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Why the World Needs the G8
2010 Catherwood Address by John Kirton, Director, G8 Research Group
March 25, 2010
On November 14-15, 2008, the leaders of the world's 20 largest countries held their first summit in Washington DC, in response to the great "made-in-America" financial crisis that erupted two months before. Within six months of their Washington meeting they gathered again in London, on April 1-2, 2009. Less than six months later, they met for a third time, in Pittsburgh, on September 24-25, 2009. There they proclaimed that their Group of Twenty (G20) summit would be the permanent, primary centre of global economic governance for the world.
The birth of G20 summitry has given rise to much assumption and advocacy that the older, smaller Group of Eight (G8) would and should soon fade away. After all, it is the new G20 that alone contains the rapidly rising powers of China, India and Brazil, and a much more diverse collection of countries from around the world. It thus presumably possesses the representativeness, legitimacy and effectiveness that the G8 lacks.
Such claims are not new. The G8 has faced them since it started work in 1975. But the new reality of a G20 rival has intensified the complaints. It is thus timely to address the core question: Why does the world need the G8 now?
Tonight, I offer fourth basic answers.
First, as an international institution, the G8 is a full-strength, democratically devoted club, whereas the G20 is still a collection of convenience concentrating on a single crisis that could soon disappear.
Second, the G8 has proven it can perform all the tasks now divided between both it and the G20, while the G20 has yet to show it can do even its own.
Third, the prospects are that the G8 and G20 summits in Ontario in June will see the G8 produce several clear successes, while the G20 will struggle to generate even one.
And fourth, G20 governors know that if their G20 is to work, it must adapt to, become like, and be led by the G8.
Let us look more closely at each of these answers, in turn.
First, the world needs the G8 because it is a different kind of international institution than today's G20 in many important ways.
The G8 was created from a series of shocks that assaulted the world between 1971 and 1975 - in finance, trade, energy, nuclear proliferation and wars in the Middle East and Vietnam. In response, the leaders of the world's major market democracies took direct control to provide the comprehensive, coherent, much changed governance needed to cope.
Their new club was dedicated to the pre-eminently political, transformational mission of intervening in the internal affairs of all states to promote open democracy, individual liberty and social advance.
Its leaders meet annually around a small table, where they can look one another in the eye, whisper in each other's ear, hold hands if they want to, and spontaneously bump into one another when they go to "pump iron" in their hotel's gym.
Their institution has evolved to give many ministers, officials and now many in civil society an influential role.
Their membership has doubled, from the four Atlantic powers that first gathered in July 1975 to the eight that have met since 1998, along with the ever expanding European Union that now has 27 states.
Participation by invited outsiders has brought dozens of other countries and international organizations into the annual event.
The agenda embraces most issues across the economic, social and political-security spheres.
Accountability has improved, as members now keep track of their implementation of the many promises they make at the G8.
Finally, the G8 has impressive, stress-tested durability. It has now governed for 36 years through many massive changes, including stagflation, recession, non-inflationary growth, intense globalization, the eruption of the new Cold War in 1979 and the post–Cold War victory in 1989.
G8 leaders never said their club would last forever, preferring to prove its value by their deeds ever year. But for the global community the G8 has become the club to count on, through good times and bad.
The new G20 summit is much different.
It was created from a single kind of shock – a financial crisis in 1999 when its finance ministers' forum was founded and again in 2008 when its summit began.
The G20's core mission is to save the status quo by providing financial stability to sovereign states and the markets they share.
G20 leaders meet in a room the size of a large hockey rink, each huddled behind a separate desk around the boards. Here they can only whisper to their own finance ministers sitting beside them and read prepared speeches to those at the other end of the rink.
They still institutionally rely on their finance ministers at their side and the frequent meetings these ministers and central bank governors have on their own. Civil society as a whole is left out.
Membership has remained frozen at 20 for all 11 years of the G20's life.
Participation has grown to generate 32 leaders at the last G20 summit in September, but is still smaller than the 40 assembled at last G8 summit last July.
