G 20 and Global Governance Challenges

1. G 20 and Global Governance Challenges Alok Sheel Secretary, Economic Advisory Council of the Prime Minister of India

2. G 20 : Global ‘Executive Committee’ ? • Trade-offbetween being compact/effective and large/inclusive • Global General Body • UNfor political matters • BWIfor economic and financial matters. • Executive Committee or Steering Group • political issues – UNSG or G 7/8 • economic and financial matters -- G 20 has arguably taken over the mantle from the G7/G8 Alok Sheel

3. Is the Executive Committee Effective? • Manifest need for an effective steering group in a globalizing world with increasing policy spillovers and blunting of national policy tools. • More effective than others, but has certainly not lived up to initial expectations. • General consensus – more effective in early stages of the crisis, when there were fears of an economic and financial apocalypse (Second Great Depression – Barry Eichengreen in VOX.EU) – apocalypse averted Alok Sheel

4. The crisis lingers -- what impedes its effectiveness now? • Little consensus amongst experts on what is to be done now : There was, and still is, consensus on short-term macro-economic policies to deal with ordinary business cycles – but protracted use in a growth crisis associated with a financial crisis creates problems of second magnitudes – there is little consensus amongst experts how the attendant trade-off are to be handled: Growth versus austerity on fiscal policy; growth versus financial stability on monetary policy; how to reform a monetary system pre-disposed to create imbalances; Olivier Blanchard – we are no longer sure what works. • Trust: developed countries versus developing countries; G-7/G20/G77/UN – trust takes time to develop: at least they are talking across the table on equal terms and signing on to consensus documents even if these are plagued by ‘constructive ambiguities’. Grand bargain?: EMEs get larger share in global governance in exchange for taking on greater/equal global responsibilities (i.e no recourse to CBDR argument; contribution to IFI resources; equal treatment in trade matters, etc.) • Sovereignty Issues – political integration lagging economic integration. Treaty of Westphalia and domestic policies of nation states : discussion and consensus versus commitments – as co-operation intensifies so do the difficulties: The EU precedent – banking and fiscal union; EU bureaucracy vs civil society – integration from the top or below? The significance of the EU experiment for the G 20. Alok Sheel

5. Internal governance issues to be sorted out to make the G 20 more effective • Appropriate geometry and legitimacy: composition of G 20 (Argentina vsSpain), out-reach to non G 20 countries (representation of Africa) • Institutional efficiency and effectiveness: secretariat versus leader/Sherpa driven process – but Summit documents not leader like any more – look like secretariat products • Operational Transparency in agenda setting – a number of G 7 items, such as trade, climate finance, put on the G 20 agenda, despite lack of consensus. Agenda setting and governance reform of international bodies remain contentious issues. Several items stuck in the parent forum have therefore made little headway in the G 20. Troika not effective. Alok Sheel

6. Bottomline • G 20 is perhaps the most effective institution that exists today for economic and financial co-operation. • Overtaken by unrealistic expectations • A young institution in its upgraded incarnation: just cutting teeth at 5 years. • Institutions take time to develop and grow strong: Leaders of developed and developing countries will learn to work together over time: learning by doing. • Hugely influencing, if not setting, the global agenda on a whole set of issues. • Incipient institution of the 21st century to manage globalization. Alok Sheel