G20 – leading the charge
In last week’s column I argued that the global economic crisis had become very complex, involving immense human and social suffering, thereby constituting a grave threat to past global developmental efforts. As such, I argued for global solutions to the crisis. In my judgement no country or region can emerge from the crisis sustainably without a collective global effort.
I also pointed out that the world body coordinating the global response is the G20 group of countries. This grouping comprises finance ministers and governors of central banks of leading economies and representatives of international financial institutions (IFIs), with direct responsibility for global financial coordination, review, regulation, oversight, and the delivery of development financing. Finance ministers carry direct political portfolio responsibility for national efforts to address the crisis, while the central bank governors have the highest level of technical responsibility for this.
As a group, G20 countries represent 85 per cent of global GDP, 80 per cent of global trade, and 65 per cent of global population. While the G20 represents the technical/political face of global efforts at finding solutions to the crisis, the G8 constitutes the highest level of political authority for this. If the United Nations had an elected Economic Security Council for economic matters, as a counterpart to the present Security Council for political matters that body would have been the appropriate one to seek to resolve the global economic crisis. It does not, and by default the G8 group fills this void.
G8 group of countries
The G8 comprises eight industrialised countries: Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States. It also includes the European Union (EU). Their heads of government meet annually, but sub-groupings, such as finance ministers, foreign ministers, and environment ministers meet more frequently.
Unlike most other international organisations, the G8 does not have a permanent secretariat. As an informal body its annual meetings rotate, and the host determines the agenda for the summit. By practice, other key countries are invited to ensure broader representation. The most regularly invited so far have been Brazil, China, India, Mexico and South Africa, to the extent that the G8 is sometimes called the G8+5.
Because annual summits are limited to a few days and there is no permanent secretariat, G8 meetings focus on broad policy issues, leaving implementation details to be filled in by the agencies it identifies.
While G8 countries represent the leading industrial economies, it is by no means as representative as the G20. It only includes about one-seventh of the world’s population, although it represents more than two-thirds of global GDP, and the vast majority of global industrial, military, and research and development capacity. It thus falls far short of a United Nations Economic Security Council, similar to the present Security Council of the UN.
Recent summit decisions
At the recent G8 Summit 40 nations and organisations attended. Four economic items dominated the agenda: the global economic crisis, food security, trade, and climate change. What was achieved?
Global crisis
Similar to these columns, the G8 Summit found it impossible to arrive at certainty as to where the global recession presently stands. It admitted that significant risks remain to global “economic and financial viability.” While the various stimulus packages may be working, it was considered inappropriate to discuss the global economy post-stimulus packages, as recovery is by no means assured. This is important, as the global economy faces risks of inflation and runaway budget deficits in several countries, as they pursue efforts to stimulate national economies and provide safety nets through deficit financing (printing money). Already in the USA, the deficit has reached the trillion dollar mark – the highest level ever.
Food security
Because of the human and social fallout from the global economic crisis much attention was given to problems of hunger, malnutrition and poverty. To the surprise of many, the summit committed as much as US$20 billion over three years to agricultural investment in poor countries.
The emphasis on agricultural investment signifies a shift in focus away from the traditional “emergency food aid,” which development experts had long criticised for not having a long-term sustainable focus. President Obama has been credited for much of the success in shifting focus to farm investment in poor countries and away from emergency food aid. He committed the US to providing US$3.5 billion towards this goal.
Trade
As I have repeatedly argued, growth in global trade is indispensable for global economic recovery. As future columns will argue, resumption of the stalled Doha Development Round of trade negotiations is a critical component of successful recovery. The summit recognised this and agreed to try to complete the trade negotiations in 2010. In pursuit of this, commitments were given towards convening a WTO Ministerial Conference, before September this year.
Climate change – ‘Not enough’
There was an effort to do two things about climate change. One was to narrow differences over cuts in greenhouse gas emissions. The group aimed at a target of an 80 per cent cut by 2050. Neither India nor China agreed to their target of 50 per cent by 2050. Canada declared the goal “aspirational,” and along with Russia said it could not meet the target. The second effort was to increase funding for low carbon technology.
Both these efforts are geared towards a new United Nations climate change agreement, emerging out of the scheduled December, Copenhagen UN Summit, to replace the Kyoto Protocol. The world press has reported UN Secretary General Ban Ki-moon as describing the progress on climate change at the G8 Summit, as “not enough.”
Oil
Finally, rising oil prices over the years 2007-2008 helped fuel the crisis of commodity price inflation in energy products and food items that immediately preceded the present global economic crisis. Concern was expressed that, although oil prices had not regained the peak of that period (US$150 per barrel), rising prices as the recovery developed could de-rail the recovery. Discussions on “regulating energy markets in order to reduce volatility” took place, but this did not make progress, as two major oil-exporting G8 countries: Canada and Russia deemed it technically infeasible.
Next week I shall look at the G8 Summit in light of the just concluded UN Conference on the global financial and economic crisis.
