The reconfiguration of the world scenario: the G-24's voice and the G-20's silence

The current economic and financial crisis has led to a reconfiguration in the scenario of power in the world. The Group of 20 (G-20), which is an extended version of the Group of 8 (G-8), proclaimed itself the main forum for international cooperation. However, the measures the group has adopted do not provide real solutions to the many crises assailing the world today. The Group of 24 (G24), on the other hand, which was originally set up by developing countries to coordinate their positions in the international arena, has in many cases recommended stronger action and with a greater long-term vision than the G-20 countries themselves.

In the framework of the recent meetings of the International Monetary Fund (IMF) and the World Bank (WB) on 24 and 25 April in Washington DC, the G-20 and G-24 also had meetings. It was expected that both groups would issue statements about the regulation of the global finance, reforms to the international financial architecture, and the role of the WB and the IMF. But while the G-24 focused on the role and governance of the IMF and the WB, the G-20 failed to make any comment about most of these issues.

The G-20 silence

The G-20 was set up in Berlin in 1999 and it consists of Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States. These countries account for 85% of the world’s GDP and 80% of world trade (including trade inside the European Union), and two thirds of the population of the planet. With these figures as its main justification, the group has assumed authority for taking decisions that affect all the countries in the world.

The fact that the G-20 took over from the G-8 reflects a change in the global balance of power. However, the G-20 still excludes more than 170 members of the United Nations, and many of these have suffered disproportionately severe impacts as a result of the crisis. The G-20 is exclusive and anti-democratic by nature, and this robs it of legitimacy when it makes decisions that affect the world as a whole.

To make matters worse, many of the reforms the group has tried to promote have been seriously questioned. The outburst of the crisis has served to reaffirm repeated calls for far-reaching structural reforms to the world’s financial system, but the measures the group has adopted just amount to “more of the same” and do not provide real solutions to the many crises the world is undergoing.

At their meeting in Washington on 23 April, the ministers of finance and governors of central banks of the G-20 countries issued a timid communiqué which in no way is an adequate response to the world’s urgent needs in this time of crisis. It is clear that the G-20 should implement financial reforms and impose regulations so as to foster “equitable balanced growth”, but the statement did not reflect any concrete progress from the positions adopted at the meeting of ministers in November 2009 in Scotland.  

The IMF issued a report about how the financial system could contribute to paying the costs of the crisis, but the G-20 did not even acknowledge it had received this document and has thus postponed explicit discussion of the subject.

In the communiqué, the only paragraph about governance reform in the international financial institutions is a request for the IMF to bring forward the deadline to complete its reform package from January 2011 to November 2010, as established at the G-20 meeting in Seoul, South Korea. In any case, it is noticeable that no specific percentages are mentioned for reforms to the IMF voting structure even though, at the Pittsburgh Summit, the group pronounced in favour of a redistribution of 5% of the votes[1].  

After that meeting, the ministers of the group met again on 5 June in Busan, South Korea, to prepare for the Heads of Government Summit in Toronto, Canada. On this occasion their statement especially stressed the need to have balanced budgets, and postponed until the Toronto Summit any pronouncement about imposing a tax on the financial sector.

The next G-20 Leaders meeting is scheduled for 26 and 27 June in Toronto, but since Pittsburgh the group has not made any important decisions. In preparation for the upcoming summit the Canadian government has tried to focalise the debate on reining in fiscal spending, planning exit strategies from all of the stimulus spending, domestic financial sector regulatory reform, addressing the European sovereign debt crisis, coordinating national policies towards a sustainable recovery. If it was up to the hosts, issues like a tax on financial transactions, tax havens, fossil fuels and climate change would again be ignored.

The voice of the G-24

The Inter-Governmental Group of Twenty-four on International Monetary Affairs and Development, better known as the G-24, was set up in 1971 with the aim of concerting the positions of developing countries, and today it is presided over by Guido Mantega, the Brazilian Minister of Finance. Five countries in the group are also members of the G-20, namely Argentina, Brazil, India, Mexico and South Africa.

The other G-24 countries are Algeria, Colombia, the Democratic Republic of the Congo, Egypt, Ethiopia, Gabon, Ghana, Guatemala, Iran, Ivory Coast, Lebanon, Nigeria, Pakistan, Peru, the Philippines, Syria, Sri Lanka, Trinidad and Tobago and Venezuela.

The group last met on 22 April in Washington DC, and in contrast to the G-20, the G-24 pronounced itself strongly in favour reforming the governance of the international financial institutions and the IMF mandate. As Bhumika Muchhala from Third World Network stated[2], the G-24 positions and recommendations are in many cases firmer and of longer-term application than what the G-20 has proposed.  

The G-24 stated that “the crisis has laid bare the need to implement fundamental reforms in the international financial institutions”. According to its communiqué, the approval and implementation of these reforms must be one of the main points in the work programme for this year.  

The ministers emphasised the need for reform in the distribution of IMF quotas and in how they are calculated so as to benefit the developing countries. Unlike the G-20, the G24 ministers reiterated their call for “a 7% redistribution of quotas from the developed countries in favour of the developing countries, and protection for the voting power of the low income countries” given that “the legitimacy, relevance and effectiveness of the IMF depends basically on its correcting imbalances as regards participation and representation.”

The ministers were in favour of revising the IMF mandate “in ways based on the lessons learned from the crisis”. They agreed on “the need to reinforce the supervisory function the IMF exercises so as to ensure equitable and effective supervision of the advanced countries and markets that are systematically important.”

As regards the World Bank, the G-24 have called for a greater widening of capital both in the IBRD and in the International Finance Corporation (IFC). In its communiqué, the group only noted the reform in World Bank governance rather than welcoming the changes that have been implemented. “They consider that the upcoming review should have an ambitious timetable and that it should lead to parity in the number of votes that the developed countries and the developing countries have.”