Global Economic Recovery and the G20 Responsibility
- 8 September 2013
Outcome of the G20 summit, which was held in Saint Petersburg, Russia, recently, indicates that the uncertainty surrounding global economic situation in recent years continues to prevail. The statement released at the end of the Summit was an evidence of this fact. The statement said that the global economic recovery is still too weak and risks remain tilted to the downside, particularly in relation to the slow recovery in emerging economies due to volatile capital flows and price volatility of raw materials.
Several efforts have been made over the years to end this situation and push economies toward stable growth. However the summit made it clear that these efforts have had limited success with little real breakthrough. This has been the case due to several important reasons. First, the actions taken by most governments in major economies, including those in the G20, have not tackled the root causes of the crisis in real economy sectors and have instead paid greater attention to fiscal and monetary aspects. Even these initiatives have not succeeded in addressing the financial and monetary problems.
Moreover, these governments continue to resort to individual initiatives instead of giving a collective response. This is evident in the repeated pledges of collective action made during previous G20 closing statements, which have rarely translated into economic policies adopted by them on the ground. Even in cases where collective efforts have been made, their implementation has been very slow. This also explains the emphasis that was given to this issue in the closing statement, especially with regard to transparency issues.
Another problem in this regard has been that emerging economies are still incapable of assuming leadership role at a global scale. Even though emerging economies have played an important role in fueling global growth in recent years, the recent vulnerabilities – mainly associated with outflow of foreign capital as some developed countries talked of tapering the policy of quantitative easing – confirm that emerging economies are still significantly dependent on events in developed countries. It might hence be premature to rely upon them to become engines of global growth.
It is necessary to emphasize that the G20, alongside other emerging countries, have a major responsibility to lead the global economy during these times. They need to fulfill this responsibility within the framework of collective action and should find real and practical solutions. After all the G20 countries combined represent around 90 percent of the global GDP and control about 80 percent of international trade. They have around two-thirds of the world’s population and are also major consumers of goods and engines of global markets.