We need the G20 – but what is it for?

If the G20 did not exist, we would have to invent it. Some would counter that the world is so divided that this grouping is unworkable. Yet this fact merely makes the G20, or something like it, even more essential: one does not have to talk to people one already agrees with. A still stronger justification for its existence is that we are no longer able to live in isolated pockets: the health of our planet and our economy depends on our co-operation. Since global challenges are more pressing than ever, so is the need to work together in such a group.

The question then is not whether we need the G20, but how best to use it. How well did the Indian government lead it? What lessons should we draw from this experience for its future?

Understandably, the Indian government used the G20 as a celebration of India and its rising role in the world. It also succeeded in gaining acceptance for full membership of the African Union. The latter is indeed a step towards greater legitimacy for the G20.

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A more important issue, however, is whether the world has been brought closer to resolving some of its biggest challenges. Here there are three obvious concerns.

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The first is division. The absence of Vladimir Putin and Xi Jinping from the recent summit in New Delhi underlines that we live at a time of conflict. The existence of a rogue nuclear superpower is a huge threat to our future. Just as worrying is the apparent decision of the Chinese leader not to engage with global peers directly, except in institutions China dominates, such as the Brics. His absence, too, bodes ill for the management of our shared future.

The second is overload. As I noted in May, the communiqué of the extremely successful G20 meeting in London in April 2009 was just over 3,000 words. It also focused on stabilising the financial system and rescuing the world economy. Crisis concentrated the mind. It is inevitable that the current approach of world leaders is more diffuse. But were all the 13,000 or so words of the Delhi summit’s declaration needed? It covers almost everything one could possibly include. How is progress on such a sprawling agenda to be monitored and assessed? The answer, as we know from previous G20 efforts, is that it cannot be: much of it will wither away.

The third is hypocrisy. We all know that leaders do not mean what they promise. The declaration states, for example, that “We reaffirm our commitment to zero tolerance for corruption”. The reality, however, is that the G20 contains some of the world’s most corrupt countries. The declaration states, too, that “we ... remain committed to enhancing women’s full, equal, effective, and meaningful participation as decision makers for addressing global challenges”. But remember that Saudi Arabia is a member.

Hypocrisy, one might respond, is the homage vice pays to virtue. But that is no great comfort when it even concerns the most important global issues of today – rising temperatures and the combination of worsening poverty with unmanageable debts in many developing countries. The communiqué states, for example, that “We recognise the need for increased global investments to meet our climate goals of the Paris Agreement, and to rapidly and substantially scale up investment and climate finance from billions to trillions of dollars globally from all sources.” Yet does this mean they are going to do anything relevant about it? After all, the very next sentence promises to scale up “finance, capacity building and technology transfer on voluntary and mutually agreed terms” (my emphasis). That “voluntary and mutually agreed” already suggests that nothing much is going to happen.

By far the most important contribution of the Indian presidency could still be the commissioned reports on strengthening finance for development and the environment, prepared by an expert group under Lawrence Summers of Harvard University and NK Singh, a distinguished Indian public servant. The first of these reports was published at the end of June. A second is supposedly due later.

The reality behind these reports is that the world needs to increase investment massively if it is to meet its development and environmental goals, as it must. A huge part of all the new investment has to be in developing countries. But most of them lack the domestic resources, the know-how, or both, to achieve what is needed. Moreover, they are also unable to access foreign capital on the scale and the terms needed. On the contrary, as interest rates have risen in global capital markets, their access has greatly worsened and many are in deep debt distress.

We know the solutions. There needs to be far more official finance, in various forms. Much of this must stimulate considerably larger private flows, via risk-sharing. That in turn will require a mixture of substantial debt relief, orchestrated by the IMF, far bigger concessional flows to the poorest countries, substantially more equity capital in the multilateral development banks, notably the World Bank, and higher leverage ratios in those banks, as well. This in turn will demand governance reforms, including in voting shares.

This agenda is radical, essential and urgent. If it is to be achieved in the relatively near future, it must become a dominant focus of global economic policymaking. The good news is that the decisions of western and leading emerging countries could make this happen. But they need to focus on what is urgent. They must concentrate their attention on transforming the scale and nature of finance for development and the environment. Nice words without a determination to act mean nothing. – Copyright The Financial Times Limited 2023