Australians all let us rejoice, for we are to host the G20. Finally, a seat at a big table and a chance to influence world affairs. Even for a government that is not normally noted for its enthusiasm about multilateral organisations, the opportunity to strike an attitude on the world stage and rub shoulders with the planet’s real movers and shakers is not to be passed up.
The gathering of G20 finance minsters in Sydney this weekend is a foretaste of the leaders meeting to be staged in Brisbane later in the year – at an estimated cost of $370 million. Given the Coalition’s current concern with belt-tightening and budget balancing, this is a not insignificant outlay. Plainly there are great expectations about what the G20 can deliver. But can what has become a sort of Olympic games for policy wonks really deliver important outcomes?
The key agenda item for this week’s meeting does not inspire confidence. As big ideas go, suggesting that the G20 members ought to pursue economic growth is hardly revolutionary. Which country is not attempting to increase economic activity at present? The debate, as ever, is about the best way of achieving this. In this context, the G20’s principal strength is also a weakness.
The great strength of the G20 is that includes countries – like Australia – that don’t usually get invited to these sorts of shindigs, but which are becoming increasingly difficult to ignore. Can any organisation that claims to be even vaguely representative of the current international order not include the likes of China, India, Indonesia, South Africa and Brazil?
And yet this is also a major problem. The reality is that the G20 contains economies that are at different stages of development and political leaders who subscribe to very different ideas about organising state-government relations. The emergence of forms of ‘state capitalism’, in which economic development serves a distinctly political purpose is the most important manifestation of this possibility, as the likes of China and Russia remind us.
Equally problematically, individual states have very different ideas about what an institution like the G20 should focus on. Many of the so-called ‘emerging market’ economies are keen to talk about the possible impact of the ‘tapering’ of the US stimulus package, which is leading to an abrupt withdrawal of capital from countries that are seen as unstable, badly-managed or both.
But the problems being experienced by Turkey, South Africa and Indonesia are unlikely to get much attention, or to be remediable even if they were. The reality is that the US continues to exercise a disproportionate influence over the group and its agenda. Even more fundamentally, its policy priorities continue to reflect a national rather a transnational agenda. The collateral damage inflicted by quantitative easing is the quintessential case in point: the Federal Reserve is legally obliged to put national priorities first.
It is worth remembering that the G20’s finest hour came when the potential meltdown of the global financial sector seemed like a very real possibility. Faced with what IMF director Christine Lagarde described as the gravest crisis since the Great Depression, key members of the G20 mustered the collective will to act. It even seemed to make a difference, dramatically illustrating the potential value of institutionalised international cooperation in the process.
Now, however, in less existentially fraught times, the chances of getting collective agreement, much less action, on anything genuinely substantial look altogether more remote – hence the motherhood statements about the merits of economic growth. Surely no one could object to that?
Actually, they could, and the Germans have done so. Many Europeans think there are far more important and specific things the G20 should be concerning itself with. The complete failure to regulate (much less punish!) the bankers who caused the global financial crisis is a standing indictment of global governance that some European governments would like to correct. Likewise the possibility of taxing short-term capital flows for governments desperate to balance the books looks like a no-brainer, but is in fact a non-starter.
Here national differences, especially the division between the ‘Anglo-American’ economies and the rest, become important. Not only are the governments of the US and the UK reluctant to regulate financial sector interests from which they believe they benefit, but they are ideologically opposed to the idea of government intervention in economic processes at the best of times.
Whether the assembled members of the G20 will be inspired by Joe Hockey’s injunction to leave it to the market we shall have to see. One suspects the Chinese and the Russians, for example, may be slightly less enthusiastic about Australia’s big initiative. Perhaps Joe will have more luck with Saudi Arabia. After all, we are well on the way to having the same sort of resource-reliant economy they do. We can only hope we don’t get the politics as well.