G20 in charge of global economic recovery

The G20 highlights the significant shift of economic gravity from the Atlantic region to Asia

In the last year the
Group of Twenty (G20) has rapidly emerged as the premier forum to deal with the
global financial and economic crisis. The group has held three summit meetings
– all of them in the past ten months. The new body is very much a reflection of
the world economy today and accentuates the movement of the centre of economic
gravity from the Atlantic region to Asia. The
G20 is now widely perceived to have both legitimacy and power to provide
collective leadership on international economic cooperation and the G8 is
henceforth expected to deal primarily with issues related to global security.

The G20 has quickly been able to fill a
vacuum that other international institutions have left as their responses to
the financial crisis have turned out to be inadequate. In addition, the rise of
the G20 is a stark reminder that traditional forms of international cooperation
have not adapted to a more interconnected and rapidly changing world. The
bureaucracies of many international organizations offer limited room for
maneuver when action is swiftly called upon. But most important, the Obama
administration has been a clear champion of the G20 in the last year and has
regarded the group as an important new body with legitimacy to discuss and act
on critical issues on the global agenda to help support growth and development
across the globe.

To understand the emergence of the G20
we need to examine its history. When the G20 was established in 1999 its main
purpose was to bring together important industrialized and developing economies
to discuss key issues in the global economy. This was an immediate response to
the financial crises of the late 1990s, and highlighted the need to ensure that
key emerging-market countries were given a seat at the table to participate in
global economic discussions. From having been primarily a forum for Finance
Ministers and Central Bank Governors the G20 has now turned into an important
forum for political leaders. The strength of the G20 comes partly from being
perceived to have the power to mobilize support for its policies not only among
its own members, but also among countries outside the group and other relevant
non-state actors. There is a clear recognition that members of the group are
important stakeholders in the global economy. Members represent around 90 per
cent of world GNP as well as 80 per cent of world trade. Its members are drawn
from all continents and represent two-thirds of the global population. It
comprises the seven major industrialized nations – Britain,
Canada, France, Italy,
Japan, Germany and the United
States – and Argentina,
Australia, Brazil, China,
India, Indonesia, Mexico,
Russia, Saudi Arabia, South
Africa, South Korea
and Turkey.
It also includes the 27-nation European Union. In contrast to many other
international organizations such as the OECD and IMF the G20 has a flexible
organization with no permanent staff of its own. The chair rotates between
member countries on a yearly basis.

The effectiveness of any international
body is closely linked with how its key stakeholders view the body. There is
little doubt that the U.S.
has identified G20 as an ad hoc forum that can promote American values and
interests to secure global prosperity. It is also clear that China attaches
great significance to G20.

In a complex world with many players,
setting the agenda and organizing summit meetings is an important form of
power. Subsequently, the U.S.
has taken an active role together to ensure that effective action could be
taken at the summit meetings. This was clearly illustrated at the G20 summit in
London in April
2009. At the summit meeting world leaders – many of them former adversaries –
went straight to the root of the matter and after two days of careful
negotiations agreed on an agenda for comprehensive and coordinated action to
deal with the financial crisis. The U.S. President Barack Obama emphasized that
this productive summit could provide the turning point in the pursuit of global
economic recovery. Even though it is too soon to form any judgment as to the
long term effects of G20 decisions, they did contribute to restore confidence
in financial markets and are likely to promote sustainable economic growth in a
longer perspective. The scope of the G20 is not only limited to financial
issues as became obvious at the most recent summit meeting in Pittsburgh. At the summit climate change was
an important topic and the group was able to provide important impetus ahead of
the UN Summit in Copenhagen 2009. UN Secretary General Ban Ki-moon argued that
“the G20 could be vital for providing climate change finance to help the
poorest countries”. The G20 is no doubt a more effective venue to have
discussions in, compared with the UNFCC process with some 190 countries at the
table. But more importantly all the major emitters of greenhouse gases – China, EU, India,
Japan, Russia and the U.S. – are represented in the
group. The critical issue is to ensure that a future agreement post-2012
includes the U.S. and China as well as India and that such an agreement is
both flexible and far reaching under the principle of “common but
differentiated responsibilities”. Whether that will succeed in Copenhagen remains a question mark.

A number of questions are raised when
examining the future of the G20. What variables are likely to determine the
future success of the G20 and what place should the group have within the
global architecture? Here it is important to understand the context in which
G20 operates and its place within the system of international institutions. Quite
often we make the mistake of thinking that systems and organizations can be
seen in isolation from each other, but the G20 is very much part of a larger
process where it is working closely with, and reinforcing the work of other
institutions such as the U.N. and the International financial institutions
(IFIs). However, its geographic composition, economic weight and flexible
organization have offered legitimacy and subsequently power to deal with global
challenges in a way that other institutions currently have not. World leaders
generally have little patience and want to conduct international business
effectively. They know that to be effective in a global crisis, several actions
must be taken together, in the right order, at the right time and at the right
place. Under such circumstances they are less likely to turn to organizations
that are primarily concerned about preserving as much as possible of the status

One of the most important questions is
whether the G20 should extend its role from mainly issues related to the global
economy and address both political and security issues. There is no simple
answer to this question. With the composition of G20 the body is no doubt
suited to address common challenges that we face in a globalised world. Those
who argue for a more political role see the G20 as a healthy injection to
traditional international cooperation that is often slow and bureaucratic. A
network of political leaders who are able to respond to international crises
and plan for future problems are perceived to be more flexible than traditional
international institutions. Already now the group has extended the agenda to
cover climate change and if a major crisis erupts at the same time as there is
a summit meeting we can be quite sure that it will be addressed by leaders
attending. However, one can also argue that the reason why G20 has been put
forward as a model of efficiency is because it has confined its agenda to
issues that are not too contentious. If the new body were to address the Iranian
nuclear issue we would quickly see sharp divisions within the group.

Fears raised – not least by members of
the G-77 – that the G20 is turning into a substitute for the United Nations are
not warranted even if the group were to address security issues. Despite being
powerful the G20 simply cannot compete with the United Nations, but rather
reinforces and complements its work. There is only one universal body for
international cooperation and that is the UN General assembly and the U.N.
Security Council has the overall responsibility for international peace and
security. However, the U.N. cannot function effectively independent of the
major powers that compose it, nor will those nations cede their power and
sovereignty to an international institution.

In summary, there is a new role for the
G20 in the architecture of world politics. Its will to act to resolve the
financial and economic crisis and how to avoid its future repeat has put the
G20 at the centre of global economic recovery. In addition it has become an
important forum to discuss climate change and is expected to play a major role
on issues related to climate change finance. A major factor in the rapidly
increased role of the G20 is that the group is perceived to have a more
relevant composition than other institutions. But the fact that 85 per cent of
the world’s countries are not represented when G20 meets is likely to be a
future issue of contention.

In the last year the G20 has provided a
model for efficiency and cooperation and is now an established forum for world
leaders. Although there is no clear trajectory for the future we have just seen
the end of the beginning of a new and more significant role for the G20. At the
summit the British Prime Minister Gordon Brown argued that the new body was
offering “more chance of delivering results than anything since the second
world war”. This certainly sounds promising. If members live up to their
commitments it might also put pressure on other international organizations to
become more effective. But above all – and this is important – the G20
highlights the significant shift of economic gravity from the Atlantic region
to Asia.

This piece first appeared in Europe’s World  

The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of its individual authors.