must continue to be a priority.
The degree of interdependence among countries is increasing, and the global nature of our problems is inherent. Within the framework of multilateralism, countries must make the effort to smooth over their differences and deepen their relations: we must conquer the inertia that moves us towards old thinking – and old alliances.
Copyright Project Syndicate