The leaders of the G20 nations will gather in Hamburg on July 7-8 to discuss how to tackle the challenges of our age.
When Germany took over the G20 presidency in December, it officially announced the priorities of the international forum for 2017, including three pillars: building resilience, improving sustainability, and assuming responsibility. The first area covers financial development, trade, investment and employment, aiming to increase the stability and resilience of economies. The second and third areas focus extensively on development issues, including energy sustainability, climate change, health, empowering women, digitalization, global peace, and food security as key issues to be put on the discussion table.
The German 2017 G20 presidency is ambitious. Its success would be a major step on the road to shaping a G20 agenda, which could serve as a source of impetus and momentum for the implementation of the 2030 UN global development agenda.
The world has become more interconnected and interdependent, not only bringing a number of benefits for development, such as expanded trade and capital flows, but also propagating shocks for development, from the country of crisis origin to the rest of the globe, especially the most fragile countries, destabilizing their economic, political and institutional structures and creating a widespread sense of insecurity in society.
Today’s global economy is still operating in the shadow of the 2008-2009 financial crisis
Today’s global economy is still operating in the shadow of the 2008-2009 financial crisis. Advanced economies are generally recovering, while emerging and developing ones have experienced slowdowns in their pace of growth, and are grappling with difficult questions of how to reform and upgrade their economies, enhance resilience from external risks and avoid the “middle-income trap.”
Many emerging economies currently face urgent development challenges such as severe air and water pollution, rising inequality and grinding poverty. The rise of global challenges is accompanied by a fragile and fragmented global order. While the financial crisis and resulting economic instability highlighted the need to include key emerging economies in global economic management, this awareness has not translated into clear institutional change, leaving the traditional global economic governance architecture largely the same.
The G20 is the only platform that has cropped up to reflect the above-mentioned needs. It was elevated to the summit level on the heels of the 2008 global financial crisis, in order to elicit a more effective global response. This can be considered as a milestone moment since it signified a major qualitative change to the global governance system.
The Group of G20 accounts for around 85 % of the world’s economy and more than half of the world’s poor population. The G20, therefore, represents a natural bridge between developed and developing countries and is one of the most effective platforms for pursuing inclusive and sustainable development. With the diversity of its members, the G20 has a feature for different voices to be heard on global economic governance issues.
The G20 currently holds power and influence over both the global economy and national economies. The consensus rule in the G20 decision-making process provides an opportunity for all member countries to be equal, to use all of the G20’s advantages and its format to incorporate national interests in final decision-making processes. This unique structure or format is showcased, when forming coordinated economic policy for all countries, developed or developing alike. Indeed, the G20 played an essential role in coordinating a global stimulus package and strengthening financial regulation following the financial crisis.
However, the G20 is still far from perfect. There have been doubts whether the G20 can successfully transform itself from a “crisis committee” to a long-term steering committee for the world economy. Concerns have also been expressed about the effectiveness of the G20 as an informal network and for its lack of strong leadership. This is especially so given the emerging tectonic shift in the global order of power, associated with the “rise of the South” and the inward-looking policies of some major developed countries such as the UK’s Brexit and the US’s “America first” policies.
On the one hand, the influence of emerging and developing countries, such as China, India, and Russia, in the global economy has tellingly increased. The trade volume of developing and emerging countries has risen quickly in the global rankings. In the 1990s, the top 10 trading economies were all developed economies; however, over the last decade emerging economies have become significant exporters. Before 2000, developed economies provided 91% of FDI while developing countries provided just 9%. Since 2012 emerging and developing countries have provided about one-third of global FDI.
On the other hand, Trump’s notion of “America first” to some extent has led to the loss or decline of the US’s international influence. Last month, after Trump’s withdrawal from the Paris climate accord, China and the EU jointly reaffirmed their role as leading supporters. It used to be imperial Britain that constructed and financed African railways; however, some new mega-railways, built and funded by the Chinese, have been inaugurated in recent years. Proud of acting in different ways as constitutional role models for the rest of the world, some major developed countries might be uncomfortable with the pace and nature of global changes and have found their lost or imperiled greatness even harder to bear.
Can the G20 enable solutions to global challenges? The answer very much depends on the stances taken by each party, especially developed countries. The interests of the global sustainable development call for profound reforms to improve the efficiency of global institutions. The need to strengthen and develop inclusive, transparent and accountable institutions is more important and pressing than ever, as is the inclusion of the voices from the developing world in the global decision-making process.