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Global Leadership in Transition

Global Leadership in Transition: Making the G20 More Effective and Responsive

Copyright Date: 2011
Pages: 353
  • Book Info
    Global Leadership in Transition
    Book Description:

    Global Leadership in Transitioncalls for innovations that would "institutionalize" or consolidate the G20, helping to make it the global economy's steering committee. The emergence of the G20 as the world's premier forum for international economic cooperation presents an opportunity to improve economic summitry and make global leadership more responsive and effective, a major improvement over the G8 era.

    "Key contributors to this volume were well ahead of their time in advocating summit meetings of G20 leaders. In this book, they now offer a rich smorgasbord of creative ideas for transforming the G20 from a crisis-management committee to a steering group for the international system that deserves the attention of those who wish to shape the future of global governance." -C. Randall Henning, American University and the Peterson Institute

    Contributors: Alan Beattie,Financial Times; Thomas Bernes, Centre for International Governance Innovation (CIGI); Sergio Bitar, former Chilean minister of public works; Paul Blustein, Brookings Institution and CIGI; Barry Carin, CIGI and University of Victoria; Andrew F. Cooper, CIGI and University of Waterloo; Kemal Dervis, Brookings; Paul Heinbecker, CIGI and Laurier University Centre for Global Relations; Oh-Seok Hyun, Korea Development Institute (KDI); Jomo Kwame Sundaram, United Nations; Homi Kharas, Brookings; Hyeon Wook Kim, KDI; Sungmin Kim, Bank of Korea; John Kirton, University of Toronto; Johannes Linn, Brookings and Emerging Markets Forum; Pedro Malan, Itau Unibanco; Thomas Mann, Brookings; Paul Martin, former prime minister of Canada; Simon Maxwell, Overseas Development Institute and Climate and Development Knowledge Network; Jacques Mistral, Institut Français des Relations Internationales; Victor Murinde, University of Birmingham (UK); Pier Carlo Padoan, OECD Paris; Yung Chul Park, Korea University; Stewart Patrick, Council on Foreign Relations; Il SaKong, Presidential Committee for the G20 Summit; Wendy R. Sherman, Albright Stonebridge Group; Gordon Smith, Centre for Global Studies and CIGI; Bruce Stokes, German Marshall Fund; Ngaire Woods, Oxford Blavatnik School of Government; Lan Xue, Tsinghua University (Beijing); Yanbing Zhang, Tsinghua University.

    eISBN: 978-0-8157-2146-8
    Subjects: Political Science, Economics

Table of Contents

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  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-viii)
  3. Foreword
    (pp. ix-x)
    Il SaKong

    The G20 Seoul summit came at a crucial moment for both the global economy and global governance. The global economy, thanks to an international, concerted policy effort led by the G20, has avoided catastrophe. Consequently, there is a general view that the G20 has been successful as a global crisis committee. In the leaders’ communiqué issued at the Pittsburgh summit, G20 leaders designated the G20 as “the premier forum for international economic cooperation.”

    Now that the sense of crisis has receded, the question for the G20 is how to keep the momentum intact and continue to be effective beyond the...

  4. Preface and Acknowledgments
    (pp. xi-xiv)
  5. INTRODUCTION: Toward the Consolidation of the G20: From Crisis Committee to Global Steering Committee
    (pp. 1-10)

    The Republic of Korea hosted the fifth G20 summit on November 11–12, 2010. As Paul Martin, the former prime minister of Canada, emphasizes in chapter 1 of this book, it was a historic moment in summitry, when a non-G8, recently developing country chaired an “apex summit” for the first time. G7/8 summits, consisting of four European nations (France, Germany, Italy, and the United Kingdom), two North American nations (Canada and the United States), Japan, and Russia, have met yearly from 1975 to the present. There has been increasing dissatisfaction with the G8 in recent years due to the fact...

  6. PART I. History and Prospect

    • 1 The G20: From Global Crisis Responder to Global Steering Committee
      (pp. 13-15)

      There have been three steps in the evolution of the G20 to date. The first, not surprisingly, was its founding during the turmoil of the Asian crisis over a decade ago, when the G20 finance ministers met for the first time. The second was the series of G20 leaders’ summits that began in Washington in 2008, arising out of the current financial upheaval. The third step, which occurred in 2009, was the announcement that Korea would be the first non-European, non–North American country to host a G20 summit. This decision spoke in a way that no communiqué ever could...

