What is the G20 meeting and is it useful? Since its creation, the key impetus of the meetings has been to get the most important leaders of the G20 in a room to decide on ways to promote economic growth and help solve the economic, political, and social issues of the time. With so much going on around the globe today, there is no shortage of issues to discuss. From the Ebola crisis and lackluster economic growth, to conflicts in Ukraine, the South China Sea, Syria and Iraq, the few days set aside for the meeting simply are not enough.
Beyond the headlines, there was hope that the global leaders would be able to commit to means of increasing economic growth by 2 per cent GDP by 2018. The hard work toward this started in Cairns, Australia back in September at pre-summit meetings, where hundreds of proposals were put on the table that could add growth to the global economy. While it is useful for world leaders to be hopeful, I'm afraid this may just be overly ambitious.
A 2 per cent growth increase target is ambitious considering the currently slowdown of the global economy. With somber growth news coming out of China, Japan, Brazil, Turkey, Russia, and even Germany, it seems difficult to see what country could lead this ambitious target. All eyes will be on the United States as one of the only leading G20 countries that seems to be reporting positive numbers in both jobs and growth.
So does this target setting serve any real purpose? Well, even an ambitious target could be a helpful tool as a signalling effect for the global market and for investors. After all, one of the key obstacles to global growth is private sector confidence in the global economy. News headlines of continued crisis, certainly does not help global investor confidence. The private sector remains timid in expansion of its investments with continued fear over a global health epidemic, volatile oil prices, and a stunted U.S. political process in Washington.
One of the less spoken about benefits of the G20 meetings is the can-do mantra that helps boost private sector investment. This means we are likely to see a positive signalling effect to the markets from the very act of having world leaders meet. While big global commitments are less likely to materialize at these meetings, we could see some progress on trade talks, particularly bilateral impediments among some G20 partners. I think there are plenty of side deals which could help bring on success. The Chinese and American climate change deal on lowering emissions is an excellent example of why these global meetings are so valuable.
The greatest advantage of the G20 is its ability to coordinate policies in the face of global crises. Hence it was most effective after the global financial crisis. However, when things are simply puttering along, the G20 is less motivated toward drastic change. Understandably today, the mood of many G20 countries is to focus on their own domestic economy. With unemployment and slow growth, most G20 countries are introverted at the moment. In absence of a crisis, many of the G20 meetings will be little more than photo ops, unlikely to result in any profound policy moves. But these photo ops are still important and valuable in signalling to markets and the global community that the G20 leaders have their eye on the ball.
This article first appeared on the CIGI Blog, Wealth and International Politics.
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