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ECONOMY: Another G20 Takes Centre Stage

Mario Osava

RIO DE JANEIRO, Nov 7 2008 (IPS) - The Group of 20 (G20) that will meet this Saturday and Sunday in Brazil could have a more defining role in shaping a new global order than any of the alliances forged in past international negotiations – like the other G20 formed by developing countries in the Doha Round of multilateral trade talks.

The G20 that will gather in Sao Paulo this weekend was born in 1999 with a financial mandate, bringing together as it does the finance or economy ministers and central bank presidents of the Group of 7 (G7) most powerful industrialised countries and 12 leading emerging economies. The twentieth member is the European Union, which participates as a bloc.

The members of the G7 – which was created in the mid 1970s and exerted an enormous influence over the course of the world’s economy despite its informal nature – include Britain, Canada, France, Germany, Italy, Japan and the United States.

When Russia began to be included in the meetings eight years ago, it came to be known as the Group of 8 (G8). But today a new and wider expansion is considered inevitable in view of the current global economic situation, triggered by the financial meltdown that has its epicentre in the U.S.

“It is becoming increasingly difficult to deny emerging and developing economies more significant participation in major global decisions,” Brazilian Finance Minister Guido Mántega, who will be hosting this weekend’s meeting, wrote in an article published Thursday in the Folha de Sao Paulo newspaper.

It no longer makes any sense to have a G7 that, for example, includes Italy but not China, Luis Alfonso Lima, president of the Brazilian Society for the Study of Transnational Corporations and Economic Globalisation (SOBEET), told IPS.

The financial G20 – which until September had kept a low profile – was recently “discovered” as a possible expanded, updated version of the G8, with the incorporation of the leading emerging markets. In light of the current global crisis, its annual meeting of financial and monetary authorities has taken on unprecedented significance.

It also offers its members an opportunity to prepare for the Washington summit called by outgoing U.S. President George W. Bush for Nov. 15. For the first time, the heads of state and government of these 20 countries will not just meet to discuss structural or long-term problems, but will try to coordinate efforts to address emergency situations, in this case, the financial crisis.

In addition to the G8 members, the G20 is made up of Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Saudi Arabia, South Africa, South Korea and Turkey, as well as the European Union.

The composition of the group, which emerged after the financial crises of the 1990s -triggered by meltdowns in Mexico, Southeast Asia and Russia, that spread to many other developing countries – could be questioned. It could be criticised, for example, for the imbalance between Latin America, which has three representatives, and Asia and Africa.

But it is a step towards recognising the undeniable weight of emerging markets, which today constitute the most robust sector of the global economy and are a source of financing for possible solutions to the crisis, which was sparked by flaws in the financial systems of rich countries.

The G20 countries combined produce 90 percent of global gross domestic product (GDP), account for 80 percent of world trade, and are home to two-thirds of the world’s population. The grouping has an informal structure and no headquarters, and the presidency is held by a different member country each year. This year it is Brazil’s turn.

According to the head of SOBEET, the G20 constitutes a valid mechanism for coming up with coordinated solutions, overcoming the conflicting initiatives put forward a month ago, which evidenced the need for coordinated action involving developed and emerging countries.

In his opinion, the current crisis has demonstrated the need to open up a dialog among many countries, which is why he does not see the size and diversity of the G20 as a problem, but rather as an indication of the direction the world must take in the search for solutions, incorporating nations that due to their economic progress have gained a significant role in the global structure.

The most acute phase of the financial crisis has passed, but now come the effects on the real economy, and that is what the ministers and central bank chiefs must focus on, Lima added.

Another group, the Financial Stability Forum, was founded in 1999 to deal specifically with financial matters. It includes senior national financial officials from the G7 countries, plus Australia, Hong Kong, the Netherlands, Singapore and Switzerland, and the multilateral bodies concerned with financial regulation and oversight.

But the Forum cannot by itself respond to the current challenge, because it leaves out emerging economies, which today are the greatest contributors to global economic growth, said Mántega.

It would need to be expanded to promote, together with the G20, a “new global economic and financial governance,” the minister concluded in his article.

However, João Pedro Stédile, a top leader of Brazil’s Landless Movement (MST) and an activist with the international peasant movement Via Campesina, disagrees. He is against expanding the G20 because he believes this would mean that emerging markets would be co-opted to keep rich nations in power and perpetuate global imbalances.

According to the activist, these groups do not propose changes or solutions for the world, so now would be the time to bring developing countries together and reactivate or create a new movement of non-aligned nations.