The G20 After Hamburg

Blog Series: What remains of the G20 Hamburg Summit?

Today people ask what the G20 is for. The answer is far from straightforward. With no written mandate, the G20’s value is in whatever it does. But to many, G20 action now seems arcane or ineffective, not worth the effort of large scale summitry. In this blog I attempt to show that the G20 has made and still can make a difference. It offers some guesses as to why doubts persist. And it gives a perspective of how the G20 might evolve.

 

To make those points let us first look back at the beginnings in 1999. What did the G20 achieve, how did it change over time, and why? Then we use a current example: How does the G20 engage with issues like the 2030 Agenda or the Paris Climate Agreement and what does that engagement mean for the way it works? This piece was written only weeks after the G20 summit in Hamburg and the author was involved in its preparation. All arguments and opinions in it may suffer from the resulting biases.

The birth of G20 from the spirit of finance

1999, in the wake of the Asian financial crisis, G7 Finance Ministers established “an informal mechanism for dialogue among systemically important countries within the framework of the Bretton Woods institutional system”. That became the group of G20 Finance Ministers and Central Bank Governors issuing their first Communiqué in Berlin on December 16th, 1999. Together they looked at what G20 members and the international community could do to protect the global financial system. Their choice of measures was clearly marked by the experience of that crisis: Building shock absorbers into national balance sheets, strengthening sovereign debt management, avoiding implicit guarantees and unsustainable exchange rate regimes. From the start, the G20 acted on the interdependence between nations and took responsibility for a global good. But in 1999, this was still left unsaid. At first sight the G20 Finance Ministers agenda looked like they lent themselves only to professional economic judgment, not political choice. After a crisis especially, knowing your way around necessities is supposed to count more than having ideas about how things should be. There was strong reliance on the Bretton Woods Institutions (BWI) and technical groups such as, later. the Financial Action Task Force (FATF). Ongoing observation of economic developments played a larger role than discretionary agenda setting. All those features still mark the general appearance of proceedings in the G20 Finance Track.

There was controversy in the late nineties as to whether BWI responses to the Asian financial crisis were appropriate. But the role of the G20 was not very broadly contested. Many welcomed it as a more inclusive forum and middle income countries were quick later to use it for gaining additional shares and more voting power in the BWI. Most G20 Finance Track outcomes could be framed as fixing problems rather than taking sides. This functional technocratic approach must have helped building consensus because it did not openly touch on contentious political issues. While many G20 Finance Track outcomes may be opaque to the wider public, that does not hurt as long as that public trusts in the underlying professionalism of those outcomes. People might be content with such processes as long as they rely on the decision makers in charge. This effect also avoids the elevated or diffuse expectations that high profile initiatives sometimes draw.

The G20 Turns Openly Political

Much has changed since then. After 2008 when the G20 again managed a crisis, the sense of urgency receded. Having become a leaders group, the G20 began taking on items far beyond finance, across the political agenda. With rotating presidencies this choice was in part driven by the chairing country’s domestic politics. The G20 was no longer limited to issues that would still be important without it. It became useful as an amplifier for a wide range of policy contents as long as they had an arguable international import. With the global financial crisis out of the headlines, questions about the G20’s legitimacy were more vehemently asked – and often answered in terms of the chairing country’s current policies. Every country has to produce legitimacy in its own way.

While the prospect and the experience of chairing raised awareness of the G20’s value in a growing number of member countries, not every topic equally appealed to everyone. This could have been expected, given those topics’ roots in different domestic policy environments. Consensus grew thinner. The G20 operated at various levels of effectiveness, as documented in the Accountability Reports issued by the G20 Development Working Group (DWG). But overall, many important achievements were made, particularly on development issues. Two more recent developments eventually led to the challenge that became visible at the Hamburg summit: A less coherent G20 facing more ambitious tasks.

