Growing G20 Governance for a Globalized World

2014/03/31

abstract

On December 15-16, 1999, the finance ministers and central bank governors of the world’s 19 most systemically significant countries and the European Union gathered in Berlin, Germany, for the first meeting of the Group of 20 (G20).[①] They did so in response to decisions earlier that year by the established Group of Seven (G7) finance ministers and Group of Eight (G8) leaders to authorize the group, which was created at the initiative of the finance minister of the G7’s smallest power, Paul Martin of Canada, and the treasury secretary of the G7’s largest power, Lawrence Summers of the United States. They and their G20 colleagues were reacting to the Asian-turned-global financial crisis that had erupted in Thailand in June 1997, had soon spread to Indonesia and Korea by the end of 1997, and had engulfed Russia, Brazil, and the United States with the collapse of hedge fund Long-Term Capital Management by the autumn of 1998. These cascading crises showed the failure of the old G7 and G8 and the even older International Monetary Fund (IMF) to provide financial stability for a new world of globalizing finance, and the need for a new, broader permanent group of established and emerging economies to provide this global public good. Almost a decade later, on November 14-15, 2008, the leaders of the world’s same systemically significant countries and the EU gathered in Washington DC for the first “G20 Leaders Summit on Financial Markets and the World Economy.” This time, the old G7 and G8 did not authorize the new forum. Still, much like the birth of the G7 summit in 1975, the meeting was initiated by two of their members, France and the United States. As in 1975, the United States insisted that a broader group of countries be brought to the table, beyond the exclusive Eurocentric club of old, to confront the compounding crises at hand. U.S. president George W. Bush now decided that the summit be composed of all members of the established G20, and that it be hosted and chaired by the United States. G20 leaders readily accepted the invitation. They were reacting to an American-turned-global financial crisis — more destructive than the one in 1997–99 — that had begun in the mortgage markets of “main street” and Wall Street, USA, and almost instantly spread to rapidly affect all parts of a now globalized world. These shocks showed the need for a new, summit-level centre of global economic governance to provide financial stability through financial regulation, economic growth, trade liberalization and development, tasks that had constituted a key component of the core agenda of the G7/8 summit since its start.

This first G20 summit set principled directions, initiated a process to apply them and took 95 concrete decisions, including holding another summit very soon. The second summit, hosted by the United Kingdom’s Gordon Brown in London on April 1–2, 2009, produced major spending stimulus. The third G20 summit, hosted and chaired by the newly elected U.S. president Barack Obama in Pittsburgh on September 24–25, 2009, proclaimed that the G20 would henceforth be the permanent premier forum for its members’ international economic cooperation. The fourth G20 summit, chaired by Canadian prime minister Stephen Harper in Toronto on June 26–27, 2010, produced a hard-won agreement to exit from the exceptional fiscal stimulus over the medium term.

The fifth summit, hosted by Korean president Lee Myung-bak in Seoul on November 11–12, 2010, saw hosting move from the established G8, Atlantic countries to an emerging, non-G8, Asia-Pacific one, and remaining among the democratic members. This trend toward balance was reinforced by the sixth summit, hosted by French president Nicolas Sarkozy at Cannes on November 3–4, 2011, the seventh by Mexican president Felipe Calderón in Los Cabos on June 18–19, 2012, and the eighth by Russian president Vladimir Putin in St. Petersburg on September 5-6, 2013. The eruption of the European financial crisis in early 2010, sparked by the spiralling sovereign debt of Greece and threatening to spread beyond Europe to become the third global financial crisis in 13 years, underscored the need for such permanent G20 summit governance.

The G20 thus provided an ultimately effective response to the global finance shocks generated by a globalized, 21st-century world, reactively in 1997–99 and 2008–09 and then preventively from 2010 to 2013. It did so by expanding beyond the old G7/8 or newer G8 Plus Five (the G8 with Brazil, China, India, Mexico and South Africa) from 2003 to a more diverse, more global, more powerful group of equals from the advanced and emerging worlds. It changed the criteria for membership, from merely major powers based on capability to systemically important countries based on connectivity as well. It rapidly expanded its role and agenda, moving from a crisis response committee to a crisis prevention and steering committee for finance and economics, social policy and political security issues such as terrorism as well. And, unlike the United Nations Security Council, which excludes Japan, and unlike the G8, which excludes China, it brought in both these Asian countries — the world’s second- and third-ranked powers — along with rising Korea, Indonesia and Australia, as equals to a central global governance group.

