Pittsburgh: The G20 inverted an apparently iron law of multilateral summitry — that the significance of a final statement is inversely related to its length — by turning in a bulky communiqué at the end of its summit here on Friday whose genuine heft is likely to be felt in the global economy for years to come.
Whether the new frameworks of oversight, regulation, decision-making and accountability envisaged finally get implemented or not, this much is clear: the world’s leading economies appear to recognise that any reversion to the ‘business as usual, banking as usual’ model of global capitalism which existed prior to last year’s financial meltdown will only perpetuate the current crisis and help trigger fresh instability in the international system.
French President Nicolas Sarkozy described the agreement as a “revolution.” Speaking to reporters at the end of the G20 summit, Prime Minister Manmohan Singh was more guarded. But he highlighted several key issues on which, he said, genuine forward movement had taken place.
Of these, he said, the most important was the designation of the G20 as the “premier forum” for future discussion of international economic issues. “This is an important development broadening the international governance structure,” he said. The change will kick in immediately.
Next year’s G20 summit will take place in Canada, alongside the summit of the G8 whose deliberations will, presumably, be confined to non-economic matters and be far less crucial than the larger, more representative forum.
In line with this diffusion of power, the G20 also agreed to effect a 5 per cent shift in the IMF quota share — used to allocate voting rights — from over-represented countries to dynamic emerging markets and developing countries which are currently under-represented, by early 2011. Dr. Singh told reporters India had wanted more. “As of now, the developing countries quota is about 43 per cent. The four BRIC countries had suggested a rebalancing to the extent of 7 per cent, in which case the developing countries would have more than 50 per cent or nearly that.” But this was not acceptable to the West, which today has a majority quota share.
A further levelling of existing power relations could potentially be ushered in by the G20 decision to set up a mechanism for peer review of each other’s policy frameworks and performance. Much will depend on how the IMF implements its mandate to analyse “in a candid, even-handed and balanced” manner whether policies pursued by individual G20 countries “are collectively consistent with more sustainable and balanced trajectories for the global economy.” But this process will allow for the macroprudential and regulatory policies in the rich countries — which failed to prevent, and even encouraged, the rise of destabilising credit and asset price bubbles — to be the target for international scrutiny in much the same way that developing country fiscal, monetary, trade and structural policies have been for decades. This was a positive development, Prime Minister Singh told reporters, rejecting the suggestion that the autonomy of policymaking in India would be affected. “As far as our domestic policy is concerned, the IMF already reviews it … so I don’t see what more can be done as far as Indian policy is concerned. But the policies of major developed countries within the framework of review by the G20 will give us an opportunity to pick holes in the functioning of their economies.”