2016: The year China kicked G-20 in the butt

The day after the G-20 Hangzhou Summit in China, I read an article in the Jakarta Post. “The G-20 needs a kick in the butt” was its title. The author, the veteran Singaporean diplomat Kishore Mahbubani, was asking G-20 countries to leave their 19th century-esque national trenches, finally arrive in the 21st century and start thinking globally. Having read the G-20 Hangzhou Communiqué and all the other relevant documents on the same day, I think that China followed Mr. Mahbubani’s wise counsel and gave the G-20 a rather hard kick in its (rather voluminous) behind. This comes after a year of transformational leadership, in which China set the G-20 on a course to become a 21st-century mechanism. It is significant that China, which up until recently was thought of as a developing country, was the country to achieve this.

During the 2008 global financial crisis, the G-20 saved the world order. Its high-level financial coordination mechanism managed to avert a global meltdown, but it could not jumpstart growth. In six out of the nine years since then, global growth has been lower than the 1990-2007 average. Low growth results in bad politics. Bad politics, from the United Kingdom to the United States, Germany to France, Austria to Poland, is all about digging deeper national trenches in a very 19th-century kind of way. It is about eroding the achievements of the post-war liberal order. I see two avenues of policy taking shape: an inclusive one and an exclusive one. If the G-20 cannot reinvent itself and jumpstart growth, we will see the exclusive line of policy getting stronger.

Why has the G-20 not been successful in jumpstarting growth so far? Managing crises and orchestrating growth are two qualitatively different things. In the case of the former, you are asking countries not to do anything new to change the global order of things. “Just keep things as they are,” the G-20 says, “no capital account restrictions, no trade barriers, etc.” But when it comes to policy cooperation for growth, you need to ask countries to do things they have never done before – things like structural reforms. Not only does that sort of thinking presume a globalist mindset, it requires an active breach of whatever national trenches remain. That’s an immense difference and quite a task, if you ask me. 

In 2016, the G-20 ingeniously crafted a new incentive-compatible agenda framework, asking both developed and developing countries to come out of their national trenches. That’s how I see this new innovative growth framework. It’s all about knowledge sharing ahead of a new industrial revolution, sometimes called “the Fourth Industrial Revolution.” The transfer of new technologies to developing countries, the diffusion of these new technologies within countries and securing intellectual property rights will form the basis of the new policy cooperation for growth. This is something profoundly new that focuses the growth agenda that makes structural reforms easier everywhere. It’s very tangible as far as G-20 decisions go. It’s all about sharing humanity’s knowledge base more efficiently and more collectively. The world has been in need of an incentive compatible framework to move everybody out of their national trenches and participate. Now we have it, in principle. The Chinese G-20 leadership has done it.

I see two kinds of leadership when it comes to the G-20 agenda: operational and transformational. Transformational leadership is about providing a new frame for the G-20 agenda. Operational leadership has nothing to do with changing the framework, it is more about cooking the set menu to varying degrees with accuracy and zeal.

The G-20 was elevated to the leaders’ summit level during the U.S. Presidency of 2008. Back then, the Americans needed to turn the group into a real crisis-response mechanism. In the Hangzhou Summit this year, as President Xi Jinping noted in his opening remarks, the G-20 was set to become a mechanism of “long-term international economic governance that shapes medium-to-long term policies.” Following Churchill here, let me state that “this not the end [of the G-20], this is not even the beginning of the end [of the G-20], this is just the end of the beginning [moving toward a more inclusive and operational G-20].” Now the world needs a zealous pedant to make the new framework operational. That’s what German leadership needs to do in 2017, and what better person to do that than Angela Merkel?