G0, G1, G8 and G20
As the world economy is trying to recover, the discussions at several Davos sessions Wednesday focused on the challenges brought about by the two different speeds of recovery between advanced economies and emerging economies, or the three speeds if one defines US as something in-between. There seems to be a strong agreement that to confront the major problems that we face today, including general inflation pressure, trade imbalances, food securities, commodity prices, volatile short-term capital flows and possible contagion of political risk events, we need better international coordination. Then the attention turned to G20. Is it an effective forum for such coordination?
The cynics like Ian Bremmer and Nouriel Roubini have been labeling the status quo as G0, where there is a lack of real leadership. Roubini further characterized China’s unwillingness of taking leadership on key issues as free-riding. But after several rounds of heated discussions on the role of G20 in one of the panel discussions, it is very clear that even the cynics agreed that the G20 has been making some progress in international coordination and that there is practically no other alternative.
A group of Young Global Leaders (YGLs) have been engaging with both Korea (last year’s G20 chair) and France (this year’s new G20 chair), to contribute to the G20 process. One of several recommendations coming from this work is to build on the key messages from the Seoul G20 meeting that took place in November, namely a) a renewed focus on development and growth, b) additional attention to inclusiveness given the fact that it is not practical for G20 meetings to include many more than the 20 largest economies, and c) a focus on implementation rather than pure intellectual debates. This YGL group, with expertise from a wide range of professions, has been in discussion with a non-G20 country and is exploring the concept of an advisory group to serve as a bridge between high-level G20 policy issues and this country’s particular development challenges and to become a sounding board for the policy-makers.
This modest potential contribution from the YGL Community will obviously not resolve the fundamental challenges of G20 and more broadly international governance, which has never been trickier. The 19th and 20th centuries were essentially dominated G1, UK and US respectively. In the 21st century, especially in the last two or three years following the financial crisis, we have observed a shift of economy weight and growth momentum from the north to the south, and from the west to the east. No one doubts that this shift will continue, but exactly how the shift will unfold will affect both the world’s economic recovery and international political stability. Whether the move from G8 to G20, together other adjustments such as the quota reform at the IMF is an adequate response to this power shift remains to be seen.
Kevin Lu is the World Bank Group's Multilateral Investment Guarantee Group's (MIGA) Director for the Asia-Pacific Region. In this capacity, Lu serves as the senior representative of MIGA in the region, manages relationships with key regional clients and partners, oversees regional business development activities, and runs MIGA’s regional presence in Hong Kong, Singapore, Beijing and Tokyo. Lu is a member of MIGA’s senior management team.