    • 2 The G8: Legacy, Limitations, and Lessons
      (pp. 16-35)

      On June 21, 1997, at their Denver summit, the Group of Seven (G7) leaders confidently proclaimed:

      We have been encouraged by the many positive indicators in our economies: inflation remains low, growth continues at a solid yet sustainable pace or is increasing, and fiscal actions are reducing budget deficits. We welcome the impressive gains of the emerging economies, which have contributed significantly to global growth.

      Less than two weeks later the Thai baht collapsed, catalyzing what turned from an Asian to a global financial crisis that spread to consume Indonesia, Korea, Russia, and Brazil and even afflicted the United States...

    • 3 The Impact of the G20 on Global Governance: A History and Prospective
      (pp. 36-47)

      This chapter presents a short, analytical history of the G20 leaders’ group. It examines the impact of the G20 on outcomes in international cooperation and its impact on the processes and institutions of global governance. The first part of the chapter traces the trajectory of the G20 across its first four meetings, highlighting the fact that after the initial “crisis committee” phase of the G20, the cooperation achieved by the group waned dramatically. The second part of the chapter examines whether the global agenda has been broadened or influenced by the inclusion of emerging economies. The third and final part...

    • 4 The G8 and the G20: What Relationship Now?
      (pp. 48-54)

      The leaders of the G20 countries made clear at their meeting in Pittsburgh in September 2009 that the G20 was the premier international forum for the discussion of economic issues. That was reaffirmed in Toronto. The G8, however, continues, with its next meeting scheduled to take place in France in 2011, the following meeting in the United States, and a meeting in the United Kingdom in 2013. Indeed, Prime Minister David Cameron has already spoken about what he sees as being on the agenda (essentially global security questions).

      Important issues, however, remain. How does one define the limits of the...

    • 5 Turning the G20 into a New Mechanism for Global Economic Governance: Obstacles and Prospects
      (pp. 55-62)

      It is widely believed that the G20 summits have played a positive role in managing the global financial crisis since their inaugural meeting in Washington, D.C., in 2008, preventing a great global recession and fostering reform in international financial institutions. At the Pittsburgh summit in 2009, the G20 was officially defined as “the premier forum for international economic cooperation”¹ and was also given a role in promoting strong, sustainable, and balanced growth globally. Its success has generated further expectations from member countries. Many believe that the G20 has the potential to become the key mechanism of global economic governance as...

  7. PART II. Financial Crisis and Regulatory Reform

    • 6 Financial Sector Reform and the G20
      (pp. 65-69)

      The great strength of the free market is its ability to innovate; its great weakness is its tendency every so often to take innovation a bridge too far. Nowhere is that weakness more damaging than when it appears in the banking system, a system that depends almost entirely on the trust that we repose in it, even more so when that system knows no borders. That is why the moral hazard posed by institutions that violate that trust will eventually eat away at the very foundations of the global economy and that is why the reform of the financial system...

    • 7 G20 Financial Regulatory Reform: Current Status and Future Challenges
      (pp. 70-85)

      The recent unprecedented global financial crisis played a key role in making the G20 the premier forum for discussion of global economic issues. However, the objective of the financial regulatory reform pursued by the G20 is not to merely respond to the crisis but to reestablish the overall financial system to prevent the recurrence of such crises in the future.

      The financial regulatory reform of the G20 began by reflecting on the deregulation movement that had been going on until the outbreak of the financial crisis. Basically, pre-crisis financial policies had generally pursued deregulation, based on the following two presumptions:...

    • 8 The G20 and the Challenge of International Financial Reregulation
      (pp. 86-100)

      Toronto, the fourth G20 summit, delivered few tangible results in the field of financial regulation despite the fact that financial regulation has been possibly the most important part of the agenda of the G20 meetings since their beginning. Following the collapse of Lehman Brothers in September 2008, the word was that “the global problem raised by the financial crisis had to find a global solution.” Leaders agreed that reinforcement of regulations, their global harmonization, and their strict enforcement were necessary to bring more stability to the financial sphere. Among the forty-seven items mentioned in the Washington communiqué, no less than...

    • 9 Bank Regulation in Africa: From Basel I to Basel II and Now at a Crossroads
      (pp. 101-122)

      The regulation and supervision of banking is a very topical issue, especially with respect to African economies, which have small banking units (for example, microfinance banks in Chad and Ethiopia) and large wholesale banks (for example, investment banks in Botswana and Namibia) but tend to offer a limited range of financial instruments, predominantly deposits and loans. As highlighted in Kasekende, Mlambo, and Murinde (2010), commercial banks continue to dominate the financial sector in Africa and nonbank financial institutions play a negligible role, except for public sector provident funds. In many African countries, capital markets remain peripheral as a vehicle for...

