In the world of ordinary taxpayers that is a lot of money that could otherwise be spent in the nation’s schools, hospitals or other worthwhile public purposes.
So what are the benefits of the G20 and can the world’s self-described “premier economic forum” justify its existence?
The G20 came into its own in 2008, when the world was staring down the barrel of the worst financial crisis since World War II.
The initial Washington and London Summits held six months apart in 2008 and 2009 made substantial progress in averting a deeper global financial crisis.
The Washington Summit agreed to a 47-point Action Plan that established common principles for reform of financial markets, which led some leaders to describe the agreement as Bretton Woods II.
The London Summit reached agreement on $5 trillion of stimulus and a $1.1 trillion package for the International Monetary Fund and World Bank.
But in the six Leaders’ Summits that have been held since London, the G20 has struggled to achieve concrete agreement on issues and member countries have a woeful track record of implementing agreed actions.
The most common explanation for this abject failure is the absence of a global crisis to compel countries to accept and implement change. But the Eurozone crisis from late 2009 onwards and the inability of many G20 countries to regain their economic oomph has challenged this theory, suggesting the G20’s problems run much deeper.
Put simply, there are too many diverse competing interests at the table making it very difficult to get agreement on real reform.
The G20 may have the right countries around the table, but the sheer size of the forum prevents spontaneous discussion. Participants report the agenda has become too extensive and debates are sterile with everyone sticking to script with only limited or empty commitments on policy change.
In addition, other than pressure from the rotating G20 president and the possibility nations could be called out by their peers around the summit table, there is nothing to compel G20 countries to implement agreed reforms. As a result no country delivers on the G20 commitments in full and implementation is patchy at best.
This year’s Leaders’ Summit
Australia has chosen to use the presidency of the G20 to narrow the agenda and concentrate on economic issues, reflecting concern about the agenda becoming overburdened. The centrepiece is a commitment by G20 members to domestic policy initiatives that will raise the level of G20 output by at least 2% above the currently projected level in the next five years.
After the recent G20 Finance Ministers meeting in Cairns, it was announced the IMF and OECD had assessed over 900 policy initiatives from G20 members and concluded they will add 1.8% to the global economy. Australia’s Treasurer Joe Hockey was quick to claim this as a major triumph that will boost global GDP by $2 trillion and generate millions of new jobs.
The problem of course is that the growth boost will only occur if the reforms are actually implemented. And the recent track record of the G20 would suggest this sort of lofty rhetoric is never matched by practical results. The fact that the 900 policy initiatives have not been released publicly does not instil confidence that this time will be any different.
A second major policy test for the Brisbane summit is whether G20 members can tackle the most notorious form of tax avoidance, base erosion and profit shifting (BEPS). The issue has been talked about at G20 meetings for the last five years. The talk needs to be replaced by bold action to stop profit shifting and increase transparency, including in emerging economies.
A third major agenda item is the delivery of real reform for the global financial sector. The G20 received praise for introducing emergency-type measures to stem the impact of the GFC. But the world economy remains fragile, particularly with respect to global finance. The G20 must now take the next step and focus on the underlying causes of that instability and take the decisions and actions necessary to mitigate against another GFC.
Finally, while the narrowing of the Brisbane Summit agenda makes sense, it is still very disappointing that key issues such as the economic consequences of climate change are currently not scheduled to be discussed. The G20 Brisbane Summit is a perfect forum for the world’s leading industrial nations to discuss the state of climate action in the lead up to next year’s all-important global climate summit in Paris.
If the history of the G20 was written today it would be a story about a forum that lost its way once the immediate danger of the global financial crisis passed in 2009. In this version of history, Australians will wonder why their government spent $500 million hosting a pointless talkfest.
A more positive version of this story could be that after some initial success the G20 process stalled before regaining its mojo. The Brisbane Summit must prove the relevance and influence of the G20. It is time to deliver or disband.
This will allow the world’s leading economies to continue the search for a global forum that is fit for purpose for a global age. And it will spare the poor tax payers of Turkey a $500 million bill in 2015 when the G20 is scheduled to come to town.