This week?s G20 summit in Seoul is the fifth conclave of heads of government of major economies since the global economic crisis of 2008. Unlike its predecessors, which were convened in dire fire-fighting mode, the latest summit?s official theme is governance in a ?post-crisis world?. This formulation refers to nagging doubts about whether the G20 will decline in relevance and significance as the Great Recession subsides in some regions.
Scepticism regarding the G20?s ability to steer the ship of the world economy is on the rise. Increasing instances of unilateral currency interventions and trade ?wars? have led some G20 members and external observers to conclude that multilateralism in this institution may be headed towards the same gridlocks as in the issue areas of free trade and climate change mitigation.
Continued global imbalances over savings rates, consumer spending, predatory export promotion and protectionism no longer seem malleable to G20-level multilateral smoothing. Regulation of the global financial sector has been patchy and uncoordinated, with the Damocles? sword of capital flight hanging heavily over G20 policymakers. Anxieties of sustaining each state?s own own economic and banking competitiveness have stayed the hand of stricter scrutiny and accountability of financial actors at the collective level.
Uneven economic recoveries among G20 members have suppressed the outward cooperative gene and reduced the bargaining space for compromise outcomes that rise above narrow inward pressures bubbling up within states. So frustrating has been the seeming failure of the G20 to iron out differences and go-it-alone tendencies that Brazil did not even participate in the preparatory ministerial meeting last month in Gyeongju, South Korea.
Top Turkish officials went on record that the G20 is not effective because it works on the basis of elusive consensus and lacks legal force to implement rhetorical commitments. China?s commerce ministry blandly stated in the run up to the summit that, notwithstanding frantic efforts at the G20, ?the currency war is intensifying? and that it will ?cast a shadow over the global economy next year?.
If international institutions are viewed purely from a functional or utilitarian perspective, then the jury is out on the G20 as an institution that may indeed wither away through a breakdown of group will as the immediate flames of the global downturn are no longer so alarming as to compel member states into thinking about the common good.
But the long view holds that institutions are reflections of international power configurations and not mere clever inventions driven by the momentary necessity of an exigency. The financial crisis was the immediate cause of G20?s elevation from a second tier finance ministers? club into a top grade heads-of-government summit. The ultimate cause was actually structural change in the global economy, wherein the share of non-G7 major economies in world output, trade and capital flows had risen to a point where no crisis, present or future, could be solved without the latter?s agreement.
The footprint of emerging economies is now so sizeable that they have to be kept inside the tent. The legitimacy and longevity of the capitalist world system is predicated on participation of these engines of growth in long-term global economic management. The G20 will still matter in the post-crisis world, because international institutions are sticky and find new raison d?etres after the original purpose is long gone. This is exactly why the North Atlantic Treaty Organisation (NATO) still exists 20 years after the fall of Communism.
The G20 will continue to be the most relevant intergovernmental institution in the economic sphere as long as the current structural distribution of power remains in its present shape. While critics have legitimate arguments about G20?s over-promising and under-delivery record, one cannot overlook the fact that it was this very institution which succeeded in shepherding simultaneous economic stimuli on a global scale in the last two years. The paradigm bridge between the old neo-liberalism and a new 21st century Keynesianism was built on the shoulders of G-20.
Only myopic and instrumental understanding of institutions leads to shorting the G20. For a stable and predictable future, there is no alternative to this unique potpourri of Global North and Global South.
The author is vice-dean of the Jindal School of International Affairs