  8. PART III. The G20 Framework:

    • 10 Global Imbalances and the G20
      (pp. 125-137)

      There is a new argument that the Great Depression was partly triggered by the Bank of France buying and hoarding huge amounts of gold.¹ Whatever its merits, this explanation draws attention to the fact that behavior determining the levels of foreign exchange reserves and current account and trade surpluses is at the heart of international macroeconomic interdependence. In 1944, Keynes, thinking of the international monetary system to emerge in the postwar period, held firmly to the opinion that countries with current account surpluses should be asked to adjust as much as countries with current account deficits. In practice, that has...

    • 11 The Political Economy of Global Rebalancing and the Role of Structural Reforms
      (pp. 138-150)

      As the global crisis moves away from its immediate, emergency phase, the international community is turning to longer-term issues. The challenge is to build a global policy framework that can maximize the benefits of international collective action and put the global economy on the path to stronger and more sustainable and balanced growth. This challenge presents two, interrelated aspects: an economic one, which consists of identifying the policy mix at the global and national levels that is needed to move toward the “optimal scenario” of stronger and more sustainable and balanced growth, and a political economy one, which would facilitate...

    • 12 G20 Framework for More Sustainable and Balanced Growth
      (pp. 151-157)

      There is little question that the recent global financial crisis was caused by weak risk management in large financial institutions combined with failures of financial regulation and supervision and that global imbalances did not trigger the crisis. However, global imbalances were an integral part of the globally low interest rates and large capital inflows into advanced economies that fostered the buildup of leverage and creation of riskier assets that led to house price bubbles in the U.S. and European countries. Although the crisis was not created inevitably from global imbalances, there was a connection, and we cannot deny the role...

    • 13 Rebalancing the World Economy: The G20’s Potential Role
      (pp. 158-162)

      Once upon a time there was the Great Moderation (GM). And the GM evolved into the Great Complacency (GC). And the GC evolved into the Great Credit Crunch (GCC), which evolved into the Great Global Crisis (GGC). And the panic about the implications of the GGC led to thea Great Fiscal and Monetary Expansion (GFME), which overcame the panic and avoided a major global recession. But the GFME came a bit too late. The crisis had already carved very deep scars in the financial and the real sectors of the key industrial countries.

      “No crisis like this has a simple...

  9. PART IV. The G20 and Development

    • 14 Bringing Development into the G20: Overarching Themes
      (pp. 165-175)

      The G20 is the self-appointed “premier forum for international economic cooperation.” As such, it seeks to be a steering committee for the global economy, born of a need to fight the Great Recession but with larger aspirations: to avoid crises and establish a foundation for strong, sustainable, and balanced growth. The nineteen countries of the core group represent some 80 percent of global GDP, suggesting that the G20 has sufficient economic mass to provide collaborative, coordinated responses to shape the global economy.

      Why should a global steering committee care about development? There is a moral and strategic economic rationale that...

    • 15 Laying the Foundation for a Long-Term G20 Work Program on Development
      (pp. 176-190)

      Korea took an important step in placing development firmly on the agenda of the G20 summit in November 2010. A Working Group on Development was established at the Toronto meeting in June 2010 and brought forward specific proposals in Seoul. Although the subject will receive additional prominence, development has been an important thread throughout all of the G20 summits, including London, Pittsburgh, and Toronto.¹ There are strong links and many cross-references between the G20 process and others, including, among others, the G8, the UN Millennium Development Goals summit, the trade talks, and the climate change talks. The argument can roughly...

    • 16 The G20 and Development: From Financial Stability to Sustained Growth
      (pp. 191-200)

      The ascendance of the G20 to holding summit meetings at the leaders’ level (L20) seized on the urgent need to address the world economic meltdown triggered by the subprime mortgage crisis in the U.S. housing market, in 2007. Although the G20 finance ministers and central bank governors group was established back in 1999 following the Asian financial crisis, with the Great Recession of 2008–09 it has evolved into what it calls the premier forum for discussion among major industrial and emerging market countries of key issues related to global economic stability and growth.

      During its first year, the L20...