The G20 agenda is confined to a small set of economic subjects, with very few forays into other spheres.
Accountability consists only of appendices attached to its communiqués, which fail to reveal which country has kept its promises or not.
Finally, the G20's durability remains in doubt. Many wonder whether it will remain in business after the financial and economic crisis that created it has passed. Others ask if it can confront the many other challenges arising in a fast-changing 21st-century world.
To proclaim within its first year that that it will govern forever as the world's primary global economic forum shows splendid self-confidence. But such words do not make it a fact.
The second reason the world needs the G8 is that it has proven it can perform all the jobs it now shares with the G20, while the G20 has yet to show it can do even its own.
On the central criterion of "mission accomplished," the G8 has helped generate the democratic revolution that swept the world when and after the Cold War was won. Along with its G7 finance ministers' forum, the G8 has helped preserve financial stability after the monetary and debt shocks of the 1970s, the stock market crash of October 1987, the Asian crisis of 1997-99 and even the American-turned-global crisis now. In contrast, during its first decade, the G20 at the finance level did not predict or prevent the current financial crisis, and the new G20 summit has not yet solved it for good.
On the first more specific task of domestic political management, G8 leaders have often used their summit to help them get re-elected at home. Brian Mulroney did so when the Toronto G7 summit he hosted in June 1988 helped him win his second majority government four months later. In the G20, it seems unlikely that British prime minister Gordon Brown can use the summit he hosted in London to secure his first electoral victory as PM. Time will tell if Stephen Harper can use his twin summits this June to secure a majority mandate, and whether it would be his solo G8 in Muskoka or his co-chaired G20 in Toronto that would bring him that reward.
On the second task of deliberation, the G8 summit offers leaders two full days to discuss any subject of an economic, social or political security sort. The G20 summit offers less than one day to do economics alone.
On the third task of direction setting the G8 has pioneered core principles such as open democracy, inflation reduction for growth and jobs and the need for climate change control. The G20 has added little, even in its limited economic sphere.
On the fourth task of decision making, the G8 now produces about 300 specific commitments at each summit. The G20 summit, with half the time, generates about 100, or only one third as much.
On the fifth task of delivering those decisions, G8 members now comply with their commitments about 75% of the time. The G20's grade is only 23%, with the G8 members inside doing much better than the non-G8 ones.
On the sixth task of developing global governance, the G8 has become a full-strength system at the leaders', ministerial, officials and civil society levels, with a defined hosting order, frequency, timing and format. The G20 has not, making it an institutionally slight and fragile forum.
Finally, G8 has generated several striking successes during its first 36 years.
In its core political-security sphere the G8 has helped stop international skyjacking, apartheid in South Africa, and an erupting genocide in Kosovo and win the Cold War.
In fields it now shares with the G20, the G8 instituted in 1979 the most ambitious and effective regime for climate change control the world has ever seen. In contrast, the G20 still struggles with the small segment of climate finance.
The G20 in its core sphere cannot yet confidently claim victory in securing economic recovery through massive government spending and monetary stimulus. It will probably say so at its Toronto gathering in June.
The third reason the world needs the G8 is that prospects for the G8 and G20 summits in Ontario in June suggest the G8 will produce several clear successes, while the G20 will struggle to generate even one.
The G8 summit in Huntsville on June 25-26 seems destined to delivers all four of its host's priorities.
The "top priority" of maternal and child health should receive strong support from Britain, the United States, and civil society throughout the G8 and beyond.
The second priority of Haitian recovery will build on Canada's leadership at the two donor conferences already held and receive strong support from the U.S. and France.
The third priority of food security flows well from both these initiatives, and from Canada's credibility as the first G8 member to deliver the money all promised for the G8's summit's signature success on food security last year.
The fourth priority of making accountability the "defining feature" of the summit is strongly supported by the U.S., the UK and the EU. It should produce comprehensive reporting according to a consistent framework that all stakeholders and their publics can understand.
