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Tuesday, May 26, 2009

Whither G7, G8 or G20?


Current worldwide economic and financial difficulties have triggered a debate over the need to strengthen the Group of 20, a forum of 20 major "economic" powers, including newly emerging countries such as China, India or Brazil, as well as some additional Western European countries.

The logic behind the efforts to consolidate the dialogue in this new forum of 20 countries, instead of the well- established forum of G7 or G8, is clear: to reflect more faithfully the latest change in economic and financial power structure. The argument seems, on the surface, flawless, but if this argument is accompanied by the conclusion that the G7/G8 forum does not play important roles anymore, it is bound to invite serious counter-arguments.

First of all, what happens to the forum of political dialogue? The shift of economic power requires not only changes in the global economic forum of consultation but also transformation of the global political or politico-economic system, including the United Nations and its special agencies such as the World Bank and the International Monetary Fund.

Why should the president of the World Bank continue to be an American while the United States is the largest debtor country of the world with various economic difficulties? And why should the IMF have a European chief when the majority of the world foreign reserves is now in the hands of Asian powers?

Why should European powers and Americans remain hesitant in practice, if not in rhetoric, to reform the U.N.?

If the tip of the balance of economic power requires a change in economic dialogue, is it not more important to change the pattern of the international political structure?

If one reflects upon such a question and upon the current situation, it appears that the G20 is, in fact, a forum for the U.S., Britain and France to maintain the status quo, while they pay lip service to China, India and others so that these "new" members are more inclined to shoulder more international responsibility.

Even if most members of the G20 are ready to go along such a path in the short run, it does not mean that we can neglect the importance of G7/G8, or, for that matter, the Brazil-German-India-Japan alliance for the reform of the U.N., or the new Asian forum for financial cooperation.

All these considerations taken together, one could say that the G20 is simply a new "addition" to the various international network forums for coordination, cooperation and consultation. It is not in any sense a forum that "replaces" the others.

It is therefore most desirable that the chair nation of the next G8 summit, Italy, take utmost care in maintaining the legitimacy and effectiveness of the G7/G8 and pay special attention to the initiatives for the reform of the U.N. and international financial institutions.

We should not forget that the G7/G8, despite some reservations on Russian domestic politics, is basically a cohesive forum that can be an effective unit to deal with any emergency situations.

After all, what we need today is not necessarily the support of as many countries as possible for the direction of economic policies. Economic policies in large countries are going to be decided on the national level and not through international coordination.

The important thing is a demonstration of determination on the part of major economic powers to carry out whatever they believe best for their own economy, without shifting political responsibilities onto others.

A strong concerted statement on economic and financial policies by the G7/G8 is more important than the political rhetoric of the G20.

Kazuo Ogoura, a political science professor at Aoyama Gakuin University, is president of the Japan Foundation.


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