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G20

The Group of 20 comprises finance ministers and central bank governors from 20 major economies: 19 countries plus the European Union, which is represented by the president of the European Council and by the European Central Bank. 

BusinessEconomy
G20 SUMMIT

All eyes on 20-ring circus

Ringmaster Putin will lead the world's grandest economic summit but the show is unlikely to tackle any of the globe's pressing issues

PUBLISHED : Thursday, 14 February, 2013, 12:00am
UPDATED : Thursday, 14 February, 2013, 4:53am

The G20 multi-ring circus reaches Russia this week for six months of no doubt bizarre performances, culminating in September in the grandest summit on earth in St Petersburg. Given that Russia excels in circus and that President Vladimir Putin is something of a showman-in-chief, it promises to be an exciting time.

But whether the Russian chairmanship of the Group of 20 actually helps solve any of the myriad issues battering fragile planet earth is less likely. The trouble is that for each dangerous question there is a multitude of conflicting answers and as many vested interests clamouring for attention.

The world's woes include slow economic growth and high government debt and deficits in most developed countries. This is fuelling unemployment in a fragile financial system and fostering political uncertainty, violence and threats of terrorism, adding to environmental crises that could bring catastrophic damage to air, water and food supplies.

Some well-intentioned commentators say the G20 has spread itself too widely and should concentrate on just a few central issues, such as the need to get global growth going again and reduce unemployment or to cut high debt levels.

But on such key economic issues there is widespread disagreement even within countries not only about what are the right policies but also over the order to introduce the steps.

To take just the single most-burning issue - austerity measures to trim government spending and get on top of debt - most developing countries - quite rightly - complain that the financial crisis in the US and Europe brought about the mess that the world is in, and the rich countries should get their houses in order. But how, how deeply and how quickly should they cut spending?

If the rich West tries the painful short, sharp shock of austerity, more jobs will be lost and growth will fall, along with demand for imports, sending shock waves around the world. Repercussions of austerity in Britain, with the fear of a dreaded triple-dip recession, have caused the International Monetary Fund, traditionally regarded as the dispenser of painful medicine, to suggest that London should consider a plan B, with less austerity.

The old developed countries have yet to understand the need for far-reaching economic and societal changes. How can they continue to live like princes, protected by health and welfare systems that their countries' battered budgets cannot afford, if their people are less flexible, less productive and less educated than the populations of up-and-coming countries?

That is the question that the developing members of the G20 are asking, and you can expect an increasingly bitter edge.

If one is being kind, one might say the G20 is still a work in progress, not least because its emergence as the putative global economic body represents a struggle between the old order of a world ruled by Washington and its supporters and the new, yet-to-be-established order where several conflicting powers are fighting for dominance.

The star of Dominique Strauss-Kahn, former French finance minister and former managing director of the IMF, has faded because of his wayward personal life. But DSK was a good head of the IMF and a perceptive observer of the world he had to deal with. Just before he left the IMF, he admitted that the 2008 financial crisis also "devastated the intellectual foundations of the global economic order of the last quarter century".

He acidly described the Washington consensus as a "number of basic mantras. Deregulation and privatisation would unleash growth and prosperity. Financial markets would channel resources to the most productive areas and police themselves effectively. And the rising tide of globalisation would lift all boats. This all came down with the crashing crisis."

So there are fierce arguments about what to do and about who should take the lead and who should bear the biggest burden of change and adjustment.

The group accounts for 85 to 90 per cent of global gross domestic product, more than 80 per cent of global trade, and 65 per cent of the world's population. Even so, almost 90 per cent of the world's countries are not G20 members, including 25 of the 34 IMF advanced economies.

Agendas have ballooned and communiqués become laundry lists as G20 discussions are driven by domestic considerations.

There's a lot to think about.

Without a better attitude of give and take and some far-seeing leader who appreciates that a global view is necessary, not merely national strength, the G20 will continue to be a glittering expensive circus, tickets available only to the rich and famous.

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