Since the 1980s, the role of emerging economies in the global economy has grown continuously. In 1999, the Finance Ministers and Central Bank Governors of the G20 met for the first time to manage the financial crises in Asia, Latin America, and Asia. The crisis demonstrated that the G7 alone were not able to handle a crisis of such magnitude.
The G20 Leaders’ Summit
The U.S. subprime crisis, which in 2008 escalated into the biggest global financial and economic crisis in more than 80 years, reiterated the need for policy coordination among the G20 countries. Drawing on the lessons learnt from the Great Depression of the 1930s, the heads of states and governments of the G20 countries met in 2008 to coordinate their fiscal, monetary and trade policy. In the 1930s, competitive currency devaluation and rampant protectionism had led the crisis, which lasted for years, to spread around.
Policy coordination across the G20 states allowed for stabilisation of international financial markets, maintenance of global trade to the best extent possible, and the initiation of regulatory reform. The coordinated national bank bailouts and economic stimulus programs as well as the G20’s commitment to refrain from protectionist measures were among the most important steps in overcoming the crisis.
Sustainable and Inclusive Growth
The mandate of the G20 is laid down in the Framework for Strong, Balanced, and Sustainable Growth adopted at the 2009 Pittsburgh Summit. Accordingly, the G20 is to focus on the coordination of fiscal, financial, and monetary policy and the promotion of structural reforms, foreign trade, investment, and sustainable growth. The Pittsburgh Summit designated the G20 as the “central forum for international economic cooperation.”
However, the G20 agenda is increasingly becoming broader. In addition to the core economic and financial policy agenda, it now includes issues such as development, Internet governance, digitalization, energy, climate, health, and migration. The summit agendas are determined by the priorities of each G20 Presidency. For example, the German G20 Presidency founded the G20 Compact with Africa to foster economic growth and development in Africa.
The G20 has both the necessary weight and legitimacy to play a central role in global economic governance. Its members are not only responsible for 89 percent of global GDP and around 60 percent each of global merchandise exports and imports, but also account for a good two-thirds of the world’s population.
Operating Principles of the G20
The G20 is an informal forum rather than an organization and holds no permanent secretariat. Instead, the rotating presidency – in close coordination with the previous and following presidencies (Troika) – is responsible for the G20 agenda, as well as the organization of working processes, meetings, and events. All decisions need to be taken by consensus.
The informal character of the G20 is both the weakness and strength of the institution. As its decisions are not binding under international law, its success depends largely on the willingness of its members to implement the joint declarations. On the other hand, it offers the necessary flexibility to find compromises between its members.
Once every year, the heads of state and government come together at the G20 Summit to summarize their joint decisions in the G20 Declaration. In addition to the Summits, various meetings of G20 ministers and G20 working groups take place several times each year. The G20 also works closely with international institutions and civil society. The G20 Presidencies are flanked by extensive civil society engagement. In eight dialogue fora – Business20, Civil20, Labour20, Science20, Think20, Urban20, Women20 and Youth 20 – social actors from all G20 countries actively participate in the G20 process.
G20 Argentina and Japan: Disappointing Results
Argentina took over the Presidency after Germany in 2017. Under the motto Building Consensus for Fair and Sustainable Development the summit took place in Buenos Aires in November 2018. However, the outcome of the summit was sobering, given the many conflicts on the international stage.
Argentina was followed by the Japanese G20 Presidency. The G20 summit was held in Osaka late June 2019. The summit communiqué once again fell short of the results of previous years. This underlines that international cooperation and multilateral solutions have become increasingly difficult. The G20 decisions on trade were particularly disappointing. The G20, while advocating strong, sustainable and inclusive growth, failed to take a common stance against protectionism. Similarly, the G20 confirmed the need for WTO reform, but did not name any concrete reform proposals. The results in the area of climate policy were also disappointing. Only the 19+1 format with regard to the Paris Agreement could be maintained.
The motto of the Saudi Arabian G20 Presidency, which started on December 2019 is Realizing Opportunities of the 21st Century for All. It aims to continue the work from Osaka and to promote multilateral consensus. If this will be successful is still anyone’s guess. The G20 summit will take place in Riyadh in November 2020. The next Presidencies of the G20 will be Italy (2021) and India (2022).