India’s World- The Usefulness of G20
The 11th G20 summit of major economies of the world recently got concluded in Hangzhou, China in the midst of pessimism about global economic growth and prosperity. The economy of G20 countries accounts for more than 80% of the global GDP of the world. The group was created with an idea of reflecting the power of the so called emerging world as well particularly China and India. The initial meeting of the G20 was held in November 2008 right after the collapse of Lehman Brothers in Washington. The aim was to ensure that if all the big economies are pulled together, global growth could be preserved despite financial crisis. The common programme to do this was announced in its next meeting in London in 2009. However, there are claims that after the first two meetings, G20 has done nothing significant.
Analysis on G20’s usefulness:
It can be said that global economy lacks a global leadership and works only in times of crisis such as in 2008. G20 began as global economic super power kind of idea. The real issue is that when there is a crisis the solutions are anyway found by different mechanisms. It has however, expanded its agenda and gone beyond just the pure economics like climate change, sustainable development, terrorism, refugee crisis and many others. It is well known that the communiqué that comes out after such summits say heights more than what it actually reveals. Political undercurrents are not manifested in such meetings for example South China Sea might not be mentioned in the documents of the summit though it was mentioned in speeches.
Secretariat of G20 shifts from country to country and therefore, it is unlikely that it would impact a large number of countries apart from some individual nations. The plus point G20 has is that it compels local bureaucracies of the countries to at least think through and work out what other 19 countries are likely to come up with. In a way, it makes them slightly more globally minded than they would otherwise have been.
There are two sets of countries in G20 i.e. the emerging market economies and the advanced industrialized economies. Economies are driven by innovation and this has slowed down considerably in last few years. This has almost been zero in industrialized nations. Now, there is still a scope here for developing countries and therefore, India and China have become prominent in the last few years in world economy and everyone is turning to them. These countries need to talk to old industrialized nations somewhere and G20 seems to be a good platform for this.
The developed nations started talking of fair trade and the developing economies talked of free trade. At present it is in our interest to use these forums for maintaining pressure of the continuing relevance of free trade and liberalization. On a public forum, it is very difficult to go against the idea free trade although the developed nations privately do not favour it.
Chinese President said that the world economies still faces multiple risks and challenges including a lack of growth momentum and consumption, turbulent financial markets, receding global trade and investment. Trade and growth have a life cycle of their own up to some extent. In this case, the dialogue among the major players does give them an advantage to talk of some policies based on the fact the slow growth phase might stay for some time to come and chalk out a plan that may work for all of them together in the global markets. A kind of consensus if derived upon might be beneficial which can be implemented individually by all countries.
The global economic might may shift to China in the coming times but Americans still retain great dominance in terms of technology, economic, political and international agendas. US is neither going to vacate this space easily nor will be compelled to vacate it because there are many other players who in their own interest would prefer American supremacy politically although economic scenario might be different. In the recent years, the TTP and TTIP have been proposed by US. They are clearly meant to give US a greater leverage in global trade and contain China. These are attempts for setting benchmarks on intellectual property, investment protection etc. something which US could not get through WTO. These are meant not to promote trade but to control trade.
Structural reforms to raise productivity and output are major issues. In Japan, economics has not led to fulfillment of promises, big banks in US still have more control over economy and are more powerful, Europe has not been able to revive public investment and commodity exporting countries have not been able to diversify their economies. Structural reforms will meet a lot of local opposition. India’s fiscal position and balance of payments is good at present. So it depends on how a country manages its economy in the long term.
In a nutshell, though G20 is a big show but it needs to have some substance as well.