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Paused at Pittsburgh: the search for the right G-spot

The planet’s constant and continuous search for economic global power consolidation moved one more step ahead when the leaders of the Group of 20 (or G20, a loose collection of the world’s 19 strongest economies and EU) joined hands in Pittsburgh last week. Gautam Chikermane elaborates.

india Updated: Sep 27, 2009 21:04 IST
Gautam Chikermane

The planet’s constant and continuous search for economic global power consolidation moved one more step ahead when the leaders of the Group of 20 (or G20, a loose collection of the world’s 19 strongest economies and EU) joined hands in Pittsburgh last week. And as Prime Minister Manmohan Singh turned 77 on September 26, he has brought India to the group that has designated itself as the “premier forum of our international economic cooperation”. So, apart from putting the city on the world’s business map, the Pittsburgh Summit — the third to host G20 deliberations on the ongoing global financial crisis in less than a year — has paved the way for fast-growing economies such as China and India, but equally Brazil, Russia, Indonesia, South Africa and Australia, to be partners in the creation of the new global financial architecture.

This partnership is not merely intellectual (being part of setting up a new global regulatory structure of banks, financial institutions and those who man them) but also numeric (a greater share in multilateral institutions like International Monetary Fund or IMF and World Bank).

“We established the Financial Stability Board (FSB) to include major emerging economies and welcome its efforts to coordinate and monitor progress in strengthening financial regulation,” the Leaders’ Statement said. “We are committed to a shift in IMF quota share to dynamic emerging markets and developing countries of at least 5 per cent from over-represented countries to under-represented countries using the current quota formula as the basis to work from.” Or appointing the heads and senior leadership of these haloed institutions “through an open, transparent and merit-based process”.

So, as the developing world celebrates its new economic power through the expansion and inclusion of significant economies in the way global finance and economy plays out through the G20, the Pittsburgh Summit has brought with it an expectation on the leaders of the included to think beyond the narrow confines of their countries. And on that front, by keeping the spotlight on regulation, on least developed economies or on the need to continue with the stimulus, Manmohan Singh has proved that India has the intellectual as well as the economic clout to stand up and be counted. Where he has lost out is in his pursuit of anti-protectionism — ironically the biggest challenge to global trade today but one that has fallen from its priority status of No. 4 in the London communique to the 28th spot in Pittsburgh’s big picture (“we will fight protectionism”) and to Para 48 out of 50 among the specifics. The tug-of-war will continue in Canada in June 2010.

Between the cynics who will claim that this recognition of economic power is just a temporary eyewash that will melt away with the end of the ongoing financial crisis and the optimists who look at it as the beginning of a new dawn in international economic relations lies a collective history of the poorer nations with the wealthy that’s more than 45 years old. The Pittsburgh statement concludes a journey that began on June 15, 1964 when 77 developing countries signed on the ‘Joint Declaration of the Seventy-Seven Countries’ on June 15, 1964 in Geneva to get the economic voice of the ‘South’ heard in the UN. The group proposed to promote its economic interests collectively and called itself the G77 with India as a member.

Seven years later, to bring a sharper focus to its economics, the G77 established the G24, with the objective being to highlight the position of developing countries on monetary and development finance issues through periodic meetings of finance ministers and central bank governors.

The developed nations followed four years later, and in 1975 formed the G8, representing the world’s seven wealthiest countries — US, UK, Germany, Japan, France, Italy and Canada — and EU. This took some time coming. It began as G6, grew to G7 and now to G8. There are great similarities between the formation and strengthening of G8 and G20. The G8 was conceived around the global recession that followed the 1973 oil crisis, when the Organisation of Arab Petroleum Exporting Countries (comprising OPEC, Egypt and Syria) embargoed their oil when the US decided to arm Israel in 1973. The greater legitimacy to G20 too has been triggered by a crisis and recession.

But as it remained largely academic, the search for the right G-Spot began in greater earnest in the first decade of the new millennium. In 2005, recognising that the new demographics was quietly and quickly becoming the source of global economic growth, UK prime minister Tony Blair invited Brazil, China, India, Mexico and South Africa to Gleneagles in Scotland for the G8’s 31st summit.

These five countries were also beginning to assert their trading power in world trade, with China and India being seen as laggards that needed to be brought to conclude the Doha round. Blair’s strategy worked and now developing countries are part of a global dialogue and stand on somewhat equal terms. Loosely termed as G8+5, these five developing countries, also called the Outreach Five, participate as “guests” in G8 meetings. With Egypt joining this group last year, the stage is set for the creation of G14.

This inclusion follows a 2001 Goldman Sachs report which argued that the combined economic strength of Brazil, Russia, India and China would be larger than the current wealthiest economies and termed the fast-growing foursome BRIC. The acronym has caught the fancy of think tanks and media and BRIC is almost an official gathering. Much of the economic status that G20 got on Friday was on account of the growth expectations of BRIC countries — notably China’s 7.5 per cent GDP growth and India’s 6 per cent.

So, from G77, through G24, G5, G6, G7, G8, G8+5, G14 and BRIC, has the global search for the G-Spot concluded in G20? I think not. Intense talks are on between the G2 (the US and China) through the April 1, 2009 US-China Strategic and Economic Dialogue to discuss a wide range of bilateral, regional and global issues in the areas of politics, strategy, security — and the economy. Coming up behind, though not very close, is the G11 (I am taking the liberty of baptising the Next-11 as G11 for this piece) — Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, The Philippines, South Korea, Turkey and Vietnam. Like BRIC, these too have been identified by Goldman Sachs in a December 2005 report as holding a huge potential of becoming the world’s largest economies in this century.

Just what are the new entrants going to do on the high table of global finance? The question is valid — along with inclusion has come a responsibility to develop internal markets, reduce export reliance on the developed world, particularly the US, be open to scrutiny by peers. So far, having an economist-leader in Manmohan Singh has added intellectual glamour and respect to India. Going forward, the only way to consolidate this would be through economic growth. Meanwhile, the changed global economic dynamics at Pittsburgh need to be seen as evolution not termination; a journey not the destination. The search for the right G-Spot has not ended, yet.