 A Less Coherent G20 Facing More Ambitious Tasks

First, public opinion in some countries became unsure whether professionals were actually in control. Decision makers did not anticipate the global financial crisis nor do they now seem to have a handle on all of the technological changes to come. Lower trust in policy relevant professionalism meant less tolerance for opacity and more perceived demand for high profile leadership. Credibility became an issue. The defensive nature of the G20’s response probably did not help. Over time, they added more adjectives to their growth goal (now it is “strong, sustainable, balanced and inclusive”), without seeming to change too many rules of the game. This made them look apologetic about their core business, and that much less convincing. The G20 did make a stand for economic reason when it warned against the effects of Brexit in the G20 Finance Ministers and Central Bank Governors Communiqués adopted in Shanghai on February 26th, 2016. But in doing so it took sides in an unresolved debate within one of its member countries. The G20’s use as a supporter for incumbent governments’ policies was now visible for everyone. It was only a small step until parts of the G20 agenda became openly dependent upon individual member states’ election outcomes.

Growing skepticism in OECD societies also affected the G20’s capability to build consensus. As long as the vicissitudes of global integration mainly hit emerging and developing countries, its premises had largely gone unquestioned. Only when OECD middle classes also began to suffer, debates on where globalization was going gathered steam. This difference cannot have escaped the emerging country members of the G20.

Second, the G20 took an active role in a script very different from its previous work. The 2030 Agenda and the Paris Climate Agreement both call for continuous transformative change across all policy areas. The G20 knew continuity before, managing the global financial system with a view to restoring it to a “normal” equilibrium. It also brought about limited transformation through single discrete initiatives such as the Agricultural Market Information System (AMIS) or the shift in voting power at the BWI. But it had never combined continuity and transformation across policy areas. That could have limited the opportunity for subsequent presidencies to set their agenda in a way that specifically resonates with their own people. The premium on flexibility had actually grown with politics in many OECD countries becoming more volatile. In addition, the very cross-cutting nature of the 2030 Agenda and the Paris Climate Agreement went against the old professional sources of G20 legitimacy. There is no master of all trades.

So the G20 had to evolve in order to solve problems, not to preserve its character. Not responding to the 2030 Agenda and the Paris Climate Agreement would have left the group permanently diminished. But the G20 had to come as it was. Not every member was equally committed to every item even of its current agenda. And not every item had broad support in in all G20 societies. The G20 could then easily (if unfairly) be framed as ineffective or disconnected, depending on the day’s mood. It was in this imperfect state that the G20 had to take on the systemic tasks inherent in the 2030 Agenda and the Paris Climate Agreement. While those are far from accomplished, in Hamburg the G20 has arguably stood up well.

 Hamburg – An Interim?

At the Hamburg Summit the G20 recommitted to “further align” their action with the 2030 Agenda and agreed on the Hamburg Update comprising collective measures across G20 policy areas that contribute to the Sustainable Development Goals (SDG). What the G20 does for the 2030 Agenda is now found in this single document, to be updated by successive presidencies. People can use it to see how the G20 engages with the 2030 Agenda and to hold it to account. The G20 itself can use it to examine what they have achieved and what still needs to be done. So some of the elements needed for continuous transformative change are now in place. We will see how far the G20 will take them. The United States (US) is still reviewing those actions in the Hamburg Update that were agreed before 2017. Given the exposure of parts of the G20 agenda to domestic politics, one could imagine other members raising similar reservations in the future. Maybe this is the flip side of the 2030 Agenda’s legitimate claim to rule at home as well as abroad. The risk will probably be there as long as different ways to achieve the SDG are not articulated across the political spectra in G20 member countries. Without that, the 2030 Agenda will be perceived as being either politically irrelevant or just part of a partisan agenda.

While all G20 members agreed to the Hamburg commitments on the 2030 Agenda, the US has reserved its position on the G20 Hamburg Climate and Energy Action Plan for Growth (CEAP). Just as the Hamburg Update, the CEAP takes a medium to long term perspective to all of its actions and lays the ground for continuous transformative change towards the goals of the Paris Climate Agreement. But for the time being, it is difficult to attribute CEAP implementation to the entirety of the G20. Tactical behavior of some G20 members around the Paris Climate Agreement, from finance to market economy status under the WTO, may indicate further uncertainty.

