Author: Il SaKong, Chair Korea Summit Coordinating Committee

Since its inception in the mid-1970s, the G7 acted as if it were the informal global steering committee for global economic and financial issues. But over the last couple of decades many considered the G7 lacked political legitimacy because it did not include the major emerging players in the world economy. These critics rightly claimed that although the G7 was only an informal global steering committee, it needed to reflect the shift in global economic power that has taken place over recent decades.

Last November, in the midst of the unprecedented global financial and economic crisis, the G20 Summit—instead of G7—was held in Washington. Read more…

Author: Barry Eichengreen

One of the least unanticipated but potentially most momentous consequences of the Great Global Credit Crisis of 2008 is the coup staged by the Group of Twenty.

The G20 has seized power from the G7/8 as the steering committee for the world economy. If you didn’t believe this before, just compare the attention garnered by the G20 summit last November with the muted response to the G7 finance ministers’ meeting in February in Rome.

R.I.P, G7

No one contemplating global financial reform thinks that the task can still be organised, much less executed, within the cosy confines of the G7. No one who seeks to reform the IMF and the World Bank thinks that the solution can still be hashed out by the G7. No one who is serious about coordinating a global monetary and fiscal response to the deepest recession since World War II thinks that this is something that the G7 can engineer. Whether the task is developing ideas, reaching consensus on their desirability, or moving from ideas to implementation, the G20 – which has working groups active in all these areas – is where the action is.

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Author: Hadi Soesastro, CSIS, Indonesia

East Asian members of the G20 must participate strategically in this emerging global forum. They need to make sure that the G20 can produce policies and actions that will help bring the global economy out of the current crisis as soon as possible. Existing international institutions have been helpless in dealing with the issues the world now confronts and are in dire need of major reforms. There is now no better forum than G20. Essentially, it will act as a ‘steering committee for the world economy’, as Barry Eichengreen aptly said of the G20, and this forum should now replace the G7 or G8 for good.

Yet the G20 is still very fragile. In part, this is due to its ad hoc nature. But it also suffers from problems of legitimacy in respect of how its membership is being determined. The problem has deepened with the inclusion of a few additional participants at the coming London Summit: why they and not others? The European members of the G20 are facing the greatest challenge from fellow Europeans on this issue although the EU already has a seat at the table. 

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Authors: Rajiv Kumar, Mathew Joseph, Karan Singh (ICRIER)

India had a dream run of five years during 2003-08 as the GDP growth averaged nearly 9 per cent annually, the best run over five years ever! The economy began to slow from the middle of 2007-08. A 9 per cent growth apparently could not be sustained: India’s potential rate of growth has been estimated by more than one agency to be around 8.5 per cent. As the economy overheated, the central bank tightened credit gently initially but more sharply since 2006-07. The economy began to slow down. Some of us had argued that the tightening was going too far and was an over-reaction to global inflationary pressures. No one foresaw the external shock arising from the global crisis which began with the financial meltdown in the US.

Now the interesting question is what would India’s growth rate have been in response to the policy measures without the global crisis as compared to what it is likely to be in the context of the on-going global crisis.

Our analysis suggests a sharp collapse in Indian growth this year. India would have grown 7.5 per cent (a slowdown from 9 per cent in 2007-08), had the global crisis not occurred. The global crisis is likely to bring India’s growth rate to below 6 per cent in 2008-09.

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Author: Andrew Elek

The financial crisis of some of the world’s richest economies has catalysed a long-overdue transformation in the oversight of global affairs. The November 15, 2008 summit was the first where emerging economic giants discussed problems and potential solutions as equal participants with the industrial leaders.

In a substantial communiqué, there was consensus on a wide range of issues which need to be addressed to speed recovery from the crisis and to make it possible to sustain global improvements in living standards in the longer term.

Importantly, the meeting also overcame the resistance to reforming the governance of the IMF and the World Bank. With adequate representation from emerging economies, it may become possible to boost the resources of the IMF to deal with future crises. The hope is that the IMF will achieve the legitimacy needed to offer advice to strong as well as weak economies, with some expectation of it being heeded.

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Author: Geethanjali Nataraj, NCAER

As developed countries struggle to recover after the global recession and try to confront the looming sovereign debt crisis in Europe, big emerging markets are now driving global growth.

Given the slow down in developed countries, emerging economies are trying to boost domestic demand to sustain growth — and this is particularly the case in China. Read more…

Author: Andrew Elek, ANU

The World Bank recently published a valuable research paper (World Bank Policy Research Working Paper 5940 by Justin Yifu Lin and Doerte Doemeland) which presents the evidence needed to justify a globally coordinated initiative in carefully selected infrastructure investment.

A G20 initiative in 2012 could make this happen. Read more…

Author: Suman Bery, IGC

The Indian government presented its National Manufacturing Policy (NMP) to the nation in early November.

Presumably, the announcement was timed to demonstrate that reform is alive and kicking before parliament reconvenes later this month. With the final text now available on the Department of Industrial Policy and Promotion website, it is possible to take a considered view of the policy’s goals, the means proposed to achieve them and the probability of success. It is also possible to speculate on the unintended consequences and possible collateral damage.

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Author: Jacob Kierkegaard, PIIE

The G20 Summit in Cannes probably made its most important contribution to global financial stability and economic growth before it even commenced.

The summit, held 3–4 November, became a deadline for European leaders to deal decisively with the economic and financial crises in the euro zone. Read more…