Source: Journal of Globalization and Development

The G20 summit of heads of state, a creature born of the financial crisis, has appointed itself as the preeminent forum for global economic policymaking. Notwithstanding its original design to curb food price volatility, reform the global monetary system, and improve the working of the G20 itself, the group’s latest summit in Cannes, France in November 2011 was hijacked by the prolonged Eurozone financial crisis. An enormous source of turbulence in the world economy, Europe’s problems are the world’s problems and should be on the G20 agenda. But the Euro crisis also diverted the G20’s focus from its long-term imperative: ensuring sustained global economic growth. Instead, the outcome of the summit was inconclusive, vague, and thus modest: the group agreed in principle to increase the resources of the International Monetary Fund to respond to Europe’s woes; China modestly strengthened its pledge to move towards exchange flexibility to assuage critics of its currency manipulation; and the leaders yet again expressed their commitment to the Doha trade round.

The French summit epitomizes the difficulties in making sweeping yet specific decisions in a large, diverse group of nations with divergent interests. Comprising ten emerging markets, nine advanced economies, and the EU, the G20 reflects the reality of a world economy where developing and advanced countries are starting to have roughly equal economic weight. By including the largest emerging markets, it has the potential to fill a large gap in global economic governance that its predecessors – the G4 launched by US Treasury Secretary George Schultz in 1973, and the subsequent permutations, G5, G7 club of rich countries, and the G8, which also included Russia – were not built to bridge. The G7 helped the liberal democracies prevail in the Cold War and worked to enhance global macroeconomic stability, while the G8 sought to engage Russia after the collapse of the Soviet bloc. But with the onslaught of economic globalization and the rise of emerging economies, both groups are outdated as venues for global policy coordination. The G20, on the other hand, looks and feels like a 21st century forum.