The New Global Order with G20 and the Voice of Business: B20

After the financial crisis unfolded in Asia in 1998 and its obvious effects on G8 and the whole world, the need of a new formation emerged bringing together the emerging economies with developed ones in decision making and operation in harmony. So, G20 has been created as a formation containing more diversified countries which are becoming increasingly effective in world trade with their economic growth, production and consumption, instead of G8 (France, Germany, Italy, Japan, United Kingdom, USA and Canada and Russia) which consists of countries that have relatively similar level of development.

 

G20(1)  is not composed of the first 20 countries that are lined up by their economic size; but generated in a way that reflects the diversity of the world by population and geography. It was built up in 1999, as an assemblage of central bank governors and finance ministers for exchange of views.

 

After the financial crisis of 2008, G20 became a summit that brings together not only the central bank governors and finance ministers, but also the leaders. The first G20 Summit was held in November, 2008 in Washington; then in 2009 in London and Pittsburg, in 2010 in Toronto and Seoul. Finally this year the summit will be held in November in Cannes, France.

 

Today, G20 provides a platform on which sherpa(2)s of leaders come together and public sector could exchange views as a part of the intergovernmental coordination, around a wide range of issues including not only monetary and financial policies but also energy, trade and investment.

 

This platform has come out as a need for reforming Bretton Woods institutions IMF and World Bank which turned insufficient in the new global order.

 

Just like business’ involvement after 2008 crisis in the process, L20 (Labor 20) summit is also planned to be held this year as a result of the proposal of French government.
 

G20 Business Summit (B20)

 

G20 Business Summit B20 has been organized in order to have opinions of business, besides governments, on conducting the aforementioned reforms and controlling the global crisis.

 

B20 stems from the meetings of business organizations of G8 countries before every G8 Summit since 2006 as a proposal of German Business Organization BDI. Due to the continuing 2008 financial crisis, not only leaders of G20 countries, but also involvement of the business representatives in the process of negotiation was seen as a necessity. Hence, the first summit of B20 formed to meet this need was held with the G20 Summit in London in March 2009.

 

The aim of B20 is that leaders and finance ministers could benefit from opinions and suggestions of business world, on the economic and social issues which have a part in the agenda of G20 Summit. The next B20 Summit will be held under coordination of French business organization MEDEF, parallel to the G20 Summit on 2-3 November 2011 in Cannes, France.

Results Acquired from G20 and B20 Summits

 

Decisions taken at G20 Summit in London in 2009, were compatible with the demands of B20 to a great extent. Furthermore solid steps taken such as the establishment of Financial Stability Board and $ 1,1 trillion financial expansion.

 

The same year at the second summit in Pittsburgh, G20 pledged to shift 5% in the IMF and 3% in World Bank quota share to emerging economies from over-represented countries.

In June 2010, at Toronto Summit, the focus of G20 leaders was strengthening the financial system and banking sector to stand without government support.

At Seoul Summit in 2010, business expressed their gladness of the post crisis policies implemented by G20 leaders in collaboration. As a next step, B20 lined up his expectations which are “rolling back protectionism to pre crisis period”,” preventing countries from increasing protectionism by undervaluing their currencies”, “returning of monetary policy to a neutral stance” and that  “focus of fiscal exit strategies to be on cutting government spending”.

 

But the fact that no solid agreement was achieved with China, who is inciting the exchange rate war by undervaluing its currency yuan, created the perception of failure of G20 in removing the imbalances in global trade.

 

Because of non-institutionalization of G20 and lack of binding power of resolutions, solid steps, which could have relieved global economy, could not be taken. Hence, in public by the time, G20 has been perceived as a debating area rather than decision making platform.

 

2011 G20 Summit will be held again in the shade of a debt crisis emerged in the euro zone, and the whole world will watch closely what position will take leaders in the process of overcoming the crisis.

 

Leaders of Germany and France reached an agreement on recapitalizing banking sector in euro zone before the summit and made their proposal at the EU Summits on 23 and 26 October. The aim was giving a positive signal to markets in an optimistic atmosphere at the G20 Summit. 

 

However, business expects concrete steps not only in banking sector, but also on commodity price volatility, reforming international institutions and especially the subjects requiring urgent solutions such as climate change or energy security. Time will show if G20 will take satisfying steps for business from now on. However, regarding that there is no other platform in global scale having such a high power of representation in terms of economic capability, population and geography, G20 could be the most appropriate formation to reach solutions that both governments and business seek. That reality may necessitate the transformation of G20 into a fully institutionalized structure with binding power.

(2) Vice gerents of leaders to guide them through the summit (a metaphor for the guides called “sherpa” who lead the ones climbing to the Mount Everest)