I. Competing Assessments of G20 Governance

Judgements about the course, causes and consequences of G20 governance have been the subject of a vigorous debate among five competing schools of thought, focused initially on the relationship between the new G20 and the old G8.

Redundant: The first school sees the G20 as redundant in the long term. This is either because it is too large and diverse in its membership and too informal in its institutionalization, or because it has inspired the older Bretton Woods, United Nations and G8 bodies to revive to meet the needs.[②] It notes that the G20 was only one institutional response to the 1997–98 financial crisis, failed to predict or prevent the 2007–09 one, saw two leaders skip the fourth summit and then reduced its meetings from two a year to one a year. Meanwhile, the annual G8 summit reached out to other leaders. It made finance and economics a core part of its agenda since 2010, above all at its British-hosted Lough Erne Summit on June 17–18, 2013. With the new Financial Stability Board (FSB), Basel Committee on Banking Supervision, IMF and Financial Action Task Force now doing the detailed reform work on finance and economics, a redundant G20 summit could fade away as the premier forum.

Rejection: The second school rejects the G20’s claim to be the primary centre of global economic governance.[③] Those with a legalization bias initially predicted the finance G20 was destined to fail due to the superior power or performance of the established hard-law multilateral bodies, the formidable institutional defects of the G20 or the dominance of the old G7 in the new G20. They then claimed that the G20 summit lacked legitimacy as a small, self-selected body without clear membership criteria, rules of governance, authorization from anyone else or developing country members, and with few benefits for G8 members.

Reinforcement: The third school sees the G20 reinforcing the G8 and similar groups.[④] It argues that the G20 has worked well on its two key tasks of providing financial stability and making globalization work for all. It has done so by adding the emerging country buy-in that the G8 lacked, showing promise in its institutional evolution as a crisis prevention network. Many early reinforcers advocated adding a leaders’ level “L20.” They then applauded the G20 summit’s performance, its move from crisis committee to steering committee, its cooperation with the G8 and its expanding effectiveness, especially if reforms were made.

Replacement: The fourth school sees replacement.[⑤] In this view the ministerial and then leaders’ G20 would substitute for a G7/8 that had, would or should fade away, revitalize an immobilized UN or even replace in practice the Permanent Five Members of the UN Security Council.

Decline: The fifth, now dominant school, sees decline during the G20’s summit years.[⑥] It argues that after its initial, crisis-inspired high performance in 2008–09, the G20’s effectiveness has dropped. Some see selective decline, with the difficulty and delay in delivery of G20 decisions notably the 2010 summit promises on fiscal consolidation and banking capital (Tower 2013). Others note a decline in macroeconomic policy performance, in contrast to its expansive success on an ever more challenging agenda in financial regulation for developed countries.[⑦]

Shortcomings: These schools present serious shortcomings, even now that the first full-length books on the G20 have started to appear.[⑧] Few are based on a detailed, systematic, empirical look at G20 behaviour over its 14-year life, across a full array of international institutional functions. Few are informed by concepts or theories of how and why such an international institutions should emerge, evolve and behave. And few offer a well-specified, systematically tested explanation for the emergence, evolution, performance and prospects of the G20.

The Argument of Systemic Hub Governance: This study, based on the first, full-length book that meets these standards, takes up these tasks.[⑨] It argues that the G20 emerged as a systemic summit hub whose performance has grown across a widening, more demanding, more domestically intrusive agenda and across all the governance functions that such international institutions have. Its expanding performance is due to proliferating shocks that exposed the new equalizing vulnerabilities of all countries, the failure of the older international institutions to cope, the rising capabilities and increasing political openness of the non-G7 members, the domestic political cohesion that participants brought, and their rational attachment to a still compact G20 club at the hub of a global governance network in the world.

Specifically, since 1999 the G20 has grown quickly and flexibly to govern much of the broad agenda of the G7 and G8, including some of their core security subjects such as terrorist finance, corruption and good governance. Especially with the advent of G20 summitry in 2008, the G20 has moved from its initial focus on domestic political management, deliberation and direction setting into decision making, delivery and the development of global governance within and beyond the G20. After its initial crisis-response success in 2008–09, it has successfully moved to effective crisis prevention, preventing the continuing Euro-crisis from going global, agreeing on IMF and banking regulatory reform, preventing trade protectionism from spiralling into a trade war of a 1930s sort, and advancing development, the environment and climate change protection, energy and food security, and corruption control. Yet with rising inequality within most G20 members, it is still struggling to make globalization work for all.

