Institutional Development: How the G-20 May Help the World’s Poor

Laurence Chandy, Geoffrey Gertz, and Kemal Derviş

Faced with a sputtering global economic recovery, an incomplete international financial regulatory system, and governance gaps in multilateral institutions, the Group of Twenty (G-20) looks set to have a busy 2010. Given this crowded agenda, the decision of Korean President Lee Myung-bak, the current chair of the G-20, to include development as an “integral part” of the G-20’s mission is particularly laudable.

In asserting ownership of international development policy, the G-20 is usurping the G7, who traditionally spearheaded this agenda. How might the G-20 tackle development differently from its predecessor?

Before trying to answer this question, it’s useful to go back five years to the 2005 Gleneagles Summit, to better understand the G7’s approach to development. There, amid much pomp and self-congratulation, the G7 leaders agreed to a bold new compact: a doubling of global aid by 2010, with half of the increase in funds going to Africa, and the cancelation of debts owed by the most heavily-indebted developing countries. “We do not simply by this communiqué make poverty history,” conceded then British Prime Minister Tony Blair, the host of the summit and the major driver behind its focus on African development. “But we do show how it can be done. And we do signify the political will to do it.”

In many ways, the Gleneagles Summit was the apotheosis of the G7’s approach to global development, one moored to the principles of charity and forgiveness. Both the style and substance of the event reflected a perception of developing countries (and Africa in particular) that has struggled to move beyond the strange blend of paternalism, pathos, and guilt that has characterized the post-Cold War period. This resulted in the global development agenda we have today: one where political incentives prioritize the announcement of commitments at press conferences above concern for what is ultimately achieved for the world’s poor. There was also too much stress on aid and not enough concern for creating an enabling global economic environment with rules supportive of development. 

Five years on, the Gleneagles Summit and the hoopla surrounding it appear both antiquated and naïve. Despite significant increases in aid volumes, the G7 nations remain short of their targets, but at a certain level this failure is beside the point. Debt relief and higher aid flows have been superseded by new development priorities such as fragile states and protecting the vulnerable from a changing climate. Moreover, there is growing recognition that our understanding of what causes growth, and how we might “make poverty history,” remains incomplete. All the while, the development landscape has shifted immeasurably, with some emerging countries becoming key drivers of the global economy. 

This, then, is the complex drama into which the G-20 has now stepped. It is unreasonable to think that its members will instantaneously make development a top priority, or will overcome all of the political difficulties that plagued the G7. But the G-20 will bring a fresh perspective to the development agenda, and on three key issues—how members see their roles in relation to the developing world, what they gain by acting as a group, and how they hold themselves accountable—we can expect to see changes which will pay dividends for the world’s poor. 

  1. From patrons to diverse responsibilities

    The G7’s relationship with the developing world has evolved through a long and complicated history into its current form: that of enlightened guardians bestowing favor on those less fortunate. Though in recent years, there have been some efforts to recast this relationship, the underlying power balance has barely evolved.

    The G-20’s position vis-à-vis developing countries is less easily characterized, not least because of its more heterogeneous composition. Given the mix of advanced, newly industrialized, emerging and developing countries present at G-20 summits, each member will relate to poor countries and the process of development in its own way. Moreover, members will likely exhibit multiple personalities when tackling development issues. Australia, for example, attends as an aid donor, a concerned neighbor of failing states, and a keen rival in commodity markets dominated by developing countries; India at once participates as a champion of Global South solidarity, an economy that promises to be one of the fastest growing in the world, and the home of the largest population of the world’s poor. Certain members may be asked to represent constituencies beyond their own borders: in a recent speech, South African Minister Trevor Manuel noted that at the G-20 his country has been called upon to speak variously for itself, for Africa, and for low-income countries in general.

    Such complexity is likely to make any G-20 debate over development less predictable. Yet the fact that G-20 membership is explicitly based on systemic significance—implying a responsibility to the developing world based on facts on the ground, rather than a sense of noblesse oblige—could bring a hardheadedness to development debates that was often lacking at the G7.

  2. From collection plate to collective action

    The purpose of G7 discussions on development was generally to convince each member to contribute a little more than they otherwise would, in the style of a charitable fundraiser. Developing country guests were occasionally invited along to tug on the heartstrings of G7 leaders, who in turn would get carried away in bidding wars, mimicking their corporate heroes. As such, G7 meetings on development weren’t really multilateral exercises, but rather an effort to get each member to increase its bilateral assistance. 

    For the G-20, conversely, the motivation for gathering is not simply to encourage each to be more generous, but to tackle challenges that necessitate cooperation and coordination. Approaching development through a collective action lens will likely alter the focus of multilateral assistance. 

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    Over the past 18 months, we have seen that global growth and financial stability are global public goods, as without them the economic prospects of any individual country falter, as are a clean atmosphere and a fair and open trading regime. The G-20’s approach to development can be expected to place greater emphasis on securing these external conditions for growth, which will indirectly support the economies of the developing world and pull individuals out of poverty.

  3. From a reliance on conscience to independent monitoring

    The G7 has historically done without official accountability mechanisms to uphold the decisions its members reach at meetings. A little peer pressure or the burden of a guilty conscience were seen as sufficient levers, befitting the G7’s small size and clubby style. The shortcomings of this approach were made evident last year as Italy’s flagrant failure to fulfill its Gleneagles targets were brushed over by its co-members. 

    By contrast, the G-20 has embraced the principle of independent monitoring from the outset, acknowledging the need for an increased role for multilateral institutions to oversee the implementation of its accords. This is not simply to further the spirit of multilateralism, but a recognition that large, heterogeneous clubs require referees to enable collective action. Such a change will potentially deliver much needed improvements in the transparency and accountability of development policies, two challenges the G7 continually struggled to address.

It is perhaps too soon to assess how the G-20 will address development; after all, the body in its current form is only a little more than a year old, and its priorities and internal machinations have yet to fully emerge. But if anticipated correctly, this new approach to development would appear to offer plenty of promise. Ultimately, the extent to which the G-20 succeeds in promoting development compared to its erstwhile predecessor will largely depend on the political will of its members’ leaders; it is up to them to rise to this challenge.