In the span of just ten months, key developing countries have accomplished what they could not achieve in the previous half a century: They have shouldered aside the staid 7 nation club of Euro-Atlantic nations plus Japan and taken seats at the top table of economic decision making. With its 3rd emergency summit underway in Pittsburgh, the G20 has quickly emerged as the principal agent for coping with world recession and managing globalization.
It is remarkable how rapidly the G20 has overtaken the G8 and how widespread that change is supported in Washington. Tim Adams, for two years the top international official in the Bush Treasury Department, says "there is no going back to the Euro North Atlantic club that was the G7/8." Fred Bergsten, head of Washington's Peterson Institute for International Economics, declares, "the G20 should be the new steering committee of the world economy." Jeff Shafer, an international economic official in the Clinton administration, says the inclusiveness and wide geographic reach of the G20 makes it "tower over the outmoded G8." Even the chief of the global bankers association, Charles Dallara of the Institute of International Finance, views the G7/8 as "outmoded and discredited." The G7, to which Russia was added in 1998, has guided the operations of the International Monetary Fund, where the Americans and Europeans call the shots.
With fast growing China, India, Brazil, South Korea, plus Australia, Mexico, Argentina, Saudi Arabia, Turkey, South Africa and Indonesia added to the G8 of four west European powers, Japan, Canada, Russia and the United States, the G20 countries comprise 85% of global GDP and 75% of world population. This economic clout, geographic diversity, and inclusiveness, says Francis Fukuyama of the Johns Hopkins School of Advanced International Studies (SAIS), gives the G20 "unchallenged legitimacy" that the G8 doesn't possess.
Ironically, this fundamental shift was promulgated not by Barack Obama or developing countries themselves, but by George Bush. Eleven months ago, at the height of the financial panic, French President Nicholas Sarkozy and European Union president Manuel Barroso hurried to Washington beseeching Bush to cap his eight-year term with an emergency summit that would redesign global capitalism. Following a 2 ½ hour Saturday session at Camp David, Bush agreed, sort of. He would call an emergency summit to "ensure that this kind of crisis doesn't happen again." But it wouldn't be just the larger G8 gathering that the Europeans wanted. Instead, Bush would convene the first ever summit of the G20, a finance ministers' forum that had been meeting since1999. So, the Europeans got their summit, but one where their own influence would be diluted, and where the agenda would eschew systemic overhaul in favor gradual reform.
Dan Price, Bush's chief planner for the meeting, collaborated with the other G20 sherpas to organize the Washington Summit in just four weeks. Held over an evening and the following day at the National Building Museum, the gathering issued a long communiqué that embraced far-reaching stimulus programs to pull the world economy back from the precipice. Working groups were given short deadlines to develop measures to minimize systemic risk, monitor large financial transactions and strengthen regulation. At a follow-up meeting in London in April, the G20 leaders took action, tripling the resources of the International Monetary Fund, reinforcing its primary role of global surveillance and lender of last resort. Using straight-forward language, the London communiqué blamed "major failures in financial supervision and regulation" for the crisis.
Bergsten of the Peterson Institute extols the substantive measures emerging from the three G20 summits. Acknowledging that its institutional status is a work in progress, he views the process as a means of integrating China and India into global economic management. He even suggests that the G20 should declare that instead of persisting with the practice of having a European at the top, the next head of the IMF should be Chinese or Indian. Nancy Birdsall, of the Center for Global Development, thinks along the same lines, believing the financial crisis gives "fresh impetus to overdue changes in global governance," like increased voting power for emerging economies in the IMF and World Bank. A G20 panel is likely to propose a 10% voting increase for developing countries, a measure that would come at the expense of the smaller European nations.