This course has been driven first by shocks, initially in the financial and economic domain from 1997 to 2001, again in 2007–10, and then in smaller but steady form from Greece in January 2010 through to Cyprus in March 2013. Success has also been spurred by shocks from terrorism since 2001 and from energy and the environment since 2007. These shocks grew in scale, contagious speed and spread across countries and sectors and destructive impact within the societies of still nominally sovereign states. Their sources changed, from an emerging Asia to a once hegemonic but now highly vulnerable America and Europe by 2007. They showed that globalization had transformed the world, materially and socially, into a complex, adaptive system characterized by compounding interconnectedness, complexity and uncertainty.

In the face of such shocks that exposed and equalized the vulnerability of the major powers, the formal multilateral organizations that America and its Atlantic allies had constructed in the 1940s could not cope. Nor could the more select G7/8-centred, often informal plurilateral institutions that had arisen since 1975. Unlike its many international institutional competitors, the G20 alone contained as full, equal members the countries that increasingly possessed the collectively predominant and internally equal capabilities required to respond. Its members also increasingly, if unevenly, became more open, democratic polities, driven by economic growth within globalization from without and G8 guidance and G20 socialization in between. The G20 further benefited from the domestic political control, capital, continuity and competence of its participants.

Above all, under the initial leadership of its founding visionary, Paul Martin, from 1997 to 2001 and again from 2003 to 2005, the G20 became a club with the unchanging membership and constricted participation necessary to reduce transaction costs, foster learning and promote socialization among the established and emerging country members, and confer on them the status, identification and new conceptions of systemic interests that came with membership in a new top-tier club. This was reinforced by the increasing intensity of interaction after the autumn of 2008. The G20 also became the hub of a growing global network in which combinations of its established and emerging country members connected in overlapping combinations in the many other relevant plurilateral institutions of global relevance and reach that joined the G20 at the centre with the rest of the world all around.

II. The G20’s Emergence and Evolution

2.1 The Creation, 1997–99.

The vision of what became the G20 was born in Toronto, Canada, on June 21, 1988. There the leaders of the G7 noted a new phenomenon they labelled “globalization.” They also called for constructive dialogue with emerging Asian countries on “macroeconomic, currency, structural and trade to achieve the international adjustment necessary for sustained, balanced growth of the world economy” and encouraged processes that would “facilitate multilateral discussions of issues of mutual concern and foster the necessary cooperation”.[⑩]

Nine years later, in 1997, the G7 had won the Cold War, brought the democratic revolution to the post-Soviet world and unleashed the globalization that would connect so many. But when its leaders met in Denver, with a now democratizing Russia added, they failed to foresee what summit host Bill Clinton would soon call the first crisis of the 21st century. A few weeks after the Denver Summit, the financial system of Thailand collapsed, followed by Indonesia in September and Korea in December. Then came Russia in August 1998, the United States almost with the collapse of Long Term Capital Management in September, Brazil in October, and Turkey and Argentina in the following years.

Two G7 finance ministers, Paul Martin of Canada and Larry Summers of the United States, concluded that a new kind of international institution was needed to govern a now intensely interconnected world. Its members would contain the most relative capability within their still sovereign, territorially exclusive states. But they would also have the greatest relative connectivity, because if one of them failed at home, even the most capable country in the world could soon fail. This new class of “systematically important” countries would no longer only come largely from the established powers of the European-Atlantic world but equally from the emerging powers arising in Asia, the Americas and elsewhere. And overwhelmingly they would be democracies, for open polities were needed to govern effectively and legitimately an economically and socially open, interconnected world. Thus Summers and Martin chose as G20 members the G8 powers of the United States, Japan, Germany, Britain, France, Italy, Canada, a democratizing Russia and the all democratic, ever expanding EU. They also chose the other members of what is now known as the “BRICS” — Brazil, India, China and South Africa. They then added financially afflicted Indonesia and Korea and still sound Turkey and Argentina, along with Saudi Arabia, Mexico and Australia. And to add representativeness and expertise, they added two universal, intergovernmental organizations from 1944 — the IMF to help ensure global financial stability and the World Bank to help globalization work for all.