When the G20 leaders assemble at the Metro Toronto Convention Centre on June 26-27, the prospects are less promising, even with Canada's highly focused approach.
On macroeconomic policy, the Americans, Japanese and others will want to emphasize stimulus to generate jobs, while the Canadians and the bond market will want to highlight the need for exit strategies to control the soaring government deficits and debts that most G20 members have.
On financial regulation, the Europeans' enthusiasm for transaction taxes and bank levies will clash with the preference of Canada, and the many others with unscathed financial systems, on getting the basics of bank capital and liquidity ratios right.
On open trade, the G20 is unlikely to conclude the badly overdue multilateral Doha Development Agenda, reduce barriers within the G20, solve the U.S.-China dispute over currencies and trade, or induce others to follow Canada's unilateral and bilateral trade liberalization steps.
On accountability, despite Canada's best efforts, the G20 is unlikely to create a mechanism to help members comply with their past commitments, in the robust way the G8 will.
The fourth reason the world needs the G8 is that G20 governors know that if their new group is to work, it must adapt to, become like, and be led by the G8.
The G20 is already adapting to a G8 that its leaders want to live on.
At L'Aquila last summer, G8 leaders decided to hold subsequent summits, not just in Canada in 2010 to complete their standard hosting cycle, but also in France in 2011, where a new eight-year hosting cycle would naturally begin.
The new U.S. president Barack Obama agreed, having seen at his first summit abroad – the G20 in London – how the G20 itself worked.
At the Pittsburgh Summit President Obama chose to host last September, G20 leaders agreed that their now permanent G20 summit would be only the primary, not sole, global governor of economics alone and nothing else.
They also agreed that their next G20 summit would take place in Canada, in tandem in time, place and hosting, with the long scheduled G8 one that will go first.
The G20 leaders agreed again that their 2011 summit would be hosted by France, the country already chosen to host the G8 summit that year.
Given the G8's long established hosting order, the U.S. is due to host the G8 in 2012. President Obama should see the advantages in doing so at the usual time in mid summer, a few months before his intended re-election in November that year.
The G20 also knows that it must become like the G8 if it is to work.
At their first meeting this year, the personal representatives or "sherpas" of the G20 leaders agreed that G20 summits should take place once a year, just like the G8 since its start.
Leaders alone would meet together, rather than with their finance ministers always by their side.
Leaders alone would deliberate, with the heads of invited multilateral organizations speaking only when spoken to, when a leader asked these international civil servants for technical advice.
Ministerials and working groups would be kept to a minimum, arising only as the agenda required.
Membership would be fixed at 20, with participation limited to only one or two additions chosen by the host each year.
No secretariat was needed, because the leaders were quite capable of governing on their own.
The agenda would be limited to economics, even though the sherpas rushed to issue a statement on the Haitian earthquake in response to the immediate crisis of the day.
Communiqués would be concise and clear.
Accountability would be strengthened by monitoring compliance through a private website and by two-country teams.
Above all, the time has come to stop talking about institutional architecture and focus on substance – on delivering the G20's outstanding promises and demonstrating real results.
Finally, G20 and G8 governors both know that the G20 must be led by the G8 for the foreseeable future if the G20 is to work – for crisis response, financial regulation, and most everything else.
At the height of the financial crisis in October 2008, it was the G7 finance ministers who tore up their prepared communiqué and produced a new one that served as the guide for what the G20 has subsequently done.[1]
G7 countries contain the financial capital, centers and expertise on financial regulation that the G20 is trying to govern as a core concern.
And G7 members control the executive boards of the International Monetary Fund and the World Bank. They thus control the many other things the G20 wishes to do there – from the Framework for Sustainable and Balanced Growth, through peer review of financial regulation, trade finance, development, to reform of these international financial institutions themselves.
[1] During that period, the G7 finance deputies would start each day with a conference call, and on bad days having another in the evening — and on terrible days having a third conference call in the middle of the night. The intensity and sequence of G7/G8 preparatory meetings at the ministerial and official level show no signs that the G7/G8 will fade away. ↩
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