Originally, the group of 20 leading industrialized and emerging countries (G20) was a body that brought together the finance ministers and central bank chiefs of the systemically most important countries to cooperate on macroeconomic issues and fiscal policy. It was founded in response to the shortcomings in dealing with the Asian crisis of the 1990s. Since 2008, the heads of state and government of the G20 countries have been meeting regularly to seek answers to the main challenges of our time. The first main challenge was to overcome the economic and financial crisis (2008–2010) as, for a short period, the global economy threatened to slide into a deep depression.
Since then, the agenda of the G20 has constantly expanded. The world is becoming increasingly interconnected. Fewer and fewer issues can be resolved by countries unilaterally. Regional political tensions and conflicts, terrorism, Ebola, the migrant crisis and climate change are among such issues.
Positive Contribution to Crisis Management and the Emergence of New Challenges
Many commentators have taken a positive view of the contribution of the G20 to dealing with the financial and economic crisis. Others point at the many issues on which the G20 has not sufficiently delivered: for example the quota reform of the International Monetary Fund, the Doha Round of the World Trade Organization, and the promotion of growth and employment worldwide.
The G20 is confronted with growing challenges whose consequences are far worse than what happened in 2008: sluggish economic growth worldwide, high unemployment, especially among young people, and technological upheavals have already caused considerable tensions in many of our societies. Ever more people have doubts about the benefits of globalization; pessimism and populism are on the rise. Thus, it is not surprising that the governments of the G20 countries are finding it increasingly difficult to resist the urge to pursue policies that are domestically oriented – sometimes even at the costs of other nations.
What has the G20 achieved so far and in which direction does it develop?
Within the framework of formal and informal global institutional arrangements, the G20 has evolved as an important forum for international economic cooperation. It complements the Bretton Woods institutions as well as diverse specialized and regional groups such as the G7, the Asia-Pacific Economic Cooperation and the BRIC states. An advantage of the G20 is that it recognizes the importance of the role played by emerging and developing countries.
The G20 has delivered several success stories not only in political crisis management but also in tackling longer-term challenges. This can best be observed in two phases: from 2009 to 2014 and from 2014 to the present day. In the first phase, the G20 concentrated on the crisis and restoring the stability of the global financial system. It committed itself to free trade and combatting protectionism. In the second phase, the focus is on the revival of global growth and job creation.
The main achievement of the first phase was that the G20 was able to prevent a global recession and to stabilize the financial system. The most important development in the second phase was the voluntary undertaking in 2014 to increase the combined gross domestic product of the G20 by 2 percent within five years (up to 2018). This is to be achieved through a series of “action plans for growth”.
International organizations have estimated that if all political commitments were to be met, around 50 percent of this target could be achieved. While progress would thus fall short of expectations, the coordinated pledges would nonetheless pave the way for a contribution to growth that would otherwise not have been made.
Challenges facing the German Presidency in 2017
The summit that took place in Hangzhou in September 2016 under the Chinese Presidency was very productive as regards content. A challenge for Germany is to press ahead with the “Hangzhou Consensus”, which German Chancellor Angela Merkel has already confirmed will happen. At the same time, topics to which insufficient attention was paid during the Chinese Presidency must be added to the agenda. In view of the sluggish economic growth worldwide, the sharp differences in regional growth rates and prospects and the high level of crisis susceptibility, above all, structural reforms should be put back on the agenda of the G20. And the group should also focus on climate change and the potentially disruptive effects of technological progress.
Robert Milliner is Special Adviser for Germany’s B20 Presidency. He was the B20 Sherpa for Australia and a member of both China’s B20 International Cooperation Committee in 2016 and the Steering Committee for Turkey’s B20 Presidency in 2015. He is Senior Adviser for International Affairs at Wesfarmers Limited, Senior Adviser at UBS and Senior Adviser to the Secretary-General of the International Chamber of Commerce of Australia.