The G20’s first autumn meeting, chaired by Canada but held in Berlin in December 1999, focused on financial stability (see Appendix A).[11] The second in Montreal in October 2000 emphasized making globalization work for all.[12] At the third meeting, in Ottawa in November 2011, the G20 became the centre of global governance, just after al Qaeda terrorists attacked what proved to be an acutely vulnerable United States on September 11, 2001.[13] Against the backdrop of the flaming ruins of the World Trade Center in New York City and the Pentagon in Washington DC neither the UN nor the IMF–World Bank twins could function. Only the G20 did, meeting to stop terrorist finance. Despite their multidimensional diversity, G20 members united to confront this existential threat to civilization. In doing so the most powerful but now most vulnerable member, the United States, became dependent on Saudi Arabia, Indonesia and Turkey to learn how Islamic financial networks worked and could be controlled. There, the members forged, temporarily, the bonds that transformed the G20 from an institutional to an interpersonal club.

The G20 subsequently became a genuine group of equals in other ways.[14] The chair passed to the emerging country members — India (2002), Mexico (2003), China (2005), South Africa (2007) and Brazil (2008). And emerging countries secured what they had long sought and been denied at the Atlantic-controlled IMF and World Bank, namely an agreement to shift some voting rights from the established to the emerging powers.

The G20’s success led Paul Martin, as Canadian prime minister from 2004 to 2005, to campaign to have the G20 meet at the leaders’ level to prevent the crises a globalized world would surely bring. He got every one of his G20 colleagues to agree except U.S. president George W. Bush.

2.2 The Upgrade to G20 Summitry, 2008.

The G20 thus stood as a global governance centre of proven performance and summit potential when the Atlantic-turned-global financial crisis struck with the collapse of investment bank Lehman Brothers on September 15, 2008.[15] Eight days later, speaking at the UN General Assembly, French president Nicolas Sarkozy suggested that a response should come from a special summit of the G8, with a few countries such as China, India and Brazil added. Bush thought first of a response from the G7, as did Japan. But very quickly, amidst cascading financial collapse and intense high-level diplomacy, the G20 won — because it already existed and because the departing Bush administration knew that it worked, as it had for them at their start in that traumatic autumn of 2001. Thus the same countries with the same mission met, now at the leaders’ level, in Washington on November 14–15, 2008. As in the autumn of 2001, no other international institution of global reach was able or willing to meet at the top level to confront the great crisis at hand.

2.3 G20 Summit Governance.

Washington, November 14–15, 2008: The first summit, taking place in Washington on November 14-15, 2008, was a strong success.[16] It was the first gathering of so many top world leaders to discuss economics and finance.[17] They focused on ensuring financial stability, by addressing the cause and the cure of the current crises — domestic financial regulation. They easily agreed on key principles, notably that regulation must be strengthened and internationally harmonized and supervised. To do so they intruded deeply into the sovereignty of member states and the private sector, to deal with credit default swaps, over-the-counter (OTC) derivatives, credit ratings agencies, banker pay and accounting standards. They renounced protectionism. They dealt with tax havens. Leaders created a process for reform with specific deadlines and deliverables. Because they knew that they could not save the global economy in one gathering of less than 24 hours, they called for a second summit a mere four and a half months later.

London, April 1–2, 2009: When they met for their second summit in London on April 1–2, 2009, the leaders produced a summit of very strong success.[18] The global economy was contracting faster than it had during the depths of the Great Depression in the 1930s. Spurred by speedily spreading financial shocks and their destructive economic consequences, British Prime Minister Gordon Brown, a determined G20 veteran, with a newly elected U.S. president Barack Obama on his first major trip abroad, relied on frank freewheeling decisions and decisions directly among the leaders themselves. They encouraged their central banks to provide massive monetary policy stimulus, agreed on large-scale, simultaneous, discretionary fiscal stimulus by all and produced $1.1 trillion in new financing for hard-hit emerging and developing countries, through $250 billion special drawing rights for the IMF, $500 billion for the New Arrangements to Borrow, $250 billion in trade finance and $100 billion for the World Bank. They agreed to create the FSB to which all G20 members would belong, to regulate all systemically important financial institutions, and to reform IMF quotas and voting rights. They more strongly renounced trade protectionism and endorsed action against tax havens. They broadened their agenda to embrace several other subjects, notably climate change control at the urging of Brown’s African partners in the Commonwealth.

