Emerging economies at the G20: good news for the poor?
To what extent has the presence of emerging economies at the head table been good news for poorest men and women?
The G20 Summit in Washington in 2008 was heralded as a step forward in global economic governance. The old members club of the G8 had been superseded by a more inclusive coalition incorporating the young bucks of the world economy, the so-called emerging economies.
The emergence of the likes of China, India, Brazil, Indonesia, South Africa and South Korea has clearly been important in highlighting the cracks in global economic governance, but arguably less successful in reorienting the agenda to fix them in favour of the poorest.
What impact have the emerging economies had?
First, they have raised the issue of institutional weaknesses. The IMF and World Bank were revealed as woefully ill-equipped to play their role during the crisis, partly because their decision-making structures had failed to keep up to date with the new realities. As a result, the G20 pledged to support reform of these institutions in favour of “under-represented countries”. Some progress was made, but reforms are incomplete and mostly favoured the emerging economies themselves. Those hoping that they would become the ambassadors for all developing countries were disappointed. Africa’s voting share at the IMF remains below six per cent even after recent reforms despite being the continent where these institutions have most business and influence. And as Christine Lagarde seals the top job at the IMF and with Hilary Clinton lining up for the World Bank equivalent, it is obvious that the old world stitch-up has not yet been undone.
The old boys’ network has expanded rather than disbanded.
Second, the emerging economies have helped to highlight the systemic weaknesses of the global economy. One of the factors fuelling the global crisis was the so-called “global imbalances” based on emerging economy addiction to the US dollar. The need for a better global monetary system was firmly put on the G20 agenda, but solutions to date fall far short of what is needed to support trade and economic stability of the poorest countries, stymied by vested interests in old and emerging economies alike.
Finally, the new players have highlighted intellectual weaknesses and blind spots of the old order. South Korea in particular launched a development agenda, recognising that many economies were integrated into global markets, but had yet to “emerge” and emphasising that there is no “one-size –fits-all” formula. But whilst Brazil’s success has seen social protection come of age as a component of pro-poor economic development, India’s focus on small businesses and South Korea’s unorthodox approaches to trade and industrial policy have done little to shape the G20’s development thinking.
It’s clear that there have been benefits of emerging economy participation at the G20, but also disappointments and even drawbacks.
Exclusion and vested interests still a major factor
The old boys’ network has expanded rather than disbanded, and the legitimisation of an expanded G8 has further marginalised the UN. Increasingly difficult politics between the club’s expanded membership has had the less expected side-effect of further excluding other stakeholders, such as civil society.
Africa’s voting share at the IMF remains below six per cent.
The new members of the club have challenged some old thinking and vested interests. But they have vested interests of their own, for example pushing back on some forms of innovative financing to favour their transport or finance sectors.
And they suffer from their own policy myopia. Whilst they have impressive economic track records, their successes in reducing poverty are more mixed. What should be the real growth lessons for low income countries from Brazil where one per cent of the population account for 13 per cent of income?
Putting the poorest at the centre of economic strategies
Even with developing countries sitting in the G20, there is a long way to go before the interests of the poorest men and women, within those countries and outside of them, are represented. The wrong-headed trade-off between being inclusive and being efficient is still evident in both institutional and economic thinking.
What is missing, then, in G20 thinking is not a “developing country” representation but a recognition of the value of having the poorest countries at the table and of putting the poorest economic actors at the heart of economic development strategies.
Christina Weller is Lead Economic Analyst at CAFOD.
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