Recent reports on the global economy make for gloomy reading. The U.S. economy is weakening. Asian policymakers are worrying. European leaders are trying to move into full crisis-management mode. Against this backdrop, leaders from the G-20 countries are preparing for a summit meeting, which will be held in Los Cabos, Mexico from June 18-19.
Brookings, along with our academic and think tank partners, has just published the fourth edition of Think Tank 20 (New Challenges for the Global Economy, New Uncertainties for the G20) to stimulate much-needed debate in advance of the meeting. The Think Tank 20 series is a compendium of essays written by individuals from 17 of the G-20 countries and the European Union and is designed to frame, forecast and explain the stakes for each G-20 summit.
In the world economy, we see renewed fears of recession or slow growth, but this time the fears have spread beyond the United States and the eurozone to encompass almost all countries. Given the ongoing U.S. election campaign and the significance of U.S. political and economic health for the rest of the world, as well as the persistent and systemic woes within the eurozone, many of the contributors to this edition of the Think Tank 20 series focus their expertise on the significance of the political and economic debates in the U.S. and Europe, in their national, regional and global contexts.
Many of the 19 essays in this volume refer to the authors’ experience with sovereign debt and banking crises and adjustment in their own countries. These essays remind us that the problems being faced in Southern Europe are not entirely new, although they do have unique characteristics because of the distinctive institutional arrangements of the European Union. The essays remind us that there is much to learn from economic history but they also show how difficult it is to extrapolate from one experience to another. Nevertheless, the historical parallels offer insights that could be useful in the informal G-20 peer reviews that accompany each summit.
Some essays carry a warning that the long-term vision for how to build and implement a low-carbon, energy efficient growth model should not be derailed by the short-term needs to respond to the crisis. One of the core areas of comparative advantage of the G-20 is its ability to provide leaders with the space to reflect on the long-term issues faced by the global economy. They could profitably focus their discussions on growth and innovation projects, which are increasingly seen as necessary complements to the austerity programs already under consideration and that could over time lay the groundwork for a new growth model.
Several essays caution that at this moment there is a risk that individual countries may resort to beggar-thy-neighbor policies on exchange rates, monetary policy, regulatory arbitrage and other means to restore growth, even if the global implications for strong, stable and balanced growth are unfavorable. Staving off these pressures is one of the unsung achievements of the G-20 and if they can again succeed in getting agreement on the maxim “Do no harm to others” it would be a valuable contribution to the global desire for greater certainty and coherence in international policymaking.
The current policy debates in the G-20 countries reflect what we see as the big dilemma in globalization: how can national democratic processes and election campaigns lead to economic decision making that also takes into account increasing global interdependence? This dilemma underscores the potential value-added of the G-20 process. It should be much more than a formal summit. At its best, the G-20, along with the existing global and inclusive international institutions, would help bridge the gap between the national and global while engaging the world of academia, civil society and think tanks to tackle the globe’s most pressing issues. This Think Tank 20 series aspires to be a modest contribution to this grand effort.