The G20 Was Made for Moments Like This
When the leaders of the G20’s member states convene for their Oct. 30-31 summit in Rome, there will be no time for fiddling. The planet is on fire. The pandemic smolders on. And the global recovery is faltering. The G20 was created for just such a moment and just such challenges. To meet them, the assembled heads of governments must make credible commitments to accelerate decarbonization, expand vaccine access and alleviate developing nations’ crushing burden of debt.
The G20 was born out of crisis—or crises, to be exact. It first emerged in 1999 as an informal network of finance ministers and central bank governors, in the wake of the Asian financial crisis. Nine years later, with the global economy teetering, then-U.S. President George W. Bush invited the G20 heads of state and government to Washington for an emergency summit, during the waning days of his administration. By elevating the forum to the leaders’ level, he conceded that the Western market democracies—working through the smaller G7 grouping—could no longer manage the world economy on their own. They needed the resources and will of emerging economies. The G20 acted decisively, mobilizing massive liquidity, breathing new life into the Bretton Woods institutions and preventing the Great Recession from becoming another Great Depression. By autumn 2009, the G20 had declared itself the “premier body for global economic coordination.”
Public Health Threats and Pandemics
The G20’s champions hoped that it might smoothly evolve from a crisis committee to a standing steering body for the global economy, capable of catalyzing collective action and advancing governance reform in international organizations. These expectations were often dashed. The group’s agenda expanded, but its heterogeneous members struggled to achieve consensus even on bread-and-butter macroeconomic and financial matters. Rising geopolitical tensions, especially between the United States and China, complicated cooperation—even during emergencies. The G20’s shortcomings were exposed in the early days of COVID-19. Rather than acting in unison, its members adopted uncoordinated national policies, a tendency exacerbated by the vacuum of U.S. global leadership under former President Donald Trump.
The Rome summit offers the G20 a chance to make amends. The Italian government has organized its yearlong rotating presidency, which culminates this month, under the triple theme of “People, Planet, Prosperity,” a rubric that gives equal weight to the health of humanity, the environment and the economy. The broad framing fits the moment: Sustained economic growth—the G20’s traditional concern—will be elusive unless national governments simultaneously address COVID-19 and climate change.
The pandemic is the leading cause of the world’s current economic woes. It has disrupted global supply chains, thrown many tens of millions into joblessness and poverty, and raised sovereign debt to record levels. There will be no sustained, equitable recovery until the world is vaccinated and global health security restored. Long-term prosperity also depends on slashing carbon emissions, investing massively in green infrastructure, adjusting trade rules to reduce climate risk and nature loss, and accelerating the circular economy. The timing of the Rome summit—immediately before U.N. Climate Change Conference in Glasgow—reflects a dawning awareness within finance ministries and central banks that environmental stewardship is not an obstacle to sustainable economic growth, but rather a precondition for it.
The G20 is not a treaty-based multilateral organization capable of taking legally binding decisions, much less implementing them. It is a consultative forum that allows the world’s most important advanced and emerging economies to harmonize their approaches, when so inclined, to the world’s biggest challenges. The ultimate test of the G20’s value is whether it catalyzes collective action within more formal multilateral institutions—like the World Bank, International Monetary Fund, World Trade Organization, World Health Organization and the United Nations Framework Convention on Climate Change—and the provision of global public goods by them.
What would success in Rome look like? First, the G20 must help the world turn the corner on COVID-19. To date, 61 percent of people in wealthy nations have received at least one vaccine dose, compared to just under 4 percent in poor ones. Vaccine inequity is prolonging the pandemic, creating havoc in supply chains and delaying recovery in low- and middle-income countries. The Multilateral Leaders Task Force—composed of the heads of the IMF, WHO, World Bank and WTO—has released a detailed plan to vaccinate at least 40 percent of the population in every country by the end of 2021 and at least 60 percent by mid-2022. The G20 should endorse these targets as well as the task force’s recommendations for mobilizing needed financing, removing barriers to trade in vaccines and therapeutics, and supporting vaccine production in low- and middle-income countries. The United States, European Union, Japan and U.K. should also continue to push for the creation of a Global Health Threats Board, modeled on the Financial Stability Board that emerged from the global financial crisis, notwithstanding resistance from the BRICS nations, or Brazil, Russia, India, China and South Africa.
Public Health Threats and Pandemics
The second task is addressing the climate emergency. As the IPCC’s bleak 6th Assessment Report on the state of climate science shows, the world is way off-track in meeting its Paris Agreement objectives. G20 members, responsible for four-fifths of global greenhouse gas emissions, have the capacity to alter this trajectory. In Rome, they must agree to ratchet up emissions reductions and set a firm timetable for delivering on the long-promised $100 billion in annual climate financing, up from the current $80 billion. They should promise to devote 50 percent of this financing to adaptation needs in developing countries, which the U.N. Development Program, or UNDP, estimates could skyrocket from $16.7 billion annually today to $300 billion by 2030.
The G20’s third priority must be to broaden and sustain the uneven global recovery, which is in danger of stalling. The IMF recently trimmed its expectations for growth in 2021 and warned of a “dangerous divergence in economic prospects across countries.” Whereas emerging markets rebounded smartly from the 2008 global financial crisis, advanced economies are performing better in the wake of the current pandemic. Many low- and middle-income countries have taken on high levels of debt. They may soon face an even more complicated macroeconomic situation, warns former U.S. Treasury Secretary Larry Summers, as central banks tighten monetary policies to bring inflation under control. G20 leaders must support not only debt restructuring and forgiveness but also massive access to new credit, including concessional lending from international financial institutions.
The G20’s Debt Service Suspension Initiative, or DSSI, which has benefited 46 low-income countries, is set to expire at year’s end, and its Common Framework for Debt Treatments has been slow to get off the ground. In Rome, G20 leaders should agree to extend the DSSI into 2022 and expand its remit to include middle-income countries, as U.N. Secretary-General Antonio Guterres recently implored. The G20 should also help ensure that IMF shareholders leverage the fund’s historic $650 billion increase in Special Drawing Rights to meet the financing needs of low- and middle-income countries.
Thirteen years after it was elevated to the leaders’ level, the G20 has seen its agenda expand well beyond macroeconomic coordination, to include pandemic response and climate action. That is as it should be, because the problems of the world do not permit rigid sectoral distinctions. As UNDP administrator Achim Steiner explains, “We must finally draw a line under the zero-sum approach of economy versus environment or health versus economy.” All three are interconnected, as never before. The G20’s response to the current crises must reflect that.