What is the G20?
Why the G20?
The G20 was created in December 1999 in response to the financial crises that hit the emerging countries at the end of the 1990s. In the beginning, the finance ministers and governors of the central banks of industrialized and emerging countries met once a year to facilitate international economic concertation.
Confronted with the most serious economic and financial crisis since the Second World War, the G20 was transformed in late 2008, at the instigation of France, at the time serving as President of the European Union, into an economic steering authority, bringing together the major public leaders at the highest level. During the founding summit in Washington in November 2008, the heads of state and government reached an agreement on an exceptional action plan to prevent the collapse of the financial system and the global economy.
Since then, the G20 has met on a regular basis: London in April 2009, Pittsburgh in September 2009, Toronto in June 2010, and lastly, Seoul in November 2010. It has become the primary forum for economic and financial cooperation, to ensure world growth based on healthy, solid foundations.
Who are members of the G20?
The G20 accounts for 85% of the world’s economy and 2/3 of the world’s population.
It is composed of Argentina, Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Mexico, Saudi Arabia, South Africa, South Korea, Russia, Turkey, the United Kingdom and the United States.
Each year, the members of the G20 can decide to invite a limited number of other countries and regional organizations to their summits.
To conduct its work successfully, the G20 depends on the technical expertise of international organizations, in particular, the International Monetary Fund (IMF), the World Bank (WB), the Organization for Economic Cooperation and Development (OECD), the International Labour Organization (ILO), the World Trade Organization (WTO), the United Nations (UN) and the Financial Stability Board (FSB).
How does the G20 function?
The G20 is based on an annual rotating presidency system that is not very formalized. Each year, a G20 member country is responsible for organizing and furthering preliminary negotiations for the summits of the heads of state and government all year long. France has the honour of shouldering this responsibility for 2011.
The decisions of the heads of state and government are prepared by their personal representatives (“Sherpas”) and by the finance ministers and governors of central banks.
The presidency of the G20 can also organize specialized thematic meetings. Accordingly, in 2011, France will organize a G20 of labour and employment ministers and a G20 of agriculture ministers.
What are the results?
The concerted action of the G20 has made it possible to absorb the shock of the growth and employment crisis and restore confidence sooner than forecast by analysts.
Indeed, the G20 countries have deployed completely new resources to support the global economy: massive and coordinated fiscal stimulus plans, central banks’ injections of liquidity, measures supporting banks’ credit activities, considerable reinforcement of international organizations’ abilities to aid emerging or developing countries.
However, the G20 has also tackled the roots of the crisis, which has a dual origin: the accumulation of global macroeconomic imbalances and financial regulation failures.
To reduce global imbalances, the G20 has created a “framework for strong, sustainable and balanced growth”, to refocus national macroeconomic strategies in a direction that is more favourable for the world economy.
The G20 reached an agreement on an unprecedented financial regulation plan, on the scale of the extent of the financial crisis. The field of monitoring and financial surveillance has expanded to high-risk players, products, activities or behaviours that until now were subject to little or no supervision in the sector.
Finally, the G20 has brought about in-depth change in terms of economic decision-making methods at the global level, in particular by reforming the governance of the IMF and the World Bank.
The G20 must now get through the post-crisis ordeal and demonstrate its ability to coordinate major countries’ economic policy strategies.
Updated on : december 2010