Can Shinzo Abe resuscitate the G20 at the Osaka Summit?
A little more than a decade after the Group of 20 (G20) appointed itself as the custodian of the global economy, effectively a board of directors for international finance, we are reaching the same crisis point that began this journey. If the 2008 economic crisis was a function of loose regulation in the US, the 2019 crisis in the making will be driven by the US trade war against China, Chinese response to that trade war, and the crumbling economies of smaller nations, squeezed between the aspirational and settled powers of the West or the fast-growing and emerging powers of the East.
While the Osaka Summit that begins on 28 June 2019 has its task cut out, the G20 is revealing its non-binding architecture and unaccountability cracks. It is imploding from within. What began well and delivered results in being able to collectively ward off the global economic crisis of 2008 has now become an institution that serves little more than a networking dance playing to a frozen economic tune for leaders, finance ministers, central bank governors and their Sherpas. The G20 has lost not merely the plot but along with it the fig leaf of its legitimacy. The irrelevance of G20 has been slow, steady and certain, one Summit after another, one city at a time.
On 15 November 2008, exactly two months after the Lehman Brothers collapsed and the US economy went into a tailspin, first financial and next economic, the G20 got a new lease of life, nine years after it was formally created in 1999. The crisis was quickly labelled the ‘global economic crisis’, taking the attention away from the dodgy practices of US financial companies overseen by lax US regulators. Of course, when an economy as large as that of the US sneezes, the entire world catches a cold.
And when the cold came, it was bitter, with the world’s growth rates not merely slowing down but contracting. According to World Bank data, from 4.2% in 2007, the global GDP growth rate first slowed down to 1.8% in 2008, and finally contracted by 1.7% in 2009. In the same period, the US growth rates stood at 1.8%, -0.3% and -2.8% respectively. The year 2009 was the worst period for most large economies – China fell from 14.2% in 2007 to 9.4%; Japan from 1.7% to -5.4%; Germany from 3.3% to -5.6%. Through all this, India’s growth rate rose from 7.7% to 7.9%.
Led by George Bush’s lame duck government, the G20 suddenly became the fulcrum of economic responsibility. At the 15 November 2008 Washington Summit, leaders of 19 largest economies and the EU, together comprising the G20, made pledges – stabilise the world economy, use a mix of fiscal as well as monetary policy to stimulate demand, pump liquidity into the system. These were underlined by tight deadlines of delivery by 31 March 2009, two days before the next Summit in London. The 2 April 2009 London Summit powered the November 2008 summit, by more pledges to restore growth and jobs, repair the financial system to restore lending, promote global trade and investment and reject protectionism. Leaders pledged an additional $1.1 trillion financial support programme.
By now, the crisis seemed to be stabilising and here’s where the hijacking of G20 began. Hosted by the UK Prime Minister Gordon Brown, the London Summit, expanded the pledges to “build an inclusive, green and sustainable recovery”. The 25 September 2009 Pittsburgh Summit, while acknowledging the “sense of normalcy”, lost direction in paras 27 (greener, sustainable growth) and 29 (climate change). It was clear that G20 was slowly but surely allowing distractions to take charge of its primary mandate of ensuring economic stability and growth. Virtue-signalling was taking precedence over real issues.
By 12 November 2010, at the Seoul Summit, it was clear that the economic crisis mandate was lost on the leaders. Para 46 brought millennium development goals into the discourse, paras 64 and 65 introduced “global marine environment protection”, climate change and green growth continued in paras 66 to 68, while paras 69 to 71 introduced anti-corruption to the leaders’ pledges. Finally, it introduced a G20 Business Summit. It was clear that now lobbies from the not-for-profits as well as for-profits were in action, host governments had become tools in their hands, and the G20 Summits were degenerating into networking opportunities and populist fluff.
The 16 November 2014 Brisbane Summit, for instance, had a statement on the outbreak of Ebola in Guinea, Liberia and Sierra Leone, and urged the World Bank Group and the International Monetary Fund to make a further $300 million to stem the outbreak through a combination of concessional loans, debt relief and grants. The 16 November 2015 Antalya Summit had a statement on the fight against terrorism, even as China continued to support Pakistan’s terror against India at the United Nations (UN) and will likely prevent Pakistan’s blacklisting by Financial Action Task Force (FATF) in October. With every such expansion of G20’s mandate but opposite or inert action in the UN – the only body with the authority and legitimacy to enforce decisions – the G20 is losing its credibility. It is imploding from within.
Can G20 be salvaged? Yes, but not in the way we expect it to. Its economic mandate is now comatose, and member nations deal with one another bilaterally, trilaterally or more. Pledges made in serial G20 communiques with great pomp and show are broken before the party ends, as the G2 – the US and China – have displayed recently. The economic tension and the resultant barriers between the G2 impacts the rest of the 17 countries and the world collectively. Growth is the immediate casualty, financial instability will follow.
It will need a crisis for G20 to salvage itself on the economic front – that line of unity has broken. What it can do, however, is allow informal, non-binding meetings between leaders. The sidelines are gathering a greater force than the mainstreams. Prime Minister Narendra Modi, for instance, is expected to have three key meetings. First, a meeting with BRICS leaders, next two sets of trilaterals – one with US President Donald Trump and Japanese Prime Minister Shinzo Abe, the other with Chinese President Xi Jinping and Russian President Vladimir Putin. There could be bilaterals with Trump, Xi and Abe as well. As far as issues go, Modi is likely to bring terror from Pakistan on the table. Likewise, Xi will hold a bilateral with Abe, while expectations and hopes of Xi meeting Trump are also in the air.
The complexity of such meetings between leaders the world’s largest economies will mean engaging with layered agendas that seamlessly flow between trade, investments and finance on the one side and security, terror and defence on the other. It also allows the freedom to experiment with stances without being bound by treaties or being held to account by formal declarations. Such meetings enable an inception of ideas, a free flow of conversations. But to tell domestic constituencies that leaders of the 19 most powerful nations are meeting for sushi would leave a bad taste; hence, the need for agendas that are spiralling out of control.
While this can be the model of G20 Summits going forward, the Osaka Summit can bring a modicum of respectability by addressing the looming economic crisis staring us in the face. If Abe can steer the Summit and bring urgency in the economic engagements of the world’s largest economies before the crisis hits, this would be a successful summit in the traditional sense. Abe needs to persuade leaders that the task begun in November 2008 is not over – a slowdown is around the corner, a recession in some countries is a few quarters away. G20 needs to get its primary act together and prevent this crisis from overwhelming the economic landscape.
Otherwise, what citizens of G20 countries see is a high-profile junket for their leaders and their entourage, which create reams of literature that will talk about the virtues of opening up markets and reduce barriers, deliver executive action to the contrary – and leave people jobless, capital depleted and economic crisis lingering.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Gautam Chikermane is a Vice President at ORF. His areas of research are economics, politics and foreign policy. A Jefferson Fellow (Fall 2001) at the East-West ...
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