Will the G20 Be Able to Fix the Global Economy?


On April 2, leaders from twenty of the world’s most advanced and emerging countries will meet in London to discuss a way to pull out the global economy out of the financial crisis. But has the so called G20 Group any ability and legitimacy to solve this difficult problem?

At Trading Economics, we think that the G20 meeting has no chance to bring relief to a deteriorating global economy. In fact, as pointed by many economists, the G20 group continues to be an ad hoc process and does not have any real political mandate or institutional legitimacy. Moreover, what goes with its decisions may not be taken seriously by national governments. For example, during the last meeting in Washington, all leaders declared to reject protectionism and implementation of new barriers to investment or to trade in goods and services. However, since the gathering, 17 of the countries that signed up to the statement have taken protectionist measures. So, although the participating countries may reach agreement on supporting the global economy and banking system, it is difficult to believe that this plan will be effective. After all, we can’t forget that monetary and fiscal policies along with financial regulation are largely the domain of domestic policymaking.

In addition, the legitimacy of certain countries within the Group on making decisions influencing other nations around the world is very controversial. Indeed, even though some new countries and organizations are allowed to participate in the meetings, the composition of the G20 has not been changed since the Group establishment in the wake of the Asian crisis in 1998.

In fact, during the last 10 years some nations become more significant for the global economy, while others have been diminished and the G20 does not account for that. For instance, of the current top 21 economies by GDP in purchasing power parity Spain, Netherlands, Iran and Taiwan are not in G20. Poland is included only as part of the EU, while Italy, France and Germany participate on their own and as a Euro zone members. On the other hand, Saudi Arabia, Argentina, and South Africa are included in the G20 group event if they rank in the range of 21 to 25.


Anna Fedec, contact@tradingeconomics.com
3/25/2009 3:51:24 PM