Temporary home of the Global Governance Program
based at the University of Toronto
|
Temporary home of the Global Governance Program
|
|
Brazil's G20 Presidency Amidst Global Turmoil:
A Conversation with John Kirton
Professor John Kirton, Director, G20 Research Group
Presentation for MAPI Talks Series hosted by Professor Paulo Esteves at the Institute of International Relations at PUC-Rio, April 22, 2024
Today, I will argue that since its start in 1999, the Group of 20 systemically significant states has done well in governing the global financial system, economy and much else. But it now faces much greater demands for global governance, which it is struggling and failing to meet. Brazil's G20 Rio Summit in November promises to make significant progress to fill the gap, on its priorities of social inclusion and the fight against hunger; of the energy transition and sustainable development in its economic, social and environmental dimensions; and of global governance reform. But it still needs to, and can do, more to meet the more rapidly expanding need.
The G20 was intellectually conceived by Canada's finance minister, Paul Martin, in the wake of the Latin American debt crisis in the early 1990s and the failure of the Group of Seven major market democracies in response. The G20 was institutionally designed and created by Martin and United States treasury secretary Larry Summers in 1999, in response to the Asian-turned-global financial crisis erupting in 1997.
The G20's carefully chosen members came from a new category of "systemically significant" states. They were those that contained the major capability and now the international connectivity that together let them both create a global financial crisis from their domestic failures and to cure it when it arose elsewhere.
The countries meeting these two new criteria were the G7 members – the United States, Japan, Germany, the United Kingdom, France, Italy, Canada and the European Union. But now joining them at the top global table were Australia and an equal number from what is now called the Global South. These were the BRICS members of Brazil, Russia, India, China and South Africa, and the MIKTA members of Mexico, Indonesia, Korea and Turkey, along with Saudi Arabia and Argentina. The G20 uniquely added as members the world's two leading multilateral organizations – the International Monetary Fund (IMF) and the World Bank.
The G20 was created with two distinctive missions: first, to preserve and promote financial stability and, second, to make globalization work for the benefit of all.
The G20 held its first meeting, at the level of finance ministers and central bank governors, in Berlin in December 1999. It held its first summit, at the leaders' level, in Washington DC, in November 2008, in response to the much bigger, broader, faster American-turned-global financial crisis erupting in New York City on September 15, 2008.
There was, and is, nowhere else to go, to solve and ideally prevent, the global financial and other crises, shocks and vulnerabilities in a now intensely interconnected, globalized world. It is one so tightly wired that a financial crisis within a small country easily can infect ever bigger, richer countries – spreading from Thailand in June 1997 to Indonesia that September, Korea that November, Russia in August 1998 and then the United States itself, whose financial system froze for a day with the collapse of its hedge fund Long Term Capital Management (LTCM) in September 1998. Argentina and Turkey were hit as well.
The IMF was too slow, and too narrowly focused, to cope with crises created by the failures of private finance. The United States, long the sole, reliable lender and spender of last resort, was now a consumer rather than a provider of financial security, as the collapse of LTCM first showed. The G7, whose most powerful member was the US, did not include as full, equal members the countries where the new financial crises started and quickly spread – Indonesia, Korea, Argentina and Türkiye, as well as Mexico, which had had a peso crisis in 1994. To stop these crises at their source, they needed to be inside the group.
Yes and no. It has successfully produced financial stability but has failed to make globalization work for all.
On fostering financial stability, G20 finance ministers and central bank governors did fail to foresee or forestall the American-turned-global financial crisis that exploded in September 2008. But its leaders quickly contained that crisis at their first four summits.
They then prevented the escalating regional European financial crisis from going global, at their subsequent summits from November 2010 to June 2012.
Since then, they have prevented any global or even regional crises from arising.
They have done so amidst unprecedented geopolitical upheavals, led by the first inter-state war in Europe since 1945 when Russia invaded Ukraine on February 24, 2022, and then the Hamas terrorist attack on Israel on October 7, 2023. But they must remain vigilant about new financial crises, potentially coming from the plunging property market in China, and the soaring deficits and debts in the United States.
On making globalization work for all, the G20 got off to a good start, but then faltered and has now clearly failed, as inequality has increased in many ways.
At the Seoul Summit in November 2010, the G20 pivoted to focus on this second mission. It launched the Seoul Development Consensus, with a new emphasis on sustainable development and green growth. It helped the world reach almost all of the eight Millennium Development Goals by their deadline of 2015. It then helped launch the broader, fully inclusive 17 Sustainable Development Goals (SDGs) and made a strong start to deliver them by their due date in 2030.
