Are we living in a G-20 or G-Zero world?
For decades now, the United States of America has been the leader of the free world, a ‘policeman’ of international affairs, and a stabilising superpower. The power of the IMF, United Nations and World Bank came in part from their backing from the USA which led an era of ‘Pax Americana’. Surrounding it was its trusty sidekicks, the G-7, expanded in 1997 to become the G-8 as Russia was inducted to protect its young brittle democracy. With the risk of international economic collapse after the 2008 Financial Crisis, the G-20 was formed. A group of the most crucial nations and emerging markets met and agreed on fiscal and monetary expansion whilst regulating financial institutions.
In today’s world such cooperation would be unimaginable. Trump’s America has no interest in leading global policy efforts, Europe is focused on saving itself, the UK is withdrawing from the world, Japan is burdened with complex domestic political and economic problems, and no national government has the resources or drive to pull any heavy weight internationally. Despite media fanfare of Barack Obama handing his mantle over to Angela Merkel, Germany lacks the economic weight and military force to ‘lead the free world’. There is now a vacuum, an international monetary and political non-system, that many argue has signalled a move from a G-20 to a G-Zero world.
In the past the largest economies would collaborate multilaterally to tackle international issues. The Montreal Protocol was an example of international collaboration where the hole in the ozone layer inspired the world to come together and stop adding fluorocarbons into the atmosphere. They did, and it worked. Agreements came because we were all plagued by same issues at same time, just as they were again in 2008 when the financial crisis loomed. But this sense of crisis has since dissipated as economies have recovered. Even the G-20 wasn’t adequately addressing climate change, now we live in a world where the US has pulled out of the Paris Agreement. In this new G-Zero world, it is more important for a country to secure its own competitive advantages and bolster its short-term position than to collaborate on international policy for the greater long-term good.
Another exit from multilateralism has been that of the UK from the EU. The governments of Europe and the United Kingdom are now focused on Brexit rather than international issues, and America lacks the interest in global leadership or mediation it may have been expected to have under previous administrations. Divides in Europe widen as Germany’s dislike for Trump contrasts with the UK’s desperation to maintain its ‘special relationship’. Meanwhile the other internal problems of the European Union go neglected. Trump also refused earlier this year to reaffirm Washington’s commitment to NATO Article 5, mutual assured protection. While later addressed, the damage to regional trust and cooperation has already been done, and Russia already encouraged to test NATO’s tenacity. We increasingly see the damage that a lack of international cooperation is doing to even the most advanced nations and organisations.
The foundations of the global economic and financial system are still strongly rooted in Western-dominated advanced economies. With unilateralism on the rise in these countries, there has been an increase in cooperation elsewhere by frustrated emerging markets. While there may be a ‘Global-Zero’, individual regions of the world are creating their own multilateral agreements. BRICS, for example, and institutions such as the Asian Infrastructure Investment Bank that essentially replicate the functions of entities such as the IMF and World Bank. The future is often, not only by economists but also political scientists, predicted to focus on regional rather than international policy cooperation. Otherwise, uncertainty is likely to stretch further than any economy can handle.
It is impossible to predict the future – India’s role may grow, the USA may reassert dominance, Europe may unify stronger than ever, or China may desire to embrace global leadership. We can already see the world fragmented into different power hubs. Germany holds weight in Europe, while Turkey, Saudi Arabia and Iran bicker over differing visions for the Middle East. In Asia there is a split between nations wanting the security of the USA or the economic values of China. It is possible that the example BRICS sets may revitalise multilateralism if it stays on a path of meritocracy over internal politics, and balances its development and commercial objectives. While difficult to argue we do not currently live in a G-Zero world, I am optimistic that regional leadership will lead to growing cooperation that will create lasting global partnerships once again that the world needs to tackle issues such as climate change, and fight back against rising protectionism.
El-Erian, M.A. (2016) The Only Game In Town, London: Yale University Press.
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