The White House describes it as part of the process of "creating a 21st century international economic architecture” and analysts around the world have already hailed the G-20 as the worthy successor to the G8 group of leading industrial economies. But when the hype from Pittsburgh settles, one thing is clear: the absence of political coherence in the larger group of twenty means the Group of Eight will remain a useful platform for the United States to try and forge a common stand on key strategic issues, even if the G-20 assumes the mantle of global economic stewardship that the smaller, more exclusive group can no longer credibly or effectively discharge.
“Dramatic changes in the world economy have not always been reflected in the global architecture for economic cooperation”, a White House statement released shortly after President Barack Obama hosted a
banquet for G-20 leaders here Thursday night. “This all started to change today … [as] leaders endorsed the G-20 as the premier forum for their international economic cooperation. This decision brings to the
table the countries needed to build a stronger, more balanced global economy, reform the financial system and lift the lives of the poorest”, the statement somewhat grandiosely asserted.
At the time of going to press, the G-20’s final communiqué had not yet been released, though key elements of the U.S. formulation are believed to have been incorporated. The communiqué is also likely to endorse the continuation of global stimulus measures, the need for rebalancing consumption and savings in major economies, better financial regulation, as well as tying the remuneration of international bankers to the adherence of their banks to prudential norms.
For the U.S., Europe and Japan, the G-20 is a better forum to accommodate the rising aspirations of Brazil, Russia, India and China than the G8 because the majority of the larger group still consists of Western, OECD countries. A truly representative G8, on the other hand, would give the BRIC nations a collective voice roughly equal to the four largest Western economies. The G-20 brings for the U.S. an added advantage: the presence of China and India helps blunt the opposition of Europe to certain structural adjustments in the management of the world economy that America, on balance, favours, such as a change in the composition of the IMF board. Since Europe has a disproportionate presence, reducing its representation there in order to make way for the emerging economies is a low-cost way of getting the latter to support wider U.S.-led initiatives. But on political issues like non-proliferation, the G-20 would never allow the U.S. the kind of latitude it enjoys at the G8, despite the presence of Russia in the smaller grouping.
How does the size of the high table matter? A senior Indian official involved in the climate change issue told The Hindu that the presence of a large Western group which already has many of its positions worked out means a country like India is always forced to go in batting on the back foot. Traditionally, India has tended to serve as the bellwether for developing country positions on a wide range of issues. India works well with G-77-plus-China and is able to leverage this wider alliance during multilateral negotiations. But in forums like the G-20, the West fights back with formulations that seek to chip away at the developing country consensus. This might be harder to do in a smaller setting like a truly representative G8 or even the G8 plus Outreach-5, where India and China do not have to raise their voice in order to be heard.
A case in point is climate change, where the U.S., and to a lesser extent Europe and Japan, have simply refused to implement the prescribed norms of the UN Framework Convention on Climate Change for binding emission cuts. Yet, in the run up to the Pittsburgh summit, India and China, which have taken on voluntary mitigation targets, found themselves under pressure in the G-20 to “do more”.