Time to readjust the focus of the G-20 once more
There is now less than a week left until the G-20 Summit in St. Petersburg. This is the eighth time that 20 heads of state have come together. I was in Moscow the other day, attending a pre-summit conference organized by the Higher School of Economics and the University of Toronto’s Munsk Center for G-20 Research. Everyone seems to agree that the agenda next week cannot but touch upon the developments in Syria. The summit is happening at a time when the Syrian crisis is further escalating, and its host has rather strong and contrarian views about Syria. Does that mean that the G-20 summit is doomed for political reasons? I beg to differ. There is an opportunity here.
The G-20 is a forum for the leaders of the biggest economies around the globe to come together and discuss global developments. First of all, in turbulent times, it is good for these leaders to come together. However, it requires a well thought out agenda. Heads of states tend not to talk about technical details, but rather political priorities. There, I believe we have a problem. The problem is not an absence of topics on the agenda, but rather their increasing number, which have been rather liberally added in the last seven meetings. What is lacking is a concise taxonomy and a prioritization of the agenda items.
Secondly, let me focus on how the agenda has evolved so far. Yes, the G-20 has an evolving agenda and rightly so. That evolution process is in line with actual developments. The G-20 started right after the 1997 Asian financial crisis. Why? Remember the days after the Thai crisis? At that time, the understanding was that the crisis was the fault of “bad” policies on the part of the recipient, emerging countries. These had just scared the “innocent” portfolio managers with their “delinquent” economic policies. So the G-20 came out to save the day, making the crisis a major item on its agenda. That is when it started to engage in policy coordination at the periphery.
Thirdly, in the late 1990s and finally with the 2008 crisis, the mindset following the Asian financial crisis changed. The G-20 came to realize that there was a problem with the greed of portfolio managers after all. That brought the shift towards financial architecture issues, together with the old agenda item of economic policy coordination.
Fourthly, now for the first time in the last five years, the rate of growth in developed countries is to be higher than in developing countries. That is new, as Helene Frey noted at the Jackson Hole meeting of central bankers. In the past, we had the impossibility of a “trilemma” in economic policy making: you could not have free capital movements, fixed exchange rates and an independent monetary policy at the same time. Hence, if you would like to benefit from the savings of others, you had to forget about some national economic policy objectives. This has lately become a dilemma. You either control capital flows, or you let the Fed, the American central bank, manage your economy. And the Fed chair is not even elected to office! Any independence in economic policy making there previously was, is now in the past. That is where the G-20 needs to rediscover itself.
The time has come for the G-20 to focus on policy coordination on growth and jobs in the periphery. Otherwise, we will see even messier transformations and more non-state actors, which rank up the cost in human lives.