Modi wants G20 to be catalyst of global change

Going by statistical data, G20, of which India became the president last week, is the world’s most powerful group of nations.

Together, these countries account for about 85 per cent of the World Bank member countries’ Gross Domestic Product and 75 per cent of the global trade. Two-thirds of the world’s billions’ people live in these countries.

On taking over the reins of G20 at the end of the Bali summit, Prime Minister Narendra Modi talked of making it a catalyst of global change. But is it in a position to play such a role?

G20 was brought into being in 1999 by G7. All G7 members are developed countries. Many in G20 are developing countries.

G7 founded the larger group as it felt the need to enlist the support of emerging economies to tackle the recurring financial crises rocking the global economic order. G7 is a predominantly white club. Its lone non-white member is Japan. The US, Canada, the UK, France, Germany and Italy are the other members.

The victors of World War II had planned to check industrial growth of the vanquished to ensure that they did not pose a threat again. That three of the vanquished sit in G7, through which the victors informally regulate the global economy, is one of the ironies of history.

The formation of G20 brought China, India, Russia, Saudi Arabia, Indonesia, South Korea, Brazil, Argentina, Mexico, Australia, South Africa and Turkey, and the European Union into the margins of G7 decision-making.

The larger group was not set up because of an overwhelming desire to have an inclusive, more representative body. It was created to enlist the cooperation of the fast-growing economies in attempts to solve problems as they arose.

There is some information in the public domain on how G7 spawned G20. It indicates G20 was a project initiated by Canadian Finance Minister Paul Martin, along with his German counterpart, Hans Eichel, with the blessings of US Treasury Secretary Larry Summers. Germany hosted the first meeting of G20 and Martin became its first president.

Initially, G20 meetings were at the level of Finance Ministers. Later they were raised to summit level to give the body a political dimension too.

The decision to form G20 was prompted by the growing realisation that G7 and the World Bank system could no longer ensure financial stability and that a broader group of the world’s large economies was needed. But instead of merging its identity in G20, G7 remained in it as a separate group to protect the special interests of the more powerful economies. In a sense, G20 is now the general body and G7 the board of directors.

An academic has provided a disquieting account of how G7 picked G20 members. According to him, a US official and a German official went through a list of countries and decided whom to include and whom to exclude. It is not clear on what basis these officials decided that Egypt and Nigeria did not qualify for membership.

In the 77 years since the end of World War II, the global scenario has undergone vast changes. But the global political system centred on the United Nations and the economic system built around the World Bank and the International Monetary Fund remain with little change in their power structure.

At one stage there was talk of reforming the UN to bring it into accord with current realities. One proposal actively canvassed in this connection envisaged enlargement of the Security Council with the addition of a few more permanent members, who will not have the veto power available to the Big 5 of the immediate post-war period. But UN reform appears to have now gone out of the agenda of the big powers. Many of them have lost their past glory but are eager to hold on to the positions they got on the basis of it.

In the prolonged talks held before the General Agreement on Trade and Tariff expired, the economically powerful nations were able to beat back pressure from the less powerful and establish a new system which suits their purposes.

All this shows that principles of equity and democratic propriety will not persuade those who wield political and economic power at the global level to move towards a more just order unless compelled by changing circumstances.

Modi has not spelt out details of the global change he wishes to promote through G20.

There are differences between the kind of changes a majority of G20 nations may want and what G7 may be ready to accept. Modi’s one-year tenure as G20 president may be too short to resolve the differences and move forward. But it is worth trying.