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G20 is Too Elite, There’s a Way to Fix That Though – Economists

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G20 is Too Elite, There’s a Way to Fix That Though – Economists

The G20 claims to be “the premier forum for international economic cooperation”.

But is it?

As scholars of global economic governance, we are sceptical of this claim. Here are our main reasons.

  • The G20 is insufficiently representative of the 193 member states of the United Nations plus the small number of non-member states.
  • It is a self-selected group of 19 countries and the European and African Unions.
  • It has no mandate to act or speak on behalf of the international community.
  • It has no transparent or formal mechanisms through which it can communicate with actors who do not participate in the G20 but have a stake in its deliberations and their outcomes.

The growing tensions in the world make it more urgent to improve the efficacy of the G20. Firstly, because there is growing evidence of the loss of interest in global cooperation. Secondly, because rich states are cutting their official development assistance and are failing to meet their commitments to help countries deal with loss and damage from climate impacts and make their economies more resilient to shocks.

And thirdly, because rich countries are also reluctant to discuss financing sustainable and inclusive development in forums like the upcoming Fourth Financing for Development Conference or the UN, where all states can participate. They prefer exclusive forums like the G20.

Here, after briefly describing the structure of the G20, we argue that its lack of representation is a major problem. We offer a solution and argue that, as chair of the G20 this year, South Africa is well placed to promote this solution.

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What is the G20 and how does it function?

The G20 was established in the late 1990s in the wake of the East Asian financial crisis. Its members were invited by the US and Germany based on a proposal from the Canadian government. Initially only finance ministers and central bank governors of major advanced and emerging economies were involved. After the financial crisis of 2008-2009 it was upgraded to summit level with the same membership.

A summit is held annually, under the leadership of a rotating presidency.

The group accounts for 67% of the world’s population, 85% of global GDP, and 75% of global trade. The membership comprises 19 of the “weightiest” national economies plus the European Union and the African Union. The 19 national economies are the G7 (US, Japan, Germany, UK, France, Italy, Canada), plus Australia, China, India, Indonesia, Republic of Korea, Russia, Turkey, Saudi Arabia, South Africa, Mexico, Brazil, and Argentina. These countries are permanently “in”. The remaining 90% of countries in the world are excluded unless invited as “special guests” on an ad hoc basis.

Representatives of a select group of international organisations including the International Monetary Fund, the World Bank, the Organization for Economic Cooperation and Development (OECD) and the World Trade Organization also participate, together with those from some UN entities.

The G20’s work is managed by a troika consisting of the current president with the assistance of the past president and the incoming president. In 2025 this troika consists of South Africa as the current chair, Brazil as the past chair and the US, which will become the G20 president in 2026. The G20 has no permanent secretariat.

The consistency in G20 membership has proven to be an advantage because it helps foster a sense of familiarity, understanding and trust at the technical level among the permanent members. This is helpful in times of crisis and in dealing with complex problems.

But its exclusivity and informal status have limited its ability to address major challenges such as the global response to the economic and health consequences of the COVID pandemic. This is because an effective response required agreement and coordinated action by all states and not just those in the G20.

A solution

We think that the governance model of the Financial Stability Board offers a solution.

The Financial Stability Board was established under the umbrella of the G20 in 2009. Its job is to coordinate international financial regulatory standard-setting, monitor the global financial system for signs of stress, and to make recommendations that can help avert potential financial crises.

It is also an exclusive club. Its membership consists of the financial regulatory authorities in the G20 countries plus those in a few other countries that are considered financially systemically important.

However, unlike the G20, the Financial Stability Board has made a systematic effort to learn the views of non-members. It has established six Regional Consultative Groups, one each for the Americas, Asia, Commonwealth of Independent States, Europe, Middle East and North Africa, and sub-Saharan Africa.

The objective is to expand and formalise the Financial Stability Board’s outreach activities beyond its membership and to better reflect the global character of the financial system.

The regional consultative groups operate in a framework which promotes compliance within each region with the Financial Stability Board’s policy initiatives. The framework enables the group members to share among themselves and with the board their views on common problems and solutions and on the issues on the board’s agenda.

Importantly, each regional group is co-chaired by an official from a Financial Stability Board member and an official from a non-member institution.

Applying this model to the G20 would allow the current G20 membership to continue, while obliging the members to establish a consultation process with regional neighbours. This would create a limited form of representation for all the world’s states.

It would also empower the smaller and weaker members of the G20 because it would enable them to speak with more confidence and credibility about the challenges facing their region.

This arrangement would also establish a limited form of G20 accountability towards the international community.

Next steps

As chair of the G20 chair for 2025, South Africa is well placed to promote this solution to the group’s representation problem. It should work with the African Union to establish an African G20 regional consultative group. South Africa and the African Union could invite each African regional organisation to select one representative to serve on the initial consultative group.

South Africa could also commit to convey the outcomes of G20 regional consultative group meetings to the G20.

South Africa can then use this example to demonstrate to the G20 the value of having a G20 regional consultative group and advocate that other regions should adopt the same approach.

Source: theconversation
Via: norvanreports
Tags: G20 is Too EliteThere’s a Way to Fix That Though – Economists

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