Pittsburgh, September 24–25, 2009: Less than six months later, on September 24–25, 2009, G20 leaders gathered in Pittsburgh to produce a summit of strong success.[19] With the global financial crisis contained, they shifted from defence to offence. They declared that the G20 would be the permanent, premier forum for their international economic cooperation. They created the macroeconomic Framework for Strong, Sustainable and Balanced Growth and the Mutual Assessment Process (MAP) to make it work. They agreed to transfer at least 5% of the quota at the IMF from the established powers to the emerging ones. They created a flexible credit line at the IMF to strengthen its financial safety net. They agreed on the need for new rules on banking capital, implementation of FSB standards and the completion of OTC derivatives reforms.[20] They again broadened their agenda and action, agreeing to phase out fossil fuel subsidies in the medium term, in a commitment that would bring major gains in climate change control, fiscal consolidation, maternal and child health, and anti-corruption. Obama as host used the summit to show Iran that more sanctions would come if its nuclear weapons program continued.

Toronto, June 26–27, 2010: The fourth summit, held nine months later, in Toronto on June 26–27, 2010, was also a strong success.[21] The new financial crisis that erupted from Greece was contained. The shift from fiscal stimulus to exit strategies began. America reluctantly adjusted so that all advanced country members other than Japan agreed to cut their fiscal deficits in half as a percentage of gross domestic product (GDP) by 2013 and stop the growth in their accumulated debt as a percentage of GDP by 2016. Leaders renounced trade protectionism for the next three years. They agreed to a capital increase of $350 billion for the multilateral development banks, to cancel Haiti’s debts, to meet the Millennium Development Goals (MDGs) by their due date of 2015, to create the Development Working Group to pioneer a new approach to development, and to establish new financial safety nets for emerging and developing countries. Toronto began to bring civil society into G20 governance, with the birth of the Business 20 (B20), the Young Entrepreneurs Summit and a post-summit meeting of G20 parliamentarians.

Toronto thus marked a great transition in several ways. G20 leaders moved from the relatively easy task of reacting to a great global economic crisis already underway to preventing the next one starting in tiny Greece from infecting all of Europe and going global to damage all. Leaders moved from the relatively easy task of large-scale stimulus to the relatively difficult, politically painful task of reducing discretionary spending. Toronto moved from summits led, chaired and hosted by the great imperial powers of the past — the United States and the United Kingdom — to a smaller, if still a G7, power. It broadened the agenda to embrace emerging members’ priorities. It brought civil society into G20 governance in an institutionalized, ongoing way. With the first meeting of G20 labour and employment ministers in April 2010, it added ministerial meetings beyond finance, as well as a serious focus on directing generating jobs, especially for the young. And with the annual G8 summit taking place near Toronto immediately before the G20 one, Toronto defined the cooperative division of labour and mutual reinforcement between the two.

Seoul, November 11–12, 2010: The fifth G20 summit, taking place in Seoul on November 11–12, 2010, was a substantial success.[22] It was the first time a G20 summit had been held in Asia, hosted by a rapidly emerging country and done in tandem with the Asia Pacific Economic Cooperation (APEC) leaders’ meeting, taking place immediately after in Japan. It was held in a region where the Cold War has not ended, and where a hot war could break out at any time. The Seoul Summit’s host was a democratic polity and a member of the Organisation for Economic Co-operation and Development.

Seoul had to nurture a fragile, uneven global recovery, contain another European financial crisis erupting in Ireland on the summit’s eve, and stave off a looming “currency war” caused by major quantitative monetary easing in the United States and Japan, an undervalued Chinese renminbi and recent taxes on capital inflows into Brazil. Leaders also had to contain current account imbalances and show suspicious markets eying deeply indebted European countries and publics protesting painful austerity measures in France and Britain that they remained committed to their medium-term fiscal deficit and debt reduction targets from Toronto.

This they largely did, while also meeting the deadlines then due for the initiatives central to promoting financial stability.[23] They agreed on the second stage of IMF quota share reform and on a larger, more automatic redistribution to take place in a few years They also agreed on a Basel 3 regime of strong capital and liquidity ratios for financial institutions. They delayed escalation of the Euro-crisis, which soon spread from Ireland across Europe. To help make globalization work for all, at the host’s initiative, they created the Seoul Development Consensus, embedded in 25 commitments on development and employment and established the precautionary credit line as another preventive financial safety net.

