Let’s face it, whatever the leaders of the Group of 20 developed and developing nations come up with at the end of their summit meetings this week in Cannes, France, we are bound to be disappointed. The G-20 should always try harder to do more but the media and the public also need to adjust their expectations. Instead of noticing only what the G-20 cannot and did not do, we should focus also on what it can do and has done.
The G-20 leaders summit will never live up to its spectacular beginnings. Born into a global financial crisis three years ago, the G-20 actually delivered real and quick results. Despite the divisions among the presidents, prime ministers, and other rulers over how to beat back the raging financial fire, the G-20 coordinated several large stimulus packages—in the United States and China most importantly. It also set in motion a necessary refunding of the International Monetary Fund, a process to review financial regulations worldwide, and reform of the global financial system.
These steps worked—the global economy did not drop into the abyss. And the decision to bolster the IMF—the lender of last resort to troubled economies—alongside promises to examine and reform the global financial system helped calm the nerves of investors worldwide. But as the financial and economic crises receded, the G-20 leaders became more cautious about potential compromises to national interests and less willing to take actions that do not play well at home. This shift was only natural.
So the first reason we have to lower our expectations about what the G-20 can accomplish in Cannes this week is positive—though the coast is certainly not yet clear (Europe’s debt crisis remains a concern), we are not in the middle of another global economic crisis. Thus the incentives for rapid, dramatic action that involves political risk-taking are reduced.
Another reason to limit our expectations is the intense set of tasks that the G-20 has adopted for itself. It is attempting to undo decades upon decades of shortsighted economic behavior to “rebalance” the global economy—to even out the hugely uneven pattern of fiscal deficits and surpluses in different nations and pave the way for a more sustainable global economy. To do this the G-20 leaders must divide up and accept the pain and costs of this major transition.
For the United States this means spurring economic growth in the short term while learning to save more in the long run. For China this means establishing social and economic safety nets, which will enable its citizens to spend more, and allow its currency to appreciate. And for Europe this means resolving its debt crisis without sparking a recession. The other big emerging economies—Brazil, India, and South Africa—also must chart a path that supports sustainable global growth while delivering better standards of living for their people.
These and other member nations of the G-20—Argentina, Australia, Canada, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Korea, and Turkey—have been avoiding painful economic medicine for decades, and walking back from these ingrained habits is not a process that’s sexy, fast, or fun. It’s boring, slow, and painful. And politically backward—the upside is years away but the sacrifice is immediate.
But it is exactly this task—allocating pain—that leaders must take on to solve today’s global problems. This is the new nature of international cooperation and we all have to get used to it.
In this light it is pretty amazing what the G-20 has been able to accomplish. It has established a mechanism called the Mutual Assessment Process, or MAP, whereby nations share their economic plans with one another so all can see whether and how they add up to global growth, and which countries’ policies push hardship onto others. It has endorsed a new set of standards for how much capital their big financial institutions must set aside against loan losses. And it has taken steps to ensure broader participation of emerging economies in the IMF, galvanized a push for wider compliance with anticorruption standards, clamped down on offshore tax havens, and intensified pressure on China to revalue its currency.
These are not earth-shattering developments. They are incremental but they are real.
Yet when powerful and charismatic leaders from the most powerful and populous countries in the world all gather in one spot, amid so much economic hardship, it is hard to keep expectations in check, especially for the media. Each of these leaders makes bold decisions at home that immediately affect their citizens, often for the better. At the G-20, however, they instead slog through a laborious process that usually generates baby steps and bland pronouncements—promises that deliver little immediate benefit.
So the upshot is this: While keeping up the public pressure on the G-20 to deliver at their meeting in Cannes this week, we should expect no major breakthroughs. Forward steps on a lasting solution to the eurozone debt predicament, catalyzing global growth, preventing another global crisis, and assisting the poorest, no matter how small, are welcome. G-20 actions may be less bold and less comprehensive than we would like but we should not proclaim that the whole exercise is fruitless. If we keep our expectations reasonable, we might be pleased with what the G-20 delivers.
Nina Hachigian is a Senior Fellow at the Center for American Progress.