LARGE QUESTIONS about the changing distribution of political and economic power in the world flowed through the Group of 20 summit in Pittsburgh hosted by US president Barrack Obama. Declaring that the G20 is now the premier forum to discuss international economic policy, the summit ditched the previously dominant Group of Eight leading industrial states. They thus acknowledged the huge change which gives the emerging economies, including China, India and Brazil, some 50 per cent of global production, the G20 an 85 per cent share of that income, and hence a key role in orchestrating policy.
The transition is Pittsburgh’s lasting significance, quite aside from the important conclusions it reached on sustainable and balanced growth, financial regulation, reform of the International Monetary Fund, climate change and protectionism. Typically, such shifts are born of crisis, certainly so this time. The G20 can claim credit for heading off another Great Depression like the 1930s by timely and co-ordinated stimulus and rescue packages. As Mr Obama put it, “we cannot tolerate the same old boom and bust economy of the past”.
This is a welcome indication that the worst of the crisis has passed. But in evaluating the summit’s success it must be asked how effective this larger group can be, alongside how well Pittsburgh brokered compromises between the interests of established and emergent powers. By choosing to expand the group to 20 efficiency may have been sacrificed to better representation, leading to the emergence of more powerful sub-groupings which will really set the agenda. Agreements reached are voluntary, within a framework of national sovereignty. Institutional arrangements are weak and much will depend on how ready national leaderships are to implement the results of these and forthcoming negotiations. They are aware that economic interdependence is now so far developed as to affect national interests directly and enduringly.
China’s economic relationship with the United States is the most obvious manifestation of this. Its huge trade surpluses have been accumulated in holdings of US government bonds; this transition throws them into question because the consumption boom they funded in the US is now exhausted. But will China as a consequence shift away from its strong export-led model of growth towards a domestically driven demand that could help sustain the world economy? This summit does not yield an answer to that strategic question; but it does indicate a real willingness of both states to work together, bilaterally and in the new institutional setting.
The emergent policy multilateralism strikingly on view at Pittsburgh and in Mr Obama’s speech last week to the United Nations should put the European Union’s role in this period of international transition at the centre of Ireland’s debate on the Lisbon Treaty. It is in Ireland’s vital interest to be well represented in such negotiations. That would be best secured by voting in favour of the treaty. It strengthens the EU’s capacity for international action through the G20 and other arenas.