But overall, the G20 has signed up to continuous transformative change. One of the things to watch is whether it will now make the necessary adjustments, including to its own ways of working. Given leaders strong language on the 2030 Agenda, it is fair to construe every action in the Hamburg Update will have to be consistent with all of the SDG. The ongoing G20 commitment to “further align” may be read as acknowledging that this may not yet be the case everywhere – no surprise, given that longstanding G20 programs have found themselves in the 2030 Agenda context only since 2016. The question then is how the G20 can make implementation consistent with the 2030 Agenda going forward. Designed as a number of freestanding sector initiatives, the G20 structure is not originally made for that. Even now, new G20 policies like the Action Plan on Marine Litter offer topical possibilities to leverage several G20 working groups, but do not give a procedure to systematically act on them. Annex A to the G20 Action Plan on the 2030 Agenda for Sustainable Development says there is a role for the DWG in aligning G20 measures to the 2030 Agenda. But it does not define that mandate in very clear terms. The preparations on the Hamburg Update across government ministries has raised awareness of the 2030 Agenda and the need to connect the dots. The challenge now will be to strengthen that cooperation across working groups without further compromising the informal nature of the G20.

 The G20 After Hamburg

The Hamburg Summit has reminded us of how urgent it is to strengthen international cooperation and the G20 in particular. But it has also shown us the limitations to certain ways of approaching multilateralism. Professional sector work and open politicization have taken us far. But both carry risks and neither can by itself fuel continuous transformative change. The following considerations take on the tools needed for that. They consciously focus on the institutional features the G20 need to bring about change, not on the change process itself.

First we must stop seeing the G20 as just another vehicle to take our favorite policy to its next destination. Multilateralism is about remaining different but still being together. The G20 can only begin formulating policy content if a group identity is already in place – and if that group identity is robust enough to carry that content. Suggestions to change the G20 membership need to be seen in that light. The existence of a group of nations that actually works may even be seen as a value in itself. And given that no one can tell the political or sector nature of the next crisis, the G20 may offer something of an insurance.

Second, it is important to control expectations. The G20 frames itself as the “premier forum for international economic cooperation”. But the mere fact that it takes an issue on board does not mean it will solve every aspect of it through its own informal structures. Often, the value is rather in giving momentum to the work of international organizations. It is by the way striking how questions about legitimacy always gain ground where the G20 seem to reach beyond what they can quietly deliver. While ambitious language on the quality of growth is definitely needed to give direction, the risk here is that everyone feels the G20 has now endorsed his or her own world view and will remake the global economy in that image. The G20 may become a projection sheet offering space for misperceptions. Some misunderstandings eventually breed cynicism.

Third, procedures must fit to intended outcomes. There is room in the G20 for both informal, one-off and bilateral dialogues among leaders as well as for continuous engagement and follow up at the working level. Different topics require different procedures. Not everything needs a dedicated working group, a specific mention in the leader’s communiqué or a formal reporting process. If continuity is the goal, G20 members first need to build a robust consensus among themselves (and in some cases even make sure there are sufficient levels of support throughout G20 societies – another reason for the importance of G20 engagement groups). Members may even have to compromise on domestic policy goals. This is the place of the various G20 substructures. And given that discontinuity is still part of the G20’s DNA, many items of the G20 agenda gain additional steadiness through formal engagement of international organizations, typically in implementation, financing or reporting roles.

(The author would like to thank Moira Feil for a thoughtful review and many good ideas.)

Previous blogs that appeared in the series on the outcomes of the G20 Hamburg Summit:

A step to the side: the G20’s climate dance, by Brigitte Knopf

Did the G20 Hamburg Summit advance 2030 Agenda implementation?, by Imme Scholz and Clara Brandi

What remains of the G20 Hamburg Summit?, by Axel Berger

From Taormina to Hamburg: A fruitful G7-G20 relationship?  by Franco Bruni

Empowering women means building a stronger, more balanced, more inclusive and fairer global economy, by Paola Subacchi