    • 17 Infrastructure and Development: A New Area for International Cooperation
      (pp. 201-208)

      I would like to put forward that the time has come to include infrastructure on the international policy agenda of developed nations in support of growth in developing countries. Based on extensive experience accumulated during Chile’s democratic governments, from 1990 to 2010, I illustrate the impact that a sound infrastructure plan has on growth and equity and how developed countries and companies can invest and build partnerships with the public sector and private local firms. New ideas for economic development should be addressed by the G20. The G20 must operate “as a premier market place for development paradigms” (Lim 2010,...

    • 18 Sharing Knowledge for Development
      (pp. 209-216)

      Composed of advanced industrial nations and leading developing countries, the G20 provides a great opportunity to approach development issues from new directions. Whereas advanced industrial nations regard their own development as an achievement of the past and tend to take an aid-centric approach to international development, leading developing countries consider development a current policy challenge for themselves as well as for other developing countries and tend to adopt a growth-centric approach. In addition, leading developing countries are playing an increasingly important role in providing official development assistance (ODA) and setting up programs to share their own development experience and knowledge...

  10. PART V. The G20 and the System of International Institutions

    • 19 IMF Legitimacy and Governance Reform: Will the G20 Help or Hinder?
      (pp. 219-223)

      The global financial crisis coincided with and was preceded in some degree by an IMF crisis. The IMF crisis, which involved the relationship between the G7 and the IMF, was in part a result of neglected governance issues, particularly on the part of the G7. Those issues still exist, and they need to be addressed by the G20; if they are not, they will fester again. The question becomes whether the G20 will be a help or a hindrance in addressing the issues of IMF legitimacy and governance.

      The G20 has described itself as the premier forum for international economic...

    • 20 How the G20 Can Break the Stalemate in the Reform of the Multilateral Development System: Proposals for Action
      (pp. 224-235)

      Prior to the creation of the G20 summit forum, the much-needed reform of the global governance system faced a stalemate.¹ All major global institutions—the United Nations and its manifold agencies, the international financial institutions, and the many other multilateral and regional institutions that had developed since World War II—confronted a crisis of legitimacy due to serious questions about their representativeness and effectiveness. But there were no drivers, internal or external, that could bring about real change in the governance of the major institutions.

      The perception that only the leaders of key countries could break the stalemate was one...

    • 21 The United Nations and the G20: Synergy or Dissonance?
      (pp. 236-246)

      This chapter assumes that to achieve effective global governance, the world needs both the nascent G20 and the sexagenarian UN to succeed and that the success of each can be greater if the two cooperate. The chapter examines in summary form some of the main factors in play between the two.¹ It makes a plea for perspicacity and wisdom from G20 members vis-à-vis the UN, so that they do not inadvertently undermine the institution as the new group evolves, and for open-mindedness and good sense on the part of the non-G20 UN members, so that they do not discourage cooperation....

  11. PART VI. New Dynamics of Summitry and Institutional Innovations for the G20

    • 22 The Cultural Foundations for the New Dynamics of Summitry
      (pp. 249-256)

      The central quest of this volume is to assess the degree to which the newly created sequence of G20 summits will make the transition from crisis committee to global steering committee. This is potentially a transformative moment in summitry. The G20 could not only replace the G8 as “the premier forum for international economic cooperation” but also assume more global responsibility on a broad range of issues and, further, generate a new kind of global leadership. For the G20 to become an enduring global steering committee, it will have to succeed in its role as crisis committee to have credibility,...

    • 23 The G20: Shifting Coalitions of Consensus Rather than Blocs
      (pp. 257-264)

      The emergence of the Group of Twenty (G20) marked a watershed moment in global governance. Since the end of the cold war, global forums had consistently failed to reflect shifts in global power. But the G20 now allows major established and emerging players to meet exclusively in a setting of formal equality—a setting that is not offered by the two-tiered Security Council or the international financial institutions, which have weighted voting systems.

      The emergence of the G20 acknowledges that global governance cannot be accomplished by the West alone, and it provides a flexible framework in which established and emerging...

    • 24 The G20 and Regional Dynamics
      (pp. 265-274)

      In many of the original conceptualizations of the G20, regional bodies were viewed as being complementary to the “hub” model for this mode of summitry at the leaders’ level. That positive image was strengthened by the presence of key regional drivers within the G20. All members of NAFTA were included, each of the EU4 (the United Kingdom, Germany, France, and Italy), plus Japan and the BRICs (Brazil, Russia, India, and China). Additional space was made available for Turkey, Saudi Arabia, South Africa, Australia, Indonesia, South Korea, and Australia, making the forum global in its reach. This structure allowed for the...