Leaders began to move the G20 from being a rationally calculating to a personally cherished club. There were several spontaneous outbursts of applause for their beloved but departing colleague Brazil’s Luiz Inácio Lula da Silva and personal condolences for Argentina’s Cristina Fernández de Kirchner on the recent death of her husband.

Cannes, November 3–4, 2011: The sixth G20 summit, taking place a full year later in Cannes on November 3–4, 2011, was a substantial success.[24] It confronted and controlled a prospective global financial and economic crisis arising first in Japan, struck by a natural and nuclear disaster in March, then in the United States, with its sovereign debt downgrade, and then, finally, in Europe, with doubts about sovereign debt in Greece, Spain, Italy and France and a Franco-Belgian bank gone bust. It also had to counter the rapid slowdown in global economic growth, strengthen financial regulation and supervision for banks and for globally systemic financial institutions now under stress, and invent new instruments and increase resources for the IMF to contain any contagious global financial and economic crisis. It advanced the three priorities defined in August 2010 by French president Nicolas Sarkozy as the G20 chair and host: modernizing the internal monetary system beyond its heavy reliance on the U.S. dollar, calming volatile commodity markets and improving global governance within the G20 and the UN.

At the summit, G20 leaders were consumed by the European crisis, reaching a critical place in Greece again and infecting Italy as well just as the leaders arrived. Practising “tough love,” they helped Greece decide to stay in the Eurozone, Italy to accept stronger international financial supervision and Italy’s leader Silvio Berlusconi to depart. They moved to augment IMF resources, strengthen the resources, role and status of the FSB, and appoint as its new chair Mark Carney, who could be counted on to lead it in smarter, fairer, more inclusive financial regulation and supervision. They thus contained the financial crisis that reached critical levels in Greece and Italy, riding to the rescue of an EU that had repeatedly tried but failed to cope with on its own.

The leaders recommitted to achieving medium-term fiscal consolidation first, short-term stimulus where possible and substantially more exchange-rate flexibility. They bypassed the moribund decade-long Doha negotiations of the World Trade Organization to focus on smaller trade-liberalizing measures to provide relief to the poorest countries. They rejected a global financial transaction tax at a time when more inexpensive money was needed to flow from abroad to Europe, as well as a G20 secretariat that would transfer ownership of the club from the most powerful leaders in the world to international bureaucrats claiming to act in their name.

Los Cabos, June 18–19, 2012: The seventh summit was held at Los Cabos, Mexico on June 18-19, 2012 was a strong success.[25] It moved the G20 from being not only a crisis-response committee but also a crisis-prevention committee and a global steering committee. It delivered a globally demanded and urgently desired double dividend by finally controlling the escalating Euro-crisis in Europe and preventing it from going global for the following year and by advancing a priority and built-in agenda that broadened G20 governance in important ways.

This G20 summit was again consumed by the Euro-crisis, with debt-ridden Spain and even France joining Greece and Italy on investors critical list. G20 leaders helped induce the Europeans to take the decisive steps to create regional institutions and regimes to control their problem. G20 leaders promised to support Greece’s path to reform and sustainability. Its euro-area members promised to take swift, specific short-term moves toward supranational European-wide banking regulation and deposit insurance, and to take “all necessary policy measures to safeguard the integrity and stability of the area”.[26] This commitment immediately led to a sustained decline in the hitherto escalating borrowing costs for Spain and Italy. By April 2013, Italy’s two-year debt costs had dropped to their lowest level since 1999 and Spain sold three-month debt at the lowest yield ever.

Los Cabos also had all G20 members except the U.S. and Canada contribute to a new IMF rescue fund, should the Europeans need financial help yet again. The summit set a credible strategy that emphasized stimulus now and fiscal consolidation soon, and to this end mandated more discretionary and automatic fiscal stimulus, monetary policy and a broad array of structural reforms. It strengthened employment and social protection, trade and investment, the international financial architecture, financial regulation and inclusion, food security and commodity price volatility, development, green growth, corruption and G20 governance, while for the first time addressing gender issues.

