An increasingly integrated world economy requires a global hub and, in the absence of a complete overhaul of the United Nations (UN) and international financial institutions, the G20 is literally the only club in town. South Africa’s seat at this table is as important for its global positioning as its membership in the BRICS grouping of Brazil, Russia, India and China.
Although the G20 was created in 1999 at ministerial level, it was overshadowed by the G8 (consisting of the United States (US), Canada, France, the United Kingdom (UK), Italy, Germany, Japan and a recalcitrant Russia) until the realisation in Washington that its sub-prime mortgage crisis demanded a global response. President George W. Bush subsequently hosted the first G20 meeting at presidential level in Washington DC in November 2008. The G20 met five times in the 24 months between November 2008 and November 2010, the last time in Toronto, chaired by Canadian Prime Minister Stephen Harper. For a brief moment the G20 became a decision-making forum, central to designing a pathway out of the worst global financial crisis in almost a century. It did so by effectively coordinating the many individual policies adopted by its members and thus established its importance in terms of crisis management and coordination during an emergency.
Its subsequent role has been less impressive. The G20 has failed to live up to expectations as a replacement for the G8, yet it remains at the heart of shifts in global power. Its ambitious efforts at reforming the international financial system have met with very limited results. It has struggled to deliver on its 2010 summit promises on fiscal consolidation and banking capital. The global finance lobby has repeatedly demonstrated its ability to thwart every attempt to regulate financial flows, despite the volatility associated with the movement of large amounts of short-term funds. Even large economies such as Germany have become concerned about the lack of effective regulation of financial flows. Countries such as Iceland, the UK and Ireland, whose banking systems had to undergo painful recapitalisation, nationalisation and restructuring to return to profitability after the financial crisis broke, share these concerns.
The failure to effectively regulate global financial flows has led to efforts to reclaim national sovereignty through so-called host or home-country financial regulations, as national parliaments seek control over financial flows. The impetus for both can be found in the changing global order as it moves towards greater global balance.
The G20 represents a vision that the 21st century requires a coordinated and global response to pressing issues. For several decades various clubs such as the G7, the G8, the Non-aligned Movement, India, Brazil, South Africa (IBSA), BRICS and others have served as informal pressure groups, generally reflecting the continued north-south divide in global politics and wealth. The G20 is different. Its membership comprises a group of systemically important countries collectively comprising 61% of the global population and roughly 80% of global Gross Domestic Product (GDP). These proportions will not change radically for many decades to come.
At the start of the global financial crisis, many commentators in the developed world viewed the G20 as a sort of extended outreach platform that the G8 could use to build global consensus on their policies. China and BRICS changed these expectations by establishing a loose coalition with a distinctly contrarian view on many global issues, including on the role of the state in development and on finance. At the moment the BRICS grouping within the G20 has a collective GDP three times smaller than that of the G7, but the gap between the two lessens with each passing year and should close completely within two decades. Perhaps more importantly, economic growth within the G20 comes from BRICS (and other developing countries) rather than from the G7.
Numerous dynamics play out within the G20, but the position of the G7 versus BRICS is probably one of the more important to watch as they jockey and compete for support from other members such as Indonesia, Mexico, Saudi Arabia and Turkey. In some instances allegiances may appear obvious, but economic and political benefits pull in opposing directions, leaving policy makers with difficult choices.
At a recent meeting of G20 think tanks in Beijing, participants noted that if the G20 countries wished to build on their collective success in the management of the global financial crisis, they needed to focus on global trade and finance reform – matters that cut to the core of global economic governance. The concern is that key groupings – North America, Europe and BRICS in particular – are moving in different directions in response to the shifting power dynamics in an increasingly multipolar world.
This is perhaps most evident in the efforts towards exclusive trade agreements in the Atlantic and Pacific oceans. The US is key to both the Transatlantic Trade and Investment Partnership (TTIP) being discussed with Europe and the Trans-Pacific Partnership (TPP) being discussed with 11 other countries, including Japan. If successful, the TTIP and TPP could undermine the future viability of a global trade regime under the World Trade Organisation, such as the Doha Round. Although not isolated, China is party to neither, and the unspoken concern is that the two agreements are aimed at ensuring continued Western control of the global economy while constraining and containing a growing and increasingly assertive China by building a strong relationship between the Euro and the Dollar.
Currently Africa has neither the top leadership nor a forum within which it can discuss and debate how best to position itself during these changing times. This situation reinforces previous calls by the Institute for Security Studies (ISS) for the establishment of an A4 or A5 grouping of key African countries such as South Africa, Nigeria, Kenya, Algeria and Ethiopia that could consider and debate these matters regularly and in depth.
Jakkie Cilliers, Executive Director, ISS
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