G20 makes its mark (page 2)
London summit
Bush warned after the Washington summit that ‘a meeting is not going to solve the world’s problems’. But he correctly predicted that it would begin a process: the following two summits to a large extent carried forward the programme agreed at the first, with a high level of common ambition and a strong focus on implementation. As recession created debt-servicing problems for a growing number of countries, the London meeting sought to amass financial resources for international institutions so that support could be assured, and to encourage the restoration of trade flows. The communiqué, reflecting the style of Gordon Brown, summit chairman and UK prime minister, claimed that a $1.1trillion programme to restore credit, growth and jobs had been agreed. While the figures left scope for scepticism, the resources available to the IMF were subsequently tripled through the addition of $500 billion to the New Arrangements to Borrow, and the creation of $250bn-equivalent of Special Drawing Rights, boosting international liquidity.
secrecy is over’. Heads of the IMF and World Bank would be appointed through a new, open, and merit-based process. The summit communiqué also went beyond the remit of economic recovery and financial reform to embrace general commitments to low-carbon technologies, and to address the threat of climate change.
Pittsburgh summit
In Pittsburgh, leaders said of the programme of measures previously undertaken: ‘It worked’. But with economic recovery still not assured, they agreed: ‘We will avoid any premature withdrawal of stimulus’. The third summit, held only ten months after the first, was notable for expanding the G20’s scope still further. While leaders continued with the programme of financial reform (for example, agreeing on guidelines for bankers’ compensation) they shifted their focus to ensuring the compatibility of national economic policies. Huge imbalances between Western consumption and Eastern savings are seen as an important cause of the crisis. The leaders agreed to a new peer-review process under which countries will assess each others’ economic policies. US President Barack Obama, as summit chairman, said this was necessary to smooth out boom-bust economic cycles. Based on the results of the first assessment, to be completed by June 2010, leaders said they would agree actions to meet common objectives.
On ‘global architecture’, the summit agreed that the voting power of transition and developing economies should rise by five percentage points in the IMF and three in the World Bank. The leaders also agreed to phase out inefficient fossil-fuel subsidies, and to increase transparency in energy markets.
Prospects
There is no doubt that economic recovery, fiscal soundness and financial stability depend primarily on the policies of national governments, which can choose to what degree they will implement their G20 commitments. It also remains true that there are wide differences in perspective between G20 members, given the different natures of their economies and political outlooks – and the very size of the G20 framework is an issue. Nevertheless, common actions agreed over the past year have been remarkably substantive. Commitments of the type previously made by the G8 carry far more weight – and peer pressure to follow through – when made by the more inclusive G20. China, while initially diffident about its role, has shown itself willing to assume responsibility, though the outcome of the peer-review process will set challenges for both Beijing and Washington. Strong views held by some members have been accommodated – for example, the desire of China and others for a stronger voice in the IMF and World Bank, and the determination of France and Germany to set tough limits on bankers’ pay.
As the G20 evolves, it could become an arena in which world leaders choose to agree common positions on a wide variety of subjects: it is already addressing ‘global architecture’ and is bringing about new balances in international bodies. Over time, it is conceivable that it could address long-term issues such as reform of the United Nations and action on climate change. However, its development will depend crucially on whether the unusual cohesion it has displayed so far will continue once the urgency created by the financial and economic crisis has eased.
1 | 2
<Previous