To help deliver its increasingly numerous, detailed, difficult and domestically intrusive decisions, leaders created the Los Cabos Accountability Assessment Framework to assess G20 members’ progress in complying with their commitments, through a peer review process and detailed assessment by international organizations. It repeated and thus reinforced the new tradition of rotating the chair and host between an advanced G8 member and an emerging non-G8 one and among geographic regions. Mexico became the first emerging member to host the G20 at both the ministerial and leader levels in different years. Mexico institutionalized the precedent, set by Korea, of having the G20’s non-G8 hosts come from democratic countries, and from those outside the more powerful emerging countries in the recently established BRICS group, which now included South Africa. This tradition was reinforced by the G20 being hosted by Russia in September 2013 and then moving back to the Asia-Pacific region in November 2014 in Australia, to Turkey in 2015 and back to Asia in 2016.

Mexico also hosted its G20 summit in tandem with a G8 one, this time on a regional rather than national basis, as the United States hosted the G8 exactly a month earlier, on May 18–19 in Camp David, Maryland, in the lead-up to Barack Obama’s presidential re-election bid. Mexico, a key member of the Summit of the Americas since its 1994 start and the North American Leaders’ Summit since it began in 2005, further enriched the position of the host of the group as a hub of a network of global governance beyond.

III. Dimensions of G20 Summit Performance, 2008–2013

A systematic analysis of evidence across the seven dimensions of governance performed by the G20 confirms this rising summit performance (see Appendix B).[27]

Domestic Political Management: On the first dimension of domestic political management, the initial measure of leaders’ attendance shows a decline. The perfect attendance at the first three summits was lost at Toronto when the leaders of Australia and Brazil did not come, and subsequently when the ailing leader of Saudi Arabia stayed at home. However, on the second dimension of compliments conferred on individual countries in the concluding communiqué, the virtual absence of any at three first three summits changed decisively when Toronto awarded 7, Seoul 3, Cannes 11 and Los Cabos 6.

Deliberation through Conversation and Conclusions: On the second dimension of deliberation, the public component of the leaders’ collective conclusions as recorded in their communiqués has seen a steady rise in length. Washington issued a total of 3,567 words, London 6,155, Pittsburgh 9,257 and Toronto 11,078, reflecting in part the expanding agenda and ambition of the group. Seoul issued an all-time high of 15,776, Cannes 14,107 and Los Cabos 12,682.

Direction Setting through Consensus: On the third dimension of principled and normative direction setting, as measured by affirmations of democratic and human rights principles, there has also been a rise. There was a spike to 29 at Pittsburg, then at another at Seoul and an all-time peak of 34 at Los Cabos.

Decision Making through Commitments: On the fourth dimension of summit decision making through precise, obligatory, future-oriented commitments, the rise again appears. The first peak was 128 at Pittsburgh. Starting at Seoul there were higher totals at every summit, with a peak of 282 at Cannes. These commitments covered a broadening agenda, but with a continuing emphasis on the initial economic and finance core. At Los Cabos in 2012, the 180 commitments covered 14 issue areas, led by macroeconomics at 37% of the total, and financial regulation, labour and employment, and trade at 10% each.

Delivery through Compliance: The fourth dimension of delivery through compliance has a three-phase cadence, as shown by the 87 priority commitments assessed thus far. Compliance was high with the assessed priority commitments at Washington at 77% (or 0.53 on the scientific scale) and London at 71%. It then dropped to 64% for both Pittsburgh and Toronto. But it rose to 75% for Seoul and 77% for Cannes. For Los Cabos it was estimated to be 74% by April 8, 2013, with five more months of implementing behavior still to come.

Development of Global Governance through Institutional Construction: On the sixth dimension of the development of global governance through institutional construction, the rise also appears. On the first component of institutional development inside the G20, communiqué references steadily rose, with a jump at Toronto to 71, to a peak at Seoul of 99 in Seoul. References to institutions outside the G20 similarly rose, starting with the 31 references at Seoul.

Distinctive Mission Accomplished: On the seventh dimension of accomplishing its distinctive mission, G20 summit performance has also been on the rise. Its work on financial stability, its first mission, began with effective crisis response in 2008–09 and moved to deeply domestically intrusive crisis prevention since 2010. Apart from several, small, non-G20 member countries in continental Europe (Greece, Ireland, Portugal, Spain, Cyprus), it has largely succeeded since 2010.

