The G-20 Report Card

 The G-20 proved successful as a exigent mechanism post the 2008 Financial Crisis but hasn’t been able to provide solutions to global issues. The 2016 Summit in September will show if the grouping will become yet another defunct multilateral forum or if it can revitalise decisionmaking in the international system.

By Hamsini Hariharan (@HamsiniH)

In the aftermath of the 2008 Financial Crisis, the G-20 was thought to be the most effective institutional response to the crisis. Since then, the multilateral forum has been struggling to stay relevant to the changing geopolitics. Delivering more structural, longer-term solutions to create a more balanced global economy requires more far-reaching actions at domestic level, often needing the approval of national parliaments, which effectively makes advancing the G-20 agenda more difficult.[1] Since 2008, economic changes have been rapid and unpredictable. The Chinese reminbi was admitted into the SDR basket of currencies in 2015 but the Chinese economy in the same year went through a number of shocks and had to devalue its currency. Thus, China which hosting the 2016 Summit, faces a completely different context from the earlier years because of its own economic problems. The Summit, to be held in September 2016 will show if the grouping will become yet another defunct multilateral forum or if it can revitalise decisionmaking in the international system.

The G-20 is an interesting group for analysis on three different levels: On one hand, it shows the wrangling of the US which has been declining in stature in the international system, unable to cope with the pressures of the system unilaterally. On the other hand, it also sees the diplomatic maneuvering of China on an ascent, keen to reform the international system in its favour. The third level sees middle power countries around the world that are pushing for their own national interests as well as the agenda of developing countries.

The Group of Twenty was initiated in 1999 as a response to the Asian Financial Crisis on the suggestion of the G7: “the commitment to work together to establish an informal mechanism for dialogue among systemically important countries, within the framework of the Bretton Woods institutional system”.  The 2008 financial crisis exposed the fault lines in the global economic system particularly excessive bank credit, build up of private consumption based on uncollaterised loans and an inexorable rise in public debt. The group emerged partly as a result of political pressure on world leaders to ‘do something’ about the global financial crisis.  But it also was a response to the absence of international institutions where international coordination could take place quickly along a broad range of policy instruments.

The G 20 in the short term has achieved a status of one of the most important exigency contingents that allows for consensus building amongst powers of differing capabilities.  In the medium term, the G-20 could reflect and (possibly even help manage) a major reorientation in the relative standing of the world’s major powers.

The G-20 was envisioned as a forum to deal with financial crises beyond the capacity of advanced Western states. However, it has been transformed into an arena for world politics to be played out. Different forces of agenda setting have been played out within the G 20. For one, an America reeling from the impact of the 2008 Financial Crisis, initially set the agenda of the G-20 as the primary mechanism for crises management. However, the US has not been able to dictate processes or outcomes of the G-20.

China, as the rising power and expectant challenger to the power of the US, briefly aligned with the US. This led to fears of the two most powerful actors combining strategies to jointly dictate the agenda. However, China did not follow through with any sort of G 2 arrangement citing domestic concerns. G-20 is also the battlefield for developed countries grappling with the rise of emerging countries. While the G20 emerged as the major platform for global politics, the expansion of its agenda and its relevance amidst dynamic geopolitical and economic contexts in the future will determine its prospects.

The G-20 has other instrumental benefits, namely the formation of a new and updated concentration of power and has cross regional reach.  The growing strength of the G-20 as a forum however does not mean that G-20 decisions are effective. G-20 pessimists often cite lack of progress on curtailing currency wars and macroeconomic imbalances and repeatedly express disappointment over the outcome of the G-20 summits. Global governance, even with just twenty members and consensus based decision making, is an arduous task.

The G-20 demonstrates that in a multipolar world, emerging powers have to share the burden of leadership with great powers. However, it has realised very little since 2009 despite much talk. China’s assumption of presidency could provide the group with the push it needs to effect any major change. However, the agenda for discussions remains unclear thus making durable solutions to the problems of global governance implausible.

[1]  Marcin Szczepański and Etienne Bassot, “The Group of Twenty (G20): Setting the Global Agenda”,  European Parliamentary Research Service (Brussels: January 2015) p.8

Hamsini Hariharan is a Research Scholar with the Takshashila Institution and tweets at @HamsiniH

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One Response to The G-20 Report Card

  1. Krishna Hariharan August 16, 2016 at 10:29 am #

    Very good article. Interesting insights

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