    • 25 A G20 “Non-Secretariat”: President Nicolas Sarkozy’s Conversations with Philosopher Lao Tzu, Strategist Sun Tzu, and Clio, the Muse of History
      (pp. 275-282)

      A little known fact is that deep in the cavernous basement of the Louvre in Paris, there exists a time machine. It is a closely held secret; the machine is made available only to the president of France, restricted for use to help resolve only the most intractable problems. President Sarkozy, host of the 2011 G20, decided to use the time machine to go back to 495 BC to consult the wise Lao Tzu at the height of his powers. What follows is the transcript—any errors or omissions are the fault of the translator, working from Mandarin and French....

  12. PART VII. The Leaders, Their Publics, and Communications

    • 26 Public Attitudes in G20 Countries
      (pp. 285-298)

      The G20 met in Seoul in November 2010 at a time of widespread despair among the publics in G20 countries. In the wake of the global financial crisis, people are hurting, unhappy about the way that things are going in their societies, disconsolate about the state of the economy, and yet generally hopeful about the future. Most fault their government for the bad economic times and think that governments are doing a poor job of coping with current troubles. There is, however, widespread support, especially in the West, for more financial regulation. Faith in capitalism and globalization still remains strong....

    • 27 G20 Summitry: Domestic Leadership in a Polarized and Globalized World
      (pp. 299-303)

      In the wake of the global financial crisis and Great Recession, the G20 emerged as an important institutional instrument for addressing critical global economic problems. The substantive challenges facing G20 leaders—not least among them fashioning policies that deliver on the promises of the Framework for Strong, Sustainable, and Balanced Growth—are daunting. A central component of the overall challenge, however, is managing the complex interplay between domestic politics and global diplomacy.

      The domestic politics of global cooperation are inevitably difficult. Globalization produces gains and losses, winners and losers. National interests and preferences are shaped through political processes—dominated by...

    • 28 The G20 Takes Center Stage as a Twenty-First-Century Leadership Forum
      (pp. 304-311)

      Like many of us, I wear a variety of hats: in my case, that of a former government official; of a businesswoman who consults around the world and works in investment in emerging markets; of incoming chair of the board of Oxfam America, an NGO that pursues a rights-based approach to eliminating poverty; and of mother, wife, and citizen of my country. I also recognize that those of us involved in this volume are a unique group with respect to our level of intellectual interest in the G20. I think that it is safe to assume that most people are...

    • 29 Successful Communications Strategies for G20 Summits
      (pp. 312-317)

      In November 2011 the G20 will celebrate its third anniversary as a group that meets regularly at the head-of-government level. Having started this phase of its life in the middle of a global financial crisis, it is evolving. The G20 is now less an emergency task force and more a steering group and discussion forum for the policy framework governing the international economy, trade and financial regulation, and more general questions of international relations.

      The biggest mistake that its communications strategy could make, in my view, is to operate as though the world were still deep in crisis and an...

    • 30 A Healthy Fear Factor: The Media as Action-Forcer at Summits
      (pp. 318-323)

      If you wish the G20 well—and who doesn’t?—then you should hope that the media will be hard-nosed and probing, if not downright cynical, in their coverage of G20 summits. Indeed, one of the biggest favors that the media could bestow on the G20 would be to produce a few scathing headlines at each summit lamenting that the gathering is plagued by disarray, or proclaiming that the summiteers are producing little more than photo-ops, or pointing out that important issues are going unaddressed.

      Calling on the media to make such assertions may seem counterintuitive, to say the least. Politicians...

  13. CONCLUSION: Priority Innovations and Challenges for the G20
    (pp. 324-332)

    A theme of this volume is that the G20 at the leaders’ level was brought into being to address the current crisis, which is in fact a three-dimensional crisis: an economic crisis that has created acrisis in confidencein markets that has affected nearly everyone on the globe; acrisis in public trustin political leaders, manifested in opinion polls in many countries; and acrisis in faithin the capacity of the system of international institutions to avoid crises and better represent public concerns for financial stability, growth, and development.

    To address the three dimensions of the crisis,...

  14. Contributors
    (pp. 333-336)
  15. Index
    (pp. 337-352)
  16. Back Matter
    (pp. 353-354)