Leaders taking part in the G20, G8+5, and G8 summits over the past year have pledged in effect to reconstitute the international economic order along the lines that progressives have been advocating for years. But for these objectives to be achieved they will need to be translated into major structural improvements in the corresponding multilateral and national institutions.
Leaders taking part in the G20, G8+5, and G8 summits over the past year have pledged in effect to reconstitute the international economic order along the lines that progressives have been advocating for years. Aimed at rendering global growth more inclusive, sustainable, and robust, the principles for fundamental reform they have articulated in these communiqués can be summarised as follows:
- Constructing a new doctrine of global economic growth and integration that enables much more inclusive and sustainable outcomes.
- Rebalancing and strengthening global aggregate demand for goods and services through deeper macroeconomic and structural economic cooperation.
- Elevating employment and social protection to a top priority of international economic policy and cooperation.
- Shifting economies onto a low-carbon economic growth path.
- Achieving a step change in the both the coordination and resourcing of the fight against global poverty.
- Fundamentally reforming and strengthening financial system regulation.
- Renovating the primary institutions of international economic cooperation as necessary to achieve the foregoing objectives.
But for these objectives to be achieved—that is, for the world economy to avoid a return to business as usual after the crisis recedes—they will need to be translated into major structural improvements in the corresponding multilateral and national institutions.
Over the past generation, international economic policy has placed excessive emphasis on top-line growth in national income—promoting economic efficiency through deregulation, privatisation, trade liberalisation, and fiscal balance—and insufficient emphasis on the role of economic institutions in fulfilling the bottom-line objectives of markets (efficient and sustainable allocation of resources) and economies (sustained, broad-based progress in living standards). The essential lesson of both the current crisis and recent legacy of globalisation is that institutions deserve as much attention from policymakers as efficiency. They are crucial for optimizing both the rate and the inclusiveness and sustainability of economic growth.
Economic institution building along precisely these lines was crucial to many advanced countries’ success in creating middle class prosperity and stronger, more stable growth as their economies integrated nationally in the 20th century. It also holds the key to strengthening the global economy’s virtuous circle of parallel, broad-based advances in living standards in both developed and developing economies as they integrate.
This institution building will require the international community to go beyond the financial sector and temporary macroeconomic stimulus measures that have been the main result of the G20 Leaders process until now. Beginning at their meeting in Pittsburgh, G20 Leaders should assemble the procedural machinery necessary to produce a blueprint for comprehensive institutional renovation of the global economy by next autumn. They made a similar decision in Washington last year to assemble a set of intergovernmental working groups to develop proposals in line with the principles on financial system reform articulated in their communiqué. Now is the time for them to commission a broader team of architects—from finance, development, labour, energy, environmental, trade, and other relevant ministries—to collaborate over the next year to prepare detailed renovation plans in the main areas of fundamental reform covered by the London and L’Acquila communiqués.
By taking their pledge of fundamental reform seriously, leaders could create conditions favorable for a Big Bang of the sort of “new multilateralism” that has been much anticipated but not yet sighted since the change in U.S. administrations. The new Center for American Progress policy brief, ‘Beyond Business as Usual: G20 Leaders and Post-Crisis Reconstitution of the International Economic Order’ seeks to remind leaders of their broader commitments, paint a specific picture of what such a comprehensive set of reforms might look like, and suggest how it could lead to a politically interconnected set of breakthroughs on some of the most intractable issues that have been bedeviling the international community in recent years, including the positive-sum-game rebalancing of global aggregate demand.
Our guest writer is Richard Samans, Senior Fellow at the Center for American Progress and Managing Director of the World Economic ForumLike this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.