But then from China came the devastating Covid-19 pandemic in late 2019. The G20 pivoted to focus on containing it. At its Rome Summit in 2021, and a special one devoted to health that year, the G20 helped quell the Covid-19 crisis by 2022.
But this came at the cost of progress on all the other SDGs beyond SDG 3 on health. Almost none are now on track to meet their 169 targets by 2030.
More developing countries now have or face debt crises, and the G20's Common Framework has done little to help them cope.
And economic inequality is increasing within and between G20 countries, as the very rich get richer and the many more poorer people and countries get poorer.
The G20 has passed its central test of responding to, and since 2010 preventing, global financial crises. However, the new world of shadow banking, and dark digital finance means another financial crisis could be brewing now, from the collapsing property markets of China – the Thailand of today.
On pandemic crises, the question is fully relevant. At the first G20 meeting hosted and chaired by Paul Martin in Montreal in 2000, he presciently said that no issue that had economic consequences was beyond the purview of the G20. And we now know the horrendous economic costs that the Covid-19 pandemic, which began in China, has had for all.
On solving the Covid-19 pandemic, the answer is a tentative yes, the G20 passed the test.
G20 leaders started making commitments on health at their Brisbane Summit in 2014, in response to the Ebola epidemic spreading among three West African countries then.
The shock of the Covid-19 pandemic spurred G20 leaders to come out of their semi-retirement after 2010, to again start holding more than one summit a year. They held three in Italy in 2021, including the two special ones on health and Afghanistan. They held two in India in 2023, including a special one in November.
But the number of G20 summit commitments fell, from a peak of 529 in Germany in 2017 to only 107 in 2020. It stayed at or below 242 ever since. However, since 2020, G20 member governments' compliance with their leaders' priority summit commitments has averaged 76%, well above the G20's overall average since 2008 of 71%.
G20 health commitments peaked with the 35 made at Rome in 2021. Compliance with them also peaked, at 80%.
Indonesia did well in 2022, but India less so last year, at the two G20 summits coming after Russia – a G20 member – committed an act of aggression with its full-scale invasion of Ukraine in February 2022.
In November 2022, Indonesia's President Joko Widodo got all G20 members, including Russia, to declare in its fully consensus communiqué that "This year, we have also witnessed the war in Ukraine further adversely impact the global economy. There was a discussion on the issue. We reiterated our national positions as expressed in other fora, including the UN Security Council and the UN General Assembly, which, in Resolution No. ES-11/1 dated 2 March 2022, as adopted by majority vote (141 votes for, 5 against, 35 abstentions, 12 absent) deplores in the strongest terms the aggression by the Russian Federation against Ukraine and demands its complete and unconditional withdrawal from the territory of Ukraine."
Indonesia's Bali Summit then proceeded to make 223 commitments on 22 subjects. They were led by the environment with 24 commitments (for 11% of the total), followed by development with 22 commitments, food and agriculture with 20, climate change and macroeconomics with 18 each, and health with 17.
Compliance with the priority commitments reached an all-time high of 80%.
Indian prime minister Narendra Modi's New Delhi Summit in September 2023 did less well. The word "aggression" was removed from its communiqué.
This helped the New Delhi leaders make 242 commitments, which comprehensively covered 22 subjects. They were led by development with 47 (for 19% of the total), followed by health and gender equality with 25 commitments each, then climate change and the environment with 19 commitments each.
So far compliance with New Delhi's priority commitments is an above-average 75%.
For the G20 summit in Rio on November 18–19, 2024, the prospects are promising.
But they are still inadequate to meet the soaring global need.
The Rio Summit is on track to produce a significant performance. It will advance its priorities of reducing poverty and hunger, and improving gender equality, Indigenous Peoples' life and health, climate change and clean energy, and artificial intelligence.
Here however, progress will come more on process than product, with the creation of new global alliances and procedural reforms at international institutions, rather than major new money mobilized or ambitious agreements on climate, food, the economy, development and debt. And it will do little to reduce the world's and the G20 members' miliary conflicts and geopolitical tensions.
This significant performance is propelled by the very high levels of shock-activated vulnerability, high levels of multilateral organizational failure and significant levels of members' predominant equalizing capability. But it is lowered by the small levels of members' common principles and practices and the leaders' domestic political control, and by the diminishing value they place on the G20 as their club at the hub of a growing network of global summit governance.
Shock-activated vulnerabilities are led by war in Ukraine and the Middle East, military expansion by China, soaring extreme weather events from climate change, growing energy, food and debt shocks, and financial fragilities.
Multilateral organizational failure in responding adequately to these shocks comes from the United Nations Security Council in ending the wars, the IMF and World Bank at their spring ministerial meetings, the World Trade Organization at its latest ministerial conference, and the World Health Organization in producing a robust pandemic accord and fund.
