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Powerful and plural G20 is worth listening to

Blue sky thinking in St Petersburg. victorgrigas

The G20 Summit brings together in St Petersburg, Russia a remarkably diverse and powerful collection of states. It is a unique experiment in global governance, signalling the end of dominance by a few western powers.

But what is the G20 really for? And how have we ended up here, with this membership? A look at the group’s history reveals why - unlike the more elitist G8 - this summit can truly claim to represent the world’s preeminent forum for global governance.

The G20 emerged out of the Asian financial crisis of 1997-98. It was created by the world’s most powerful countries, who felt they needed a mechanism to consult regularly with the so-called “emerging markets”, particularly in Asia and Latin America.

Actual G20 membership was the outcome of a rather arbitrary process. Timothy Geithner, at the time a mid-ranking US treasury official, reportedly called his German counterpart and read out the names of potential members. As they went down the list, names were deemed in or out, until they had agreed on the new invitees.

Over time the newer members became increasingly assertive at G20 meetings. As the BRICs (Brazil, India, Russia and China) continued to grow, so did the sense that the G7 was an outdated grouping for presiding over global financial governance.

Following the 2008 global financial crash, US president George Bush decided to handle the response through the G20. For the first time the group met at leaders’ level in Washington in November that year, and further leaders’ summits followed in London in April 2009 and in Pittsburgh that September.

At the Pittsburgh meeting Geithner (now US treasury Secretary) formally announced that the G20 would be the premier forum for global economic governance. The announcement effectively promoted the G20, while demoting the G7/G8.

Crucially, G20 finance ministers and central bankers now meet more regularly (3-4 times throughout the year), whereas previously there had been only one annual G20 meeting at this level, compared to numerous G7 meetings. This simple procedural change has given greater momentum to the G20 as an ongoing annual process.

Power in numbers

The G20 account for over 85% of world GDP (compared with the G8’s 40% per cent), 80% of world trade and two thirds of the world’s population. This makes them a far more representative and legitimate grouping than the exclusive G7/G8. With that comes greater reach and greater authority.

Likewise, the G20 countries constitute the principal donors for the multilateral lending agencies, the IMF and the World Bank, accounting for around two thirds of both institutions’ capital. In other words, what the G20 can negotiate within itself in relation to shares of funds for these institutions determines the capital base, internal power structures and capability of the world’s two leading multilateral donor agencies.

Given such power, the agreements the G20 reaches, or fails to reach, shapes the structure of the world economy.

There are some downfalls to this increased size. The choreography and room layout at G20 summit meetings does contrast with the smaller G8. A large circular arrangement, with rows of supporting officials, contrasts starkly with the informal intimacy of G8 meetings. This places a premium on behind the scenes, corridor and bilateral discussions. It also means the kind of frank, candid back and forth of G8 meetings are not really reproduced at G20 summits, at least in formal sessions. Agendas tend to be much more scripted.

The G20 has in part got around this problem through creating working groups that produce detailed and informed reports on clearly focused and tightly defined issues. Working groups are staffed by mid ranking officials and they have a history of consulting with outside experts and civil society. Their work is critical in formulating agendas and setting policy trajectories, while producing base line agreement among G20 countries on broad principles and agendas.

A unique experiment

Probably the most important thing to understand about the G20 is that it is a unique governance experiment. Whereas in the past multilateral processes, at least in the field of economic governance, have tended to bring like-minded countries together with shared broad cultural traditions and values - evident in the G7 as a group of western countries - the G20 breaks the mould.

Here we have a mechanism for regular dialogue and discussion between: a one party state making a transition from a command economy to the world’s largest market economy (China); a rentier state in a tribal Islamic society governed by an authoritarian ruling family (Saudi Arabia); populous dynamic and partially democratic Islamic societies (Indonesia and Turkey); the world’s second most populous state notable for its religious diversity (India); a state still reconciling post apartheid legacies and tensions overlain by an increasingly successful market economy acting as Africa’s sole representative (South Africa); alongside established western liberal democracies and newly emerging dynamic economies in Latin America and Asia, that themselves operate subtly different forms of capitalism.

In this respect, the G20 is important for its symbolism as much as anything else. It is a least a step in the direction of a more plural world of co-existing civilisations, based on an expectation of diversity with tolerance and a willingness to confront the frustrations of a search for consensus on diverse issues.

The G20 signals that the dominance of a small group of western powers is a thing of the past and, for the first time in modern history, we are moving towards more diverse and plural governance of the world economy. On those grounds alone, it is important that the G20, for all its imperfections, continues to operate as the central hub of global economic governance.

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