Consensus will be the key to the next G20 summit

Security forces prepare to stand guard outside the venue for the G20 foreign ministers’ meeting, in Nusa Dua, Bali, Indonesia, July 7, 2022. [Photo/Agencies]

The G20 Leaders’ Summit held in Rome in October and hosted by then Italian Prime Minister Mario Draghi produced a declaration full of promise to “address today’s most pressing global challenges”. today” and to “converge towards common efforts to better recover from COVID-19”. crisis and enable sustainable and inclusive growth” around the world. What a difference almost a year makes.

The promise of 2021 should not be underestimated. The leaders’ statement produced by the Rome summit included lofty promises to pay “special attention to the needs of the most vulnerable”. When it comes to global public goods, the 61-paragraph document covered virtually all the bases, from food security to the circular economy, from the environment to the international financial architecture.

This makes the events of 2022 all the more disappointing. The meeting of G20 finance ministers and central bank governors in Bali last month – largely overshadowed by the discord over the Russia-Ukraine conflict – produced no statement. And, as things stand, there is little reason to think November’s G20 Leaders’ Summit in Bali will go any better.

In terms of global crises, the Ukrainian conflict is only the beginning. In the United States, soaring inflation – which hit a 40-year high of 9.1% year-on-year in June – has spurred increasingly aggressive interest rate hikes by the US Federal Reserve. , raising fears of a recession. The midterm elections – which will be held just a week before the G20 summit – are adding to the uncertainty emanating from the United States.

In Europe, the struggle to escape the yoke of Russian energy dependence is taking place against a backdrop of soaring prices and supply disruptions. Meanwhile, the continent is experiencing record temperatures, wildfires and drought, just a taste of what is to come if the world does not act quickly to tackle climate change. And there are still plenty of political turmoil to contend with, with Draghi’s recent resignation as Italy’s prime minister as an example.

Emerging market economies, already reeling from the collapse of the Sri Lankan economy, are bracing for higher inflation, growing food shortages and increased over-indebtedness. JPMorgan notes that mounting pressure on the external and fiscal accounts is pushing a growing number of countries to seek help from the International Monetary Fund, or at least move in that direction.

Amid such deep and interconnected crises, one would imagine that global cooperation would be forthcoming. But there seems to be little appetite for compromise, especially at the G20 level.

The situation is very different within the G7. At 47, the G7 has been around more than twice as long as the almost 23-year-old G20, although it should be noted that the G7 has been the G8 for much of that history. Russia was expelled in 2014.

This underscores a defining characteristic of this older, smaller club: it includes Western democracies that have largely dominated the global economy since 1945.

In 2020, the G7 accounted for more than half of the world’s net wealth and about half of the world’s GDP, despite being home to only 10% of the world’s population.

This disproportionate economic power and this widely shared political ideology largely explain the behavior of the G7.

With so much in common – and with those who disagree being rejected – it’s no wonder the G7 manages to agree on more than the G20, which was created after the Asian financial crisis. of the 1990s to engage the largest developing economies.

With 19 countries and the European Union as members, the G20 represents more than 80% of global GDP and nearly two-thirds of the world’s population.

G20 countries are much more diverse, culturally and politically. They also typically have much younger populations. These factors help explain why many G20 countries operate over longer policy horizons. Meanwhile, escalating global crises have raised doubts about the neoliberal economic orthodoxy that G7 countries have long championed.

The host of the G20 this year is a representative of this more diverse group of major economies. Indonesia understands that strategic patience is key to building consensus among countries operating under different perspectives and stages of development. After all, it is a member of the highly diverse Association of Southeast Asian Nations, which emphasizes consultation and consensus. Most developing and emerging economies regard peace and stability as prerequisites for their continued development.

If this year’s G20 summit is to produce progress, its members, especially the G7 countries, must embrace consultation and consensus.

The ASEAN approach can be frustrating, but it has been essential in enabling compromise as well as progress. ASEAN is on track to become the world’s fourth largest economy by 2030, overtaking Germany and Japan.

Demographically, the G20 is a much more legitimate grouping – in terms of representing a diverse and complex world – than the G7. The G7 must therefore do a much better job of listening and collaborating with its non-G7 partners.

The “remnant” cannot force the West to act in their interests. Nor can the West ignore the rest and maintain economic and moral leadership. This year’s G20 Leaders’ Summit in Bali represents a crucial opportunity for the West to decide what future it is working towards.

Andrew Sheng, Distinguished Fellow of the Asia Global Institute at the University of Hong Kong, is a member of the UNEP Advisory Council on Sustainable Finance. Xiao Geng, president of the Hong Kong Institution for International Finance, is a professor and director of the Institute of Policy and Practice at the Chinese University of Hong Kong, Shenzhen. Opinions do not necessarily reflect those of China Daily.

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