Predominant equalizing capability is significant. G20 members together control 80% of the global economy and a predominant portion of most specialized capabilities. But they are equalizing less in the value of their currencies with the US dollar rising, and those of China, Japan, Korea and other G7 members falling.
Converging principles and practices are low. The increasing authoritarianism in Russia and China and right-wing pressures in Europe exceed the small steps toward democracy in Argentina and Turkey. Moreover, Brazil and the US are among the most economically unequal large countries in the world.
Leaders' domestic political is low, outside authoritarian Russia and China and democratic India.
The low value leaders place on the G20 as their personal club at the hub is seen in the absence of any actual or planned special G20 summits before or after the regular late November one, by the diversion of action to G7 plus summits which held two special ones held by mid April and to the North Atlantic Treaty Organization summit in Washington in July and by the poor progress in preparations for the UN's Summit of the Future in September.
The pathways from these propellors to Rio's prospectively significant performance begin with the many ministerial meetings planned and held along the route.
On December 11 Brazil released its schedule of G20 ministerial meetings. It planned to hold 26 meetings for 18 different portfolio meetings, from February 22 to October 31, all coming before the summit's start on November 18. This was more than India's 19 ministerial meetings for 16 different ministerial portfolios in 2023, which was similar to Indonesia's numbers in 2022.
Brazil's ministerial meetings were led by those for finance ministers and central bank governors with four, followed by foreign ministers with two, and one each for ministers of development, hunger and poverty, employment, agriculture, the digital economy, research, tourism, energy transitions, climate and environmental sustainability, disaster risk, women's empowerment, culture, anticorruption, trade, education and health, in addition to one joint health and finance ministers meeting on October 31.
The first ministerial meeting was for foreign ministers in Rio de Janeiro on February 21–24. On February 22 a press statement issued by Brazil's foreign minister Mauro Vieira contained seven commitments. They pointed to some progress on all of Brazil's three priorities, adding a meeting of G20 foreign ministers and any other UN member at the General Assembly in September. The absence of any collective communiqué may have resulted from divisions between Brazil's President Luiz Inàcio Lula da Silva and the US over Israel's actions in Palestine.
The second ministerial meeting was for G20 finance ministers and central bank governors in São Paolo on February 29. It failed to try to adopt a consensus communiqué, due to the members' divisions over Ukraine and Gaza.
Its Brazilian chair's concluding statement with annexes contained 26 commitments covering 11 subjects. By subject, they were led by development with six; followed by macroeconomics, financial supervision, international financial institutions reform and trade with three each; Africa with two; and, with one each, tax, infrastructure, climate change, food and agriculture, and health. Although they focused on G20 finance ministers' traditional economic-finance and development agenda, they included others that reflected Lula's social and equality priorities. At the meeting Brazilian finance minister Fernando Haddad suggested taxing the super-rich.
The third ministerial meeting was another for finance ministers and central bank governors. It came on April 18 in Washington DC at the spring meetings of the IMF and World Bank. It failed to try to adopt and did not adopt any outcome document, again due to the geopolitical divisions at its previous meeting.
Brazil as chair emphasized climate change finance and reform of multilateral development banks. The G20 started work on ways to raise revenue by taxing the super-rich. There was growing enthusiasm among G20 members for doing so, including from a supportive France. Haddad said the G20 could reach agreement by November, with a political communiqué produced in July (at the next scheduled finance ministerial) agreeing that the proposal should be examined over the next three to four years. He said it could help world on the brink of a debt crisis, and to combat poverty, hunger and the green transition.
Haddad further proposed increasing the debt relief for developing countries and the capitalization of the multilateral development banks. Brazil was working on a roadmap to do so, for the G20 finance ministers' fourth meeting in October.
By April 22, Brazil was also emphasizing finance for sustainable development, the elimination of ineffective and obsolete global governance institutions, the reduction of greenhouse gas emissions and inequalities in accordance with SDG 10, the bioeconomy concept, net zero deforestation, Indigenous Peoples and their traditional knowledge, and intellectual property.
Brazil's President Lula has made climate change and equality the top two priorities for the summit he will host in Rio in November 2024. But the world cannot – and the G20 should not – wait until then to start to protect the climate and to make this purest form of globalization work equally for all.
So, President Lula should do at least three things, starting now.
First, hold more G20 summits, virtually if need be.
Second, hold a special G20 summit dedicated to climate change, biodiversity loss and its impact on food and agriculture and human and animal health.
And third, have G20 leaders agree to end fossil fuel subsidies by 2025, as they have repeatedly promised to do at almost every G20 summit since 2009.