No. 4: April-June 2012

Miroslava Filipović


Academic Foresights

How do you analyze the present situation of the G20?

Back in 1999, the finance ministers and central bank governors of the 19 most influential countries (‘systemically important’) and the European Union decided to establish a more permanent forum - the Group of Twenty (G20) - to deal with progressively interconnected financial flows. Since 2008, this group has not only encompassed finance officials and governors, but also features heads of states summits. It is not a surprise that the year 2008 witnessed the beginning of a new structure to be developed for the purpose of international economic-policy cooperation. As the crisis consequences started to spread well beyond financial sectors and the US, the leaders of those countries (and others as well) have become increasingly aware that single-state actions in containing the crisis effects would not suffice. The financial crisis of 2008 might have been a direct motivation to start a global political interplay regarding regulation, but it was also a unique opportunity for numerous actors to start pressing their own agenda vis-à-vis a global economic (and political) order. The processes of global political deliberations were directed to several culminating points: the G20 summit meetings in Washington (2008), London and Pittsburgh (2009), Toronto and Seoul (2010) and Cannes (2011). Nevertheless, the G20 agenda has significantly evolved since the first G20 Summit in Washington, to include issues from other domains, such as development, energy, environment protection, food security, etc.

The most significant advances have been made in the areas of national financial regulation (bank supervision and capital base) and emergency financing (as a complement to central bank financing). Also, certain improvements have been made regarding the coordination of national economic policies in order to avoid (as much as possible) policies with adverse and harmful effects on other countries. This can be attributed less to a developing common view on the global economy among the G20 members and more to harsh economic consequences of deteriorating trade and capital flows. Substantial reforms of the existing monetary system and proposals for creating an international debt resolution mechanism have not received proper attention. The issue of coordinating the core of any macroeconomic policy, i.e. its fiscal mechanism, on the global scale has met significant resistance. But most important, the issues of development and more appropriate inclusion of small- and medium-sized developing countries are where the least advances have been made.

In your opinion, how will the situation likely evolve over the next five years?

As Jordana and Levi-Faur describe (1), recent global economic developments have emphasised an expansive use of the notion of regulation, broadening to include all mechanisms of social control (in contrast to a narrow understanding limited to specific forms of governance with authoritative rules, monitoring and compliance enforcement). From this perspective, a new regulation for global problems is characterised by partially voluntary agreements, the lack of strong monitoring and enforcement rules and obvious disregard for the concept of national sovereignty. Kobrin (2) attributes the rise of new regulatory arrangements in today’s world to ‘patchwork’ political structures: in an interdependent world, actors stretch across fluid boundaries, adapt themselves and liaise with other actors in order to achieve their goals. As interdependence increases, the need to coordinate actions across states and regions also increases; hence, there is a greater need for international regulation. It is then reasonable to expect further strengthening of international structures and regulatory bodies in the years to come.

However, not all cross-border organizations/fora/structures will have the same opportunities. Those with more adaptive skills and wider resources (in the broadest sense), in line with fast changing global economy, will see more chances to impose their norms and rules. The G20 certainly belongs to that category. Its agenda conversion not only involved changing agenda items (e.g., from private actors’ risk taking to sovereign financing) and rankings (e.g., from the prominence of financial regulation in 2008 to that of employment in 2011), but also changes to the agenda’s comprehensiveness (from financial regulation in 2008 to monetary and fiscal coordination in 2011), its geographic focus (from the US in 2008 to Europe and the East in 2011) and modes of the Group’s functioning (from the top leaders to specific ministerial meetings). One might expect that in the years to come, the G20 will further develop its own internal structures, corresponding to major issue-areas in the world economy. In addition, it is likely that certain issues which have so far met significant resistance (e.g. inclusion of small- and medium-sized developing countries, substantial changes in the voting system of numerous international organizations, exchange-rate management, and fiscal discipline) will become unavoidable items on the agenda.

What are the structural long-term perspectives?

The G20’s current status as a discursive organisation is in sharp contrast with the more strongly decisional types of other intergovernmental actors, such as the IMF, but may shed more light on the future of multilateralism. Following the arguments of Muller and Lederer (3), the power and activities of the G20 may point to a new developing form of managing global affairs, with specific actors, instruments and practices. Hence, this organization may be the centre point from which new, soft-law instruments of international financial and economic regulation would appear.

Despite all the criticism, the G20 has managed to induce numerous and somewhat coordinated national policy responses to the crisis. There are many possible reasons behind such an improved level of measures implemented in accordance with the summit’s declaration. One of the reasons may be the severity and outreach of the crisis in today’s world of rising interdependence. Another factor may be related to the institutional development of the group itself in terms of better profiling of its role: from a financial crisis management group (its primary role in 2008) it is being transformed into a steering committee to propose design for new global economic order.

Even though G20 efforts to coordinate policies and agree on regulatory common denominators have to be welcomed, the present level of discrepancy among national/regional agendas is still too significant for longer term and sustainable effects on the world economy to be foreseen. Still, some light can be shed on the G20 long-term perspectives if the Cannes final document is analysed compared with the G20’s previous ones. One of the most striking differences is its repeated reference to a great number of international organisations, such as the IMF, World Bank, ILO, OECD, IOSCO, BIS, etc. One may understand this as a new ‘reality-check’ for the G20: although it has positioned itself as a global economic-policy centre and comprises 90% of world GDP, the issues may be beyond reach of such an informal, minilateral group. So, from a longer view, the G20 will certainly set the tone of ‘world economic policy’, but probably as one of the actors in multi-nodal world politics.

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  1. (1)Jordana, Jacint and David Levi-Faur (eds.) (2004). The Politics of Regulation: Institutions and Regulatory Reforms for the Governance Age, Edward Elgar and the CRC Series on Regulation, Manchester: The University of Manchester Press.

  2. (2)Kobrin, Stephen, J. (2002). “Economic Governance in an Electronically Networked Global Economy”, in: Hall, R.D. and Biersteker, T.J (eds.), The Emergence of Private Authority in Global Governance. Cambridge: Cambridge University Press, pp. 43-75.

  3. (3)Muller, Phillip S. and Markus Lederer (2003). “Reflecting on Global Governance: Demarcating the Politics of Global Governance”, in: Lederer, Muller (eds.), Challenging Global Governance: A Critical Perspective, ELRC/ CPOGG workshop at Harvard Law School, October 2003.

Miroslava Filipović is Professor of International Economics and Macroeconomics at the EDUCONS University in Sremska Kamenica, Serbia. She has got her PhD in International Relations from the City University, London. She conducts research and publishes in the area of International Relations, global politics and banking, international regulation and transition.

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