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The G-20 Governments Should Look at Their Own Governance

The G-20 just finished their third meeting, and there is a lot of buzz surrounding the demise of the G8 and it being replaced by the broader G-20. Accolades are also given to this Summit on the progress of IMF and World Bank governance reforms and on climate change.

But, no uncorking of the champagne yet.

For starters, during the G-20 London Summit last April, was obvious that the G-8 was effectively displaced. While the G-20 was grappling with the gravest phase of the financial crisis, the Italian prime minister announced that he would host the forthcoming G8 summit in a ship. Thus, Pittsburgh may have merely formalized what long ago was already inevitable, given the changed geopolitical and economic reality.

While broadening the “voice”of emerging economies in these elite clubs is obviously welcomed, there is less than meets the eye. First, let us keep in mind that while more “voice” is being given, some of those very governments are not particularly adept at giving “voice” to their own people. It is still an elite club of governments, representing 19 countries and the EU.

Aabout 1.5 billion citizens living in three of these countries are severely “voice deprived,” while another 400 million living in another three countries have it only a tad better, living in a “voice challenged” environment. This “people-friendly voice” (and not merely government-focused) perspective is also important in looking at the “voice reforms” at the IMF and the World Bank. So far, these reforms are marginal, and again, focused on government representation. Many of these governments are not necessarily fully representative of their own people. Other country governments, such as Belgium, are representative of their citizenry, but are tiny, and yet are holding on to their executive chairs in these organizations.

Further, a larger group may enhance voice and participation, but important decision-making is unlikely. The Pittsburgh communiqué is illustrative with “encouragements,”exhortations and principles, and even a bit of “peer review.” But there are no sanctions or other clear incentives or enforcement mechanisms to engage in concrete collective action for the public global good.

Witness for instance the bit on trade in the communiqué. It is last, an afterthought, and simply reiterating what was already exhorted in the London Summit in April, including the customary “commitment to Doha.” In reality, the world continues to move further into protectionism. U.S. duties on Chinese tires illustrate just this. Likewise, the outcome of the G-20 meeting is rather weak on the expected revamp of financial regulations. Granted, there was so much focus on compensation reform. But this is neither the crux of the matter, nor best resolved by 20 governments.

To give credit where it is due, the London Summit did further convergence among key players toward the need for stimulus plans in their economies. But this is an exception, which was forced by the dire magnitude of the crisis. And during Pittsburgh, an emerging consensus to phase out inefficient energy subsidies may turn out to be a non-trivial achievement as well. And there was again a long list of calls to help the vulnerable and poor. While laudable, they were mostly exhortations for voluntarism, again.

Finally, consider a very different “Group-of-8:” Botswana, Chile, Mauritius, Uruguay, New Zealand, Norway, Singapore and Switzerland. Do they have any relevance for the G-20? Little, at first. None of them were invited to the previously G-20 summits since neither their economic size nor their population are large enough, and they lack the global “systemic significance” of most G-20 members. This particular “Group-of-8” does not even really exist as a formal body.

But there is a rationale for G-20 leaders to pay attention to this particular set of uninvited countries. Like the G-20, they comprise a rather diverse group of developing and developed countries from different regions of the world. But, unlike most of the G-20, this particular group of eight countries exhibits high quality of national governance. In fact, their levels of governance, on average, exceed the now defunct G8. This good governance group is not perfect either, but their experiences and lessons ought not be ignored. In a previous article, I emphasized the need to look for good practices outside of the G-20.

We need to keep in mind that it is rare for any organization to be better than the sum of its parts. Too often we assess global governance institutions without first having a serious look at the governance (and set of incentives) of each individual country member—in this case governments.

The Pittsburgh Summit was very weak on national governance and integrity issues, even though they are critical to solving other global challenges. Perhaps the G-20 may focus better on governance in Seoul, while also drawing from lessons from outside the G-20.