Judging the G20 by output ignores input problems

Robert Wade (LSE) and Jakob Vestergaard (DIIS) argue, in a letter to the Financial Times, that champions of the G20 miss a key point:

"Sir, Daniel Price says that the Group of 20 leaders’ “steering committee” for the world economy is making good progress... But he evaluates only its “output” legitimacy, such as its ability to strengthen international co-ordination on critical global economic issues. He misses the same point as did the Saudi official who said to an interviewer: “Why are they protesting? Our rulers’ doors are always open.”

By taking as given the G20 as presently constituted, he ignores the fact that it does not meet widely accepted criteria of “input” legitimacy. First, it is constituted as a reflex of G7 power. Its 19 states plus the European Union were selected back in 1999 by the US Treasury and the German finance ministry, using no explicit criteria, and its membership cannot even be “reverse-engineered”. It includes several states that are obviously not “systemically significant”.

Second, states are either in or out, permanently. There is no rotational membership, no way to bring states in and others out as the distribution of economic weight changes, and no way that states not sitting at the top table are nevertheless represented. True, invitations have been extended to the Association of Southeast Asian Nations and the African Union, but the invitees have second class status in setting the agenda and agreeing the communiqué.

These input features help explain why the Norwegian foreign minister recently declared the creation of the G20 to be “one of the greatest setbacks since world war II”, and the governor of the central bank of Uganda dismissed it as but an extension of “the old architecture”.

Once the world economy stabilises, a new global economic council should be created, based not on the G20 but on a reformed version of the Bretton Woods constituency system."

Robert Wade and Jakob Vestergaard, Financial Times, 5 April 2011.

To download a recently published DIIS report on 'The G20 and beyond. Towards effective global economic governance', click here.

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