G20 is too elite; There's a way to fix it: Economists
LONDON: The G20 claims to be 'the premier forum for international economic cooperation'.
But is it? As scholars of global economic governance, we are skeptical of this claim. Here are our main reasons. The G20 is insufficiently representative of the 193 member states of the United Nations plus the small number of non-member states. It is a self-selected group of 19 countries and the European and African Unions. It has no mandate to act or speak on behalf of the international community.
It has no transparent or formal mechanisms through which it can communicate with actors who do not participate in the G20 but have a stake in its deliberations and their outcomes. The growing tensions in the world make it more urgent to improve the efficacy of the G20. Firstly, because there is growing evidence of the loss of interest in global cooperation. Secondly, because rich states are cutting their official development assistance and are failing to meet their commitments to help countries deal with loss and damage from climate impacts and make their economies more resilient to shocks.
And thirdly, because rich countries are also reluctant to discuss financing sustainable and inclusive development in forums like the upcoming Fourth Financing for Development Conference or the UN, where all states can participate. They prefer exclusive forums like the G20. Here, after briefly describing the structure of the G20, we argue that its lack of representation is a major problem. We offer a solution and argue that, as chair of the G20 this year, South Africa is well placed to promote this solution.
What is the G20 and how does it function? The G20 was established in the late 1990s in the wake of the East Asian financial crisis. Its members were invited by the US and Germany based on a proposal from the Canadian government. Initially only finance ministers and central bank governors of major advanced and emerging economies were involved. After the financial crisis of 2008-2009 it was upgraded to summit level with the same membership.
A summit is held annually, under the leadership of a rotating presidency.
The group accounts for 67 percent of the world's population, 85 percent of global GDP, and 75 percent of global trade. The membership comprises 19 of the 'weightiest' national economies plus the European Union and the African Union. The 19 national economies are the G7 (US, Japan, Germany, UK, France, Italy, Canada), plus Australia, China, India, Indonesia, Republic of Korea, Russia, Turkey, Saudi Arabia, South Africa, Mexico, Brazil, and Argentina. These countries are permanently 'in'. The remaining 90 percent of countries in the world are excluded unless invited as 'special guests' on an ad hoc basis. Representatives of a select group of international organizations including the International Monetary Fund, the World Bank, the Organization for Economic Cooperation and Development (OECD) and the World Trade Organization also participate, together with those from some UN entities.
A solution
We think that the governance model of the Financial Stability Board offers a solution. The Financial Stability Board was established under the umbrella of the G20 in 2009. Its job is to coordinate international financial regulatory standard-setting, monitor the global financial system for signs of stress, and to make recommendations that can help avert potential financial crises.
It is also an exclusive club. Its membership consists of the financial regulatory authorities in the G20 countries plus those in a few other countries that are considered financially systemically important.
However, unlike the G20, the Financial Stability Board has made a systematic effort to learn the views of non-members. It has established six Regional Consultative Groups, one each for the Americas, Asia, Commonwealth of Independent States, Europe, Middle East and North Africa, and sub-Saharan Africa. The objective is to expand and formalize the Financial Stability Board's outreach activities beyond its membership and to better reflect the global character of the financial system. — Reuters
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