G20 ‘relatively a new institution established in the recent past, has emerged as a central player in the global financial architecture and an effective contributor to global economic and financial stability.
The G20 traces its history back to the late 1990s when a crisis in emerging economies that had begun in Thailand in mid-1997, widened and intensified through the next two years to affect other Asian countries and spreading to Russia and Latin America. This threat to international financial stability became the motivation for launching a new international group as a permanent forum for dialogue between advanced and emerging economies.
In September 1999, the finance ministers and central bank governors of the Group of Seven countries (the G-7) announced their intention to ‘broaden the dialogue on key economic and financial policy issues among systemically significant economies and promote cooperation to achieve stable and sustainable world economic growth that benefits all.’ This announcement marked the official birth of what subsequently became known as the Group of Twenty countries (the G20).
The establishment of the G20 was reflective of the tectonic shifts in the global economy over past 2 decades. Earlier, the advanced economies had managed to address most global economic issues among themselves through the G-5 or subsequently the G-7. However, through the declining share of these advanced economies in global economy and the growing importance of emerging economies, along with the increasing integration of the global economy and financial markets, it became difficult for G-7 to manage economic threats at global level and the requirement of broadening the scope of international economic and financial cooperation was felt.
The G20 brings together finance ministers and central bank governors from 19 countries: Argentina, Brazil, Mexico, Canada, the United States of America, Australia, China, India, Indonesia, Japan, the Republic of Korea, Saudi Arabia, Turkey, South Africa, France, Germany, Italy, Russia, the United Kingdom, plus the European Union, which is represented by the President of the European Council and by Head of the European Central Bank. The Managing Director of the International Monetary Fund (IMF) and the President of the World Bank, along with the chairs of the International Monetary and Financial Committee (IMFC) and the Development Committee (DC), also participate in G20 meetings of finance ministers and central bank governors ex officio.
G20 members represent almost:
1. 90% of global GDP.
2. 80% of international global-trade.
3. 2/3 of the world’s population lives in G20 member countries.
4. 84% of all fossil fuel emissions are produced by G20 countries
The objectives of the G20 refer to:
1. Policy coordination between its members in order to achieve global economic stability, sustainable growth;
2. Promoting financial regulations that reduce risks and prevent future financial crises;
3. Modernizing international financial architecture.
The first G20 leaders’ meeting took place in Washington in 2008. Further summits were held in London (2 April 2009), Pittsburgh (24-25 September 2009), Toronto (26-27 June 2010), Seoul (11-12 November 2010) Cannes (3-4 November 2011) and Los Cabos (18-19 June 2012). The next G20 leaders’ meeting is scheduled for Spetember5-6, 2013 St. Petersburg Summit.
The G20 is unique in that it operates without any permanent secretariat or staff. Its annual Summits are hosted by the Chair country which is selected from different regions. The G20 finance ministers and central bank governors continue to meet to follow-up on decisions made in these Summits. Each G20 summit is prepared by meetings of Deputies, Sherpa and Finance Tracks. The Sherpa’s Track focuses on non-economic and financial issues, such as development, anti-corruption and food security. The Sherpas carry out important planning, negotiation and implementation tasks continuously. The Finance Track focuses on economic and financial issues.
Another mechanism ‘invented’ by the G20 is a management ‘Troika,’ consisting of the previous, current, and immediately upcoming chairs. This innovation, which is virtually unique among international groupings, has strengthened the continuity of the group. Among its duties, the Troika proposes agenda issues for the G20, selects speakers in consultation with members, and deals with the logistics of meetings. It also gives the current and upcoming chairs ready access to the experience of the previous year’s chairman.
Structural Innovations in G20
The G20 is no more limited to meetings of its Leaders, Ministers and Sherpas only; it has taken initiatives to include voices of representatives from society. These include:
‘The Business 20 (B20) is a meeting of business associations, financial institutions, and the G20 governments.