Words by Asad Khan
Photograph courtesy of the Presidency of the Nation of Argentina
Since the global financial crisis (GFC) in 2008, the G20 has become the foremost international economic forum. This year, Australia is chairing the summit, which will see heads of state, finance ministers, and central bank governors converge upon Brisbane on 15-16 November.
Nineteen countries (and the EU) will be represented at the event: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, and the United States. Spain is invited every year as a permanent guest and the host country also chooses countries to invite as guests.
The G20 is extremely influential because it represents 85 per cent of global gross domestic product (GDP), more than 75 per cent of world trade, and more than 65 per cent of the global population.
The Australian government has identified two key themes for the summit: building global economic resilience and spurring international economic growth, especially in terms of job creation. In February this year, finance ministers and central bank governors agreed to the aim of lifting the economic output of G20 nations by two per cent in five years.
At the advent of the GFC, the previous incarnation of the forum—the G8—was expanded to include emerging economies that are essential to the restructuring and rebuilding of the global economy. Cooperation enabled the aversion of a new great depression by limiting the spread of the banking crisis, yet simultaneously providing for huge stimulus spending and keeping concerned countries from adopting protectionist policies.
However, many economists and commentators believe that the G20 has failed to live up to this initial promising achievement. The group has failed to alleviate in any meaningful way the Eurozone crisis, and reform of the International Monetary Fund (IMF)—which were agreed upon in 2010—has been blocked by the US Congress, effectively derailing the entire process. Since the global economy no longer seems to be headed for the edge of a cliff, some countries have begun to dispute which fiscal policies will fix the global economic slowdown.
Associate Professor Mark Crosby of the Melbourne Business School sees these failures as evidence of the forum’s ineffectiveness. He says that the G20’s plans for action are amorphous, making it difficult to assess progress. Nonetheless, he identifies areas where the plans have been unsuccessful.
“They (the G20)stated [in 2008] that emerging markets should have a stronger voice in multilateral organisations such as the IMF. “Soon after a Frenchwoman was appointed to head the organisation, instead of equally qualified candidates from emerging markets,” Crosby says.
“In Toronto in 2010, [the G20] agreed to halve deficits by 2013, and reduce sovereign debt by 2016. The US has been among the more delinquent in this area but most countries are far from achieving this.”
Crosby further argues that the G20’s current stated goal of raising long-term growth has been established in a similar vein. “It’s as if it is easy to do and politically simple,” Crosby explains.
The Australian government has indicated that the topics of climate change and the “greening” of economies, as well as any other issues that might impede talks focussing solely on the creation of economic growth, are not a priority.
The EU has been vocal in its opposition to this, alongside Christine Lagarde of the IMF. Abbott is keenly aware of the blows to Australia’s international reputation such opposition will cause. On a trip to the US and Canada earlier this year, Abbott declared that there are more important problems than climate change. Yet within a week, he insisted that he took climate change very seriously and agreed with President Obama. Facing opposition not unlike that of Abbott and his Opposition party, Obama led an ill-fated attempt to institute an emissions-trading scheme in America in 2007.
The Abbott government will likely continue to emphasise that Australia is “open for business” and push, as the Prime Minister did in Switzerland in February, for “freer trade and smaller government” as the keys to prosperity. Abbott has consistently underscored the reliance on markets and the encouragement of the private sector in his speeches at economic forums this year.
His ideas are contentious for the G20 nations. Abbott’s insistence that you “don’t address debt and deficit with yet more debt and deficit” flies in the face of the US experience, and Eurozone countries feeling the effects of German-imposed austerity are likely to disagree.
Adjacent summits have been held in the lead up to the G20, including the Business 20 (B20), Labour 20 (L20), and Civil Society 20 (C20). These conferences act as forums for the business community, major labour unions, and civil society organisations who work to lobby the leaders of other countries.
The B20 has created a list of recommendations to address the G20’s key themes, especially its goal of two per cent growth. The recommendations include removing impediments to the free movement of goods, services, capital, and labour across borders.
The C20 and L20 collectively articulated the need for the two per cent growth goal to be achieved in an inclusive way so that the poor of the world are not left behind. The C20 further highlighted the need for action on climate change and the sustainable use of finite resources
Other minor summits are the Think 20 (T20), composed of academics and think tank representatives, and the Youth 20 (Y20), made up of youth delegates from the G20 countries.
Each group produces a communiqué that is presented to the leaders at the G20 summit in order to give their views and recommendations on the G20 agenda.
Irrespective of its success in helping avert global financial catastrophe in 2008/09, the G20 seems to have lost this earlier decisiveness. The loss of any sense of urgency has given way to more general discussions and in-principle agreements on how to tackle economic issues. Because of this, there are no binding resolutions like those released by the UN Security Council. Countries can ultimately choose whether to adhere to paths defined by the group, which does nothing to end the no-one-else-is-doing-anything mentality, specifically with regards to climate change.
Despite its increasing ineffectiveness as a decision-making body, the G20 is nevertheless valuable because, as Legarde has said, it allows nations to “compare notes, and exchange information and best practices”. Whether it achieves the reforms needed of the international economic system remains to be seen but, as recent events in the Ukraine and the Middle East attest, every opportunity for dialogue must be seized. This is no less true of international political economics than international relations generally.