Friday, September 25, 2009

G-8 is dead, long live G-20

Ahead of the official Pittsburgh communiqué’s release, the White House leaked on Thursday that the Group of 20 would permanently replace the Group of 8 as the world’s premiere economic coordinating body.
This amounts to a recognition of the new-found economic clout of emerging economies ranging from India to China, South Africa to Brazil, and marks a historic shift in the way the world is run.
It also fulfills a long-standing demand of countries like India. Foreign Secretary Nirupama Rao had said on the eve of the G-20 summit of the need for the global financial system to reflect “ground realities”.
Prime Minister Manmohan Singh is known to have often privately complained about being invited as an observer to the G-8 countries. This meant India and other emerging economies were excluded from the core decision-making meetings. It was a view, he found, that was shared by Chinese leader Hu Jintao.
While the G-8 countries represent roughly 60 per cent of the world’s GDP, the newly-added 12 emerging economies now represent a fifth of the world’s wealth. Crucially, however, they provide as much as two-thirds of new GDP growth.
As US President Barack Obama, host of the present Pittsburgh summit, has repeatedly noted, on the key problems affecting the global economic system, the solutions are impossible without the emerging economies.
But the G-20 will have to accomplish things. Says US foreign policy analyst Daniel Twining, “The G-20 is not only a reflection of the new world we live in — it is also a sort of proving ground for India, China and other emerging powers that they can corral and build international coalitions.”

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