For both leaders and citizens of the G20 countries, this week’s summit in Cannes is about as welcome as a visit to an undertaker. Euro-zoned out, as most of us are by now, seeing presidents and prime ministers assemble at a moment of global crisis to issue bland communiqués and even blander group photos will tempt many to reach for their “Occupy Wall Street” signs and pitch their tents in the nearest town square. This would, however, be a mistake. For all its unwieldiness and amorphous sense of purpose, the G20 represents the beginnings of an understanding – as necessary as it is reluctant – that a global economy with new growth sources must have a new structure of governance.
Founded in the late 1990s in the aftermath of the Asia crisis, the G20 found its purpose at the 2008 Washington Summit when its members had gone through the experience of the Lehman collapse, and feared for their economic lives. Their minds concentrated by the threat of a cascading systemic crisis throughout the global banking system, G20 political and economic leaders coordinated stimulus programs and ensured that central banks injected vast amounts of liquidity into the global economy. Rising out of the ashes of the much-derided G7 meetings, this was a grouping that accounted for more than 80% of global output and two-thirds of the world’s population – and was yet able to take effective economic action.
With the likes of Indonesia, Turkey, South Africa and Saudi Arabia finally joining with China, Brazil and India at the grown-up’s table set by the Americans and the Europeans, this forum for economic cooperation has the potential – uniquely among global gatherings – to harness the power and interests of rising and rich countries alike. What keeps its strength potential rather than actual, however, is a stark fact: in many Western capitals the G20 is still seen more as a symptom of disorder in the global system than a solution entirely fitting for a new world of fragmenting capital, power, and ideas.
Before the G20 can become the force for effective coordinated action to address challenges both economic and political, the old powers need to get over their outdated sense of privilege. Rather than appearing as reluctant joiners of a coalition of the un-willing, they must understand that the price of a new global growth era is one of shared power, and shared rule-setting, among developed and developing countries. Preaching must be replaced with genuine partnering; lecturing with hard-headed, realistic dialogue that recognizes the position earned by those countries whose successful management of their economies earned them a position of virtual lender and investor of last resort to embattled Western countries.
And yet, we’re far from this realization at present. You’d have thought that the U.S. debt-ceiling debacle and the Eurozone’s endless cycle of half-measures declared and quarter-measures taken would have impressed upon Western leaders the urgency of finding new solutions to their economic difficulties, and the modesty to recognize the need for help in implementing them. You’d be wrong. Instead, they responded to a recent proposal from a number of emerging market countries to increase the firepower of IMF with a mixture of fear and arrogance. Seeing the power of their global foreign exchange reserves and sovereign wealth funds to serve as a definitive boost to Europe’s failed attempts to regain the confidence of markets, the rising powers had suggested allowing surplus countries to make ad hoc bilateral loans to the IMF, or contribute to a special purpose vehicle designed to support sovereign bond purchases.