As the G20 leaders gather on July 7-8 in Hamburg, Germany to take the temperature of the global economy, critics and supporters have amplified their concerns and hopes from the forum.
Supporters say the G20 played a critical role in responding to the trans-Atlantic financial crisis that began in 2008. They state that its role as the “world’s economic steering committee” remains vital for leading the world back to economic prosperity.
The critics, on the other hand, have been harsh on the unchecked expansion of the forum’s scope. It now goes much beyond its original mandate of fixing the global financial architecture to issues like climate change, sustainability, development, healthcare, migration, and even terrorism – much like the United Nations.
Both arguments have merit. As the forum enters the eighth year of its formation in a world that is in geopolitical turmoil, it is appropriate to assess what has worked, what has not, and why.
The G20 is best known for coordination of the macro-economic response to the trans-Atlantic crisis, especially the years between 2009 and 2011. The coordinated action by the 20 countries helped to inject liquidity into markets, recapitalise the IMF, and bail out Systemically-Important Financial Institutions, i.e. the major western banks. It ensured that western economies in financial crises would be carefully attended to in the operating theatre, then in the ICU, and on the way to recovery.
The coordination was also hailed as the exemplar of collaboration between developed and developing countries. This is true given that the G20 is the first global economic body since Bretton Woods in which developing countries have as equal a say in designing the rules of global economic engagement as do the developed countries. The annual rotating presidency ensured that each country could bring in its area of concern and priority. For instance, Turkey introduced a focus on Small and Medium Enterprises in 2015. China prioritised innovation in 2016. And Argentina, the president-elect of the G20 in 2018, is likely to highlight food security and employment.
The rotating presidency also forced developing countries to build capacity to contribute to the global economic governance process for the year. An internal Gateway House study revealed that Turkey had conducted over 150 high-level meetings during its G20 presidency, including ministerial, official and sub-forum meetings all combined.
For countries such as India, which, for decades, have been at the receiving end (‘rule-takers’) of global policies set by institutions like the IMF and the WTO, this opportunity is invaluable. India is in the running to be the G20 president in 2019, and will have a chance to be a rule-maker – a golden opportunity for it to captain the global economic governance process in the future. As Raghuram Rajan, the former governor of the Reserve Bank of India, stated at a T20 forum hosted by Gateway House in Mumbai in 2015, “He who holds the pen writes the rules.”
More importantly, issues that are vital to India like trade in services, are put forth for global study and discussion and will encourage more global economic policy research in the country.
The G20 successfully controlled the damage from the 2008 crisis. And it rightly turned its attention to the chronic problems that had petrified the global financial system. Here the G20’s effort in making the multilateral organisations evaluate global inter-disciplinary economic problems was successful, but less acknowledged. The joint research conducted between 2011 and 2013 by the “standard-setting bodies”, such as the Bank of International Settlements (BIS), the Financial Stability Board (FSB), the IMF, Food and Agriculture Organisation (FAO), the World Bank, International Organisation of Securities Commissions (IOSCO) and the OECD, on the increasingly unreliable and muddled functioning of global credit rating agencies, energy and financial benchmarks, food price and energy price volatility, and shadow banking, is seminal to this day. It made the G20 a global star, recognised as an “agenda-setting” governing body, above and more visionary than the standard-setting bodies.
Over the years, and under pressure to diversify from the elite concerns of big financial institutions and western economies and to address the larger socio-economic needs of the masses, the forum began to include issues such as climate change, infrastructure development, economic inequality, jobless growth and development challenges – issues particularly important for the developing countries, and not an illogical evolution.
Unfortunately during the last two Summits, the G20 focus areas of migration and terrorism became a further departure from global economic issues. Issues on the “finance track” – typically led by finance ministries and central banks – were overtaken by the prioritisation of issues on the “development track”, typically led by officials outside finance ministries.
To that end, Germany’s call this year for focusing on UN Sustainable Development Goals (SDGs) has come both to the forum’s advantage and detriment. Surely, prioritising SDGs is a better way to consolidate the myriad issues already on the agenda, especially given that SDGs are on the UN’s agenda.
But is it really the G20’s agenda? SDGs have brought in even more issues than were previously on the table (e.g. water, education, gender, sanitation). The group’s core issue i.e. the financial architecture, can now, at most, be directly attributed to only one of the 17 SDGs (#8 Decent work and economic growth).
If the G20 stands for everything, then, as Rohinton Medhora, president of Canada’s Centre for International Governance & Innovation said at the Think Tank 20 Summit in Berlin in June, it basically stands for nothing.
This then, is the G20’s midlife crisis. The forum lacks the sharp focus and energetic execution that once brought it recognition. The very job it was hired for, i.e., multilateral agenda-setting, is now under question by political developments in the U.S. and Europe.
The G20 should be used better. It is now a mature institution, with a depth of economic governance experience. The G20 must retain its expanded vision of addressing the large socio-economic issues. But its work agenda must revert to its laser-focus on improving global economic policy design. For instance, the world still needs holistic metrics to measure economic success because GDP captures neither social well being nor ecological sustainability. An appropriate plumbing is required for channelling funds into infrastructure – like targeted solutions for financing a decentralised solar energy model.
The G20 Leaders’ Summit starting on July 7, is an opportunity for the G20 to do what it’s good at: addressing the systemic, chronic economic issues of the world.
Akshay Mathur is Director, Research and Analysis & Fellow, Geoeconomic Studies, Gateway House.
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 Rajan, Raghuram, ‘Global Economy and Challenges for Multilateral Policies’ speech delivered at the T20 regional consultation, Mumbai, 19 October 2015
 Medhora, Rohinton, ‘Germany’s G20 Presidency: Implications for Global Governance’ speech delivered at the T20 Summit, Berlin, 30 May 2017