Probably the most important thing about the G20 summit in Pittsburgh last week was that it is the third time it has met in the past year. What was a relatively marginal international body seems to be morphing into a significant institution.
The G20 was set up in 1999 as a response to the Asian financial crisis. It consists of the finance ministers and central bank governors of 19 states plus the European Union.
But it has been a pretty irrelevant body that was unable to stop Wall Street and the City of London motoring towards the crash of 2008.
The severity of the resulting economic crisis has, however, transformed the G20 into what the latest summit called “the premier forum for our international economic cooperation”. It wasn’t finance ministers but heads of government who met in Washington in November 2008, in London this April, and in Pittsburgh last week.
These meetings have overshadowed the G8. Essentially a club of the big Western capitalist states, the G8’s formation was prompted by the first major post-war economic crisis in the mid-1970s. Russia joined the annual summits in 1997.
What does the G20 have that the G8 doesn’t? In a word, China. The greater prominence of the G20 reflects the changing distribution of global economic power.
The shift was highlighted in the White House statement after the Pittsburgh summit: “Dramatic changes in the world economy have not always been reflected in the global architecture for economic co-operation. This all started to change today [with the] historic agreement to put the G20 at the centre of efforts to work together to build a durable recovery.”
Existing international bodies such as the United Nations Security Council and the International Monetary Fund (IMF) reflect the pecking order among the great powers at the end of the Second World War.
But states whose relative power has declined in recent decades hang fiercely onto their positions in these bodies. Thus Britain and France aren’t going to give up their permanent seats on the Security Council and, in the lead-up to Pittsburgh, were resisting pressure to surrender their IMF directorships to make way for India and China.
The G20 has provided a convenient way of sidestepping the problem because its membership includes both the G8 and the most important states in the Global South.
The ascent of the G20 fits into the narrative of the decline of the West and “the rise of the rest” that has become so popular. Goldman Sachs in particular strenuously promotes the idea that the “Brics” – Brazil, Russia, India, and China – are about to become the centre of the world economy.
As a general proposition, this is nonsense. Many members of the G20 are economic small-fry.
Brazil and Russia are important regional powers (and Russia’s nuclear arsenal gives it a global importance) but they are raw-material producers whose share of the world economy has shrunk since the early 1990s. India potentially matters more, but it is overshadowed economically by China, as its rulers are all too aware.
It’s China that really counts. The economic relationship it has developed with the US has underpinned both the boom and the crisis of the present decade. On government orders, the Chinese banks have financed a massive surge in investment that has helped to stabilise the world economy in the past few months.
But the fact that the G20 offers a framework for integrating China into the global capitalist leadership doesn’t mean it has any solutions.
For all the talk about bankers’ bonuses, it’s clear that the banks, swollen with ultra-cheap state money, are being allowed to carry on as usual.
Meanwhile, the US and Britain are at loggerheads with China and Germany over who is going to take the strain of shifting the world economy towards what the summit called “a more balanced pattern of global growth”. The G20 may be a bigger tent but it won’t end rivalries among the leading capitalist states.