The G20, whose 2021 Summit will be held in Italy as part of the Italian G20 Presidency, was established in 1999 as a consultation forum for the finance ministers and central bank governors of the world’s leading economies, largely in response to the Asian financial crisis that began two years earlier. For the subsequent ten years, the G20 did not actually set itself the goal of policy coordination. Following the Great Recession of 2007-08, it was relaunched as an international cooperation forum for the heads of state and government.
After being urgently convened in Washington in November 2008, in its new format but with a predominantly European leadership since the United States was in the middle of its presidential elections, the G20 summit was held twice in 2009, in London in April and in Pittsburgh in September. At the Pittsburgh meeting it was decided to turn the new G20 into a regular event, effectively making it the successor of the G7 as the main forum for international economic and financial coordination. Its enlargement was a natural response to the recognition of both the opportunities and challenges of globalisation, as well as of the rapidly declining influence of the world’s seven “major economies” on global GDP and international trade. Two summits were again held in 2010, in Toronto in June and Seoul in November. Since 2011 the G20 summits have taken place annually, in the countries holding the rotating presidency: in turn France, Mexico, Russia, Australia, Turkey, China, Germany, Argentina and Japan, and Saudi Arabia this year.
Since 2010, in addition to the annual summits of heads of state and government, there have also been many meetings involving finance ministers and central bank governors (the so-called Finance Track) and other ministries. A number of Engagement Groups have also been created whose role is to develop studies and draft recommendations on behalf of different sections of civil society, which they submit to the G20 leaders’ summits for consideration. Engagement Groups include Think 20 for think tanks, Business 20 for the business community, Labour 20 representing workers, Women 20 dealing with gender inequalities, Youth 20 for youth and Civil 20 representing civil society.
Until 2010 the G20 agenda focused on the financial issues, which were the Group’s key concerns prior to 2008 and justified its strengthened role driven by the Great Recession. During the Washington summit, the first efforts were made, at times with difficulty, to develop a shared diagnosis of the financial crisis then underway, and an action plan was eventually launched focusing on fiscal and monetary stimulus on the one hand, and reform of international financial regulations and institutions on the other. The plan detailed the ‘immediate actions’, to be taken by the end of the following March, and those to be implemented more gradually. The IMF and the Financial Stability Fund, which was later strengthened and became the Financial Stability Forum, were designated as the multilateral bodies responsible for implementing the decisions taken. In London and Pittsburgh, the focus was on assessing the results of the immediate actions, from reform of the rules on minimum capital requirements for banking institutions to bankers’ remuneration and the surveillance criteria to be applied by the IMF. Several major issues were addressed in greater depth, including new accounting and transparency standards, resolution procedures for banks in crisis and regulation of the derivatives markets and rating agencies. The decision was taken to coordinate macroeconomic stimulus, including through a systematic assessment of the global effects of each country's policies, to provide reassurances about the intention of maintaining commercial freedom, and to significantly increase the funds to finance the balance of payments of emerging and developing countries. On the whole, until 2009, the work of the G20 and its communiqués were concise and concrete, and the monitoring of progress on cooperation seemed encouraging.
Meanwhile, partly thanks to G20-coordinated policies, the Great Recession was losing its grip and economic growth was beginning to pick up in several countries, particularly the United States, despite some persisting fears of a renewed downturn in the global business cycle. The G20 summits in 2010 were less impactful and showed at least three trends that would eventually undermine the concreteness and efficiency of the summits held in subsequent years. Firstly, differences over the macroeconomic policies to be jointly pursued became more obvious. Some countries, especially among the Europeans, wanted to curb expansionary stimulus fearing it would drive up inflation and lead to excessive indebtedness, while others, particularly the United States, wanted to keep pursuing stimulus driven policies. There were also differences on the causes of and remedies for balance of payments imbalances, especially with reference to the high US trade deficit and China’s large surplus.
Secondly, the G20 began to lose direct control over the financial regulatory reforms it had launched. The technicalities of the reforms meant they were increasingly delegated to the Financial Stability Board and national regulatory bodies, while the inevitable disagreements over the details of their design lacked a solid political foundation for compromise and reformulation. All this ultimately made the financial reform process too slow. Thirdly, the presence of heads of state and government, the multiplicity of inter-ministerial meetings and the proliferation of Engagement Groups widened the scope of the G20 agenda far beyond macro-financial issues, spreading political commitment too thinly across too many areas and watering down the G20’s conclusions. On the other hand, its increasingly diversified agenda was also a consequence of the fact that globalisation, having impacted financial stability, was now highlighting the magnitude of many other dramatic challenges associated with global coexistence – notably climate change, epidemics, energy, pollution, migration, natural resource availability, the impact of information technologies on communications and the media, the effect of technological progress on employment, and so on. Also, partly due to the severity of these challenges, faith in multilateralism was gradually declining while nationalist and populist sentiments were on the rise.
In recent years, it has been increasingly difficult to reach a consensus over the G20’s conclusions, particularly with US policies under President Trump hindering the promotion of free trade and cooperation over climate change action. The work of the G20 has always delivered many useful ideas, stimulating global debate and mobilisation over the major challenges facing the world. But its conclusions and concrete effects have been weak and lacking a clear focus, driven as they are by a generalised approach partly in order to secure unanimity in the final communiqués. Today the G20 is inevitably tied to a broad and diverse agenda. It must, however, find a better way to select the issues on which to focus and develop paths towards the concrete resumption of cooperation, even at the cost of sacrificing the goal of unanimity, at least to achieve the objectives that cannot be pursued through isolated actions by individual countries.