Its mission to make globalization work for the benefit of all has similarly expanded after a slow start. Since Pittsburgh it has given increasing attention to employment. In development it created the Development Working Group at Toronto, adopted the Seoul Development Consensus at Seoul and added as one of 10 agenda items post-2015 MDGs for St. Petersburg in 2013. Yet as it has done little to address the increasing economic inequality directly in most G20 members and elsewhere, its work here remains incomplete.[28]

IV. Causes of G20 Performance: the Systemic Hub Model

The causes of the G20’s growing performance are well captured by the model of systemic hub governance.[29]

Shock-Activated Vulnerability: The key cause of the G20’s successful performance is shock-activated vulnerability, particularly from the same core field of finance and economics. The Asian-turned-global financial crisis from 1997 to 2001 was central to the group’s creation in 1999 and to its success in its early years. The much larger, faster American-turned-global financial crisis from 2008 to 2009 was similarly essential for its rapid upgrade to the leaders’ level in 2008, following the failure of the earlier campaign to do so in 2004–05, years free of financial crisis. The continuing succession of escalating Euro-crises, starting in early 2010 in Greece, then Ireland, Portugal, Spain and Cyprus by March 2013, fuelled the global crisis prevention success from 2010 to 2013, for the G20 was now sensitive to such similar shocks and the global damage their rapid escalation could produce in an interconnected world.

A second set of shocks came from terrorism. The September 11, 2001, attack on America propelled the success of the Ottawa ministerial, the G20’s subsequent work and the eventual decision of the Bush administration to choose the G20 for a summit in 2008. The terrorist attack on London on July 7, 2005, helped all leaders save one to agree to hold a G20 summit by the end of Paul Martin’s campaign in 2004–05. Small shocks spurring G20 success came from spiking food and energy prices, oil rig spills, natural disasters as in Haiti and climate change.

These sequences of shocks showed all members and outsiders the vulnerability of even the most powerful countries to the new, non-state threats arising in a densely interconnected, complex, uncertain, globalized world, defined by the demise and death of distance and delay. The strength and steady succession of financial shocks and, secondarily, terrorist shocks explain the G20’s move from effective crisis response to effective crisis prevention and but do not explain the significant expansion of its agenda beyond food, energy and environment into the political-security sphere beyond the finance-related subjects there.

Multilateral Organizational Failure: The second cause important is the failure of the old formal multilateral organizations from the 1940s and the more informal, plurilateral institutions since 1975 to respond adequately to such shocks. The failure of the European-dominated IMF and G7 to control the Asian-turned-global financial crisis, especially in the eyes of rising Asian powers, spurred the creation of the G20 and its ascendance over the Financial Stability Forum and IMF’s International Financial and Monetary Committee. The September 2001 terrorist shock on America dramatically showed that only the fledgling G20 forum could function, and that the G7 and IMF could work only because the G20 did. The inadequacies of the IMF and G8 Plus Five led George Bush to select the G20 over his initial G7-centric instincts to respond at the summit level to great financial shock in the autumn of 2008. Only with the advent of G20 summitry did the IMF abandon its strategy, there since the start in 1999, of eliminating its G20 rival in order to make itself indispensable to the G20’s work. The IMF and the World Bank thus gave the G20 a critical, formal “G192” supporter, to go along with the G20’s informal G7 ally. And the failure of the EU to control its escalating regional crisis from 2010 to 2013 led the G20 increasingly to step in and succeed.

Predominant Equalizing Capability: The third cause — globally predominant and internally equalizing capabilities — helps explain why these particular 20 members came to create and succeed in a group that continued from 1999 to 2010 with an unchanged membership, unlike the recurrently expanding G7/8, IMF and Financial Stability Forum. These 20 members gave the G20 the critical collective predominance and increasingly internal equality in the relative capabilities and the global connectivity of its members that its international institutional alternatives lacked. Summers and Martin’s consideration of which countries should be in or out of their new group, the continuing inclusion of South Africa and Argentina, and the closing of the list at 19 shows that the selection criterion was both relative capability and global connectivity, as the new category of “systemic significance” captured very well. It was a highly appropriate criterion for a globalized world defined by the death of distance and delay. It was also a highly prescient criterion and selection, because the major consumers of financial security in 1997–2011 — Indonesia, Korea, Russia, Brazil, Argentina and Turkey — rationally and responsibly became providers of financial security from 2008 to 2013, