Spotlight G-20: If not now, then when?

Jayati Ghosh

Part of the Triple Crisis Spotlight G-20 series.

The G20 meeting to be held in Los Cabos, Mexico on 17-18 June is arguably the most important meeting of this group since it was formed, and certainly one that the world will be watching. It is possibly even more important than the famous meeting of April 2009 when the member countries committed themselves to co-ordinated recovery measures in the wake of the global fallout from the Lehmann closure.

The reason for this significance is that for some time now, the G20 appears to have lost its way. Its original intention – to provide a relatively speedy and workable arrangement for global governance (especially economic governance) at a time when co-ordination of macroeconomic measures is seen as essential – has clearly fallen by the wayside in the past two years. Indeed, if it cannot deliver this time around, it risks sinking into irrelevance, at a time when the global economy badly needs some institutions to respond to what is more and more evident as a crisis of massive proportions.

The G20 has increasingly shied away from addressing the more important questions: the systemic issues in the international financial architecture; the need for concerted and more comprehensive re-regulation of finance; co-ordination of monetary and fiscal policies for growth and employment generation; reorienting productive structures in an equitable way to cope with the challenges of ecological degradation and global warming. At recent meetings, the differences and contradictions within the grouping have overshadowed any agreement, to the point that most communiqués have become banal renderings of pious hopes or restatements of obvious points rather than clear indications of future strategies and commitments.

While the global economy sputtered on in a meandering fashion during the half-hearted and fragile recovery after 2008-09, it could still be argued that this lack of real activity or co-ordination did not mean very much and did not cause too much damage. But now the storm clouds that were gathering over the horizon are actually upon us: the eurozone is in the process of imploding; the United States economy is showing a slowdown yet again; and most of all, the BRICS and other emerging markets that were supposed to provide the cushion for the world economy are also exhibiting different degrees of strain and decelerating growth.

The next round of the financial crisis will clearly originate in Europe, and any one of the “peripheral” European countries can serve as the trigger, whether it is to be relatively small Greece or much larger Spain. But the rest of the world simply seems to be watching the process unfold with bated breath. Obviously, the European Union has to solve this problem internally or not solve it at all, but the systemic implications are immense.

So what is surprising is the apparent absence of any Plan B – not only among the leaders in Europe, but also in other countries and in the international community generally. Isn’t this the moment for the G20 at least to figure out various options on how to mitigate the damage of what is an increasingly likely scenario of at least partial eurozone dissolution? Isn’t this the time to think of strategies to protect citizens around the world from the disastrous consequences of another round of bank collapses without reinforcing a negative feedback loop that puts more strain on governments that are forced to bail out the banks?  Shouldn’t this be the time for urgency to deliver on co-ordinated strategies for protecting and reviving employment when asset markets, currency flows and trade and investment are all indicating downward trends? If not now, then when will the G20 act? Or will it wait until it is too late?

It was always questionable whether the G20 arrangement was justified and democratic, since it did not have the credibility of the UN system and excluded the vast majority of countries. However, it was argued that a smaller group of important countries could provide a better platform for hammering out differences and arriving at strategic decisions, and could work more quickly because of the relatively small size.

In any case, it sought to replace the even more elitist G8, and provided a better representation of the global population because of the inclusion of several large and populous developing countries and other so-called ‘emerging nations”. But now it seems that inclusion in the high table of global governance has not really pushed several of the emerging country members of G20 to be more active in promoting the interests of the bulk of the people of the developing world either.

Maybe the geopolitical contradictions and internal political economy concerns of the governments of all G20 member countries are such that this group cannot really play the role it is supposed to. The coming summit will reveal at least a large part of the answer. If this is indeed so, Los Cabos will tell us whether we urgently need to develop or build on another international forum to address the current crisis.

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