The G20 is a policy no-brainer for Australia, and we should be actively engaged in the forum.
This is one of the basic conclusions that my colleague Hannah Wurf and I outline in our Lowy Institute analysis, Making the most of the G20, released today.
The position may surprise those that have bought into the sheer cynicism embodied in Gordon Brown’s recent remarks that the G20 is widely viewed as ineffective. There’s been a noticeable downgrading of Australian government attention on the G20 (particularly in the treasury) since the end of 2014.
To be clear, the G20 may be a flawed forum (a viewpoint that is justified by a lacklustre meeting among finance ministers last week in Chengdu) but it is certainly valuable. At a time when multilateralism is in decline and countries are turning inwards, it is needed.
As an economic governance scholar, I’ve found myself in many quite depressing conversations about the state of the world. I think that they can be ordered along a ‘spectrum of depressing challenges’. At one end (let’s call it the ‘positive’ end) are conversations with financial markets analysts, who will confidently weave a story about emerging dangers in financial markets and predict that the next financial market crash is just around the corner. There will be an impressive chain of logic backing up their views, and I often need to seek comfort in Nobel Laureate Paul Samuelson’s famous joke that Wall Street predicted nine out of the last five recessions (and its mistakes were beauties).
Further along the spectrum are conversations with climate change experts. These are the people examining an existential threat for the planet. Generally, they will tell you that there is a narrow window in which we can act, although we can’t say for certain when or what the impacts of missing are. But they are confident that the clock is ticking, and that government efforts have only done enough to save the chance to save the planet.
This doesn’t even get close to those looking at refugee issues, where governance arrangements globally are failing both states and people, there is no coherent global architecture governing cross-border migration (and seemingly little appetite to create one), and an absence of global leadership.
But the space at the end of spectrum needs to be reserved for multilateral trade experts. These are the people examining trade liberalisation; a movement that has a strong track record of contributing to global prosperity since the 1940s (even if benefits are not spread evenly). Yet we’ve experienced two decades of disappointing results, and significantly backsliding is an ever present and increasingly real threat. One only has to look at the number of protectionist measures implemented every six months and the dangerous rhetoric coming out of the US to recognise the threat to a crucial policy space.
You sit in enough of these conversations, and it becomes clear exactly why it is so important to have a forum like the G20 that brings together the political leaders to progress intractable issues.
The G20 has developed a bit of a reputation of ‘good during the global financial crisis, but less effective over time’. The forum certainly has design flaws and governments need to work to make the G20 more effective.
But here’s the thing: it still provides valuable political leadership on macroeconomic matters. For example, Australian policy settings, and the lives of Australians, are affected by minimum global standards on tax and finance.
These are long-term issues that we will need to continue to engage in. Even if there were no other motive, being involved in and contributing to such discussions would be worth the price of admission. And as Phillip Lowe, governor-elect of the Reserve Bank, points out in our paper, Australia has a responsibility as a high-income country to contribute to global public goods.
In an uncertain world, and with at least one prominent global risk scenario (Donald Trump) having an uncomfortably high probability of realisation, the G20 remains the best means the international community has to coordinate responses to global economic and financial crises. The G20 also has an as-yet-untapped potential to play an important role in countering anti-globalisation sentiment, although it needs to be stronger, clearer and more robust in its rhetoric in support of the liberal economic order and the institutions (such as the IMF and WTO) that underpin in.
The forum also gives us an unrivalled chance to influence, and not just listen to, the global economic debate. As those who are not members of the G20 will readily tell you, it’s much better to be a policy-maker, and not a policy-taker.
Rather than a question of why engage in an ‘ineffective’ process, the key question Australians ask should be how do we get the most out of our membership.
One important area is ideas. To make and shape policy as a middle power, you need to be continually coming up with influential suggestions. Australia has forged a strong reputation in this space over the past two decades. Our contributions are better when we do our homework: thinking about issues, developing proposals, socialising ideas, and backing our proposals with evidence.
In this vein, Wurf and I argue that what is needed now is for Australia to make focused and strategic investments of ministerial time and bureaucratic resources.
Central to our efforts should be a Cabinet-approved long-term international economic engagement strategy. And it should start with the Australian prime minister and treasurer issuing a statement (perhaps drawing inspiration from the 1998 Task force on International Financial Reform) that details the challenges facing the global economy that could lead to a future international economic crisis.*
It would be a great opportunity for the government to demonstrate the importance it attaches to it the liberal economic order, that it is addressing global issues that Australians care about, and that it is improving how it communicates the relevance of the influential work of the G20 to Australians.
Photo: Getty Images/VCG
*This reference to the 1998 Task force was altered after original post