The global financial and economic crisis of 2007-2009 has been widely blamed on a loose approach to the regulation of financial markets and insufficient management of international economic linkages. The scope and depth of the crisis met with an unprecedented response: a concerted global effort to provide fiscal and monetary stimulus and to return markets to an orderly state.
The most visible innovation that has arisen from the crisis so far is the institution of the G20 at the leaders’ level as the “premier forum for international economic cooperation.” The G20 has launched far-ranging reforms of economic governance institutions and the manner in which key economies should cooperate in the future. Its ambitious aim is not only to stabilize the world economy following the economic crisis of 2007-09, but also to anticipate and, as far as possible, prevent future crises and foster sustainable growth going forward. A central element of the promised reform is the “Framework for Strong, Sustainable and Balanced Growth,” introduced at the 2009 summit in Pittsburgh, in which the G20 agreed to accept joint and individual responsibility for the health of the global economy.
In this paper, Daniel Schwanen argues that the assessment process envisaged in the Framework needs to be strengthened if its goals are to be realized. He further argues that the Framework’s fuzziness in spelling out commitments and its inattention to how commitments will be followed up and how differences can be aired out risk leaving the framework as ineffectual as some earlier cooperative attempts to promote global sustainable and balanced growth.
To deal with these issues, the paper recommends:
- using a common template based on collective promises of the G20, each member should be required to spell out the actions it intends to take to deliver on collective commitments, in light of its own circumstances and ability to deliver, and should institute a formal procedure for follow-on implementation;
- this formal process should be able to hear complaints from other members regarding the framework’s implementation;
- an intermediary body — a kind of “wise persons’ commission” — be established between the G20 leaders and institutions, such as the IMF, that provide technical expertise, to ensure that the various assessments are integrated to provide the wide perspective needed for the G20 to be “approximately right,” as well as to ensure the right balance between internal candour and external transparency; and
- discussions take place on an ongoing basis between the “wise persons’ commission” and G20 finance ministers and heads of central banks about the results of these processes to help broker solutions to deadlocks that stand in the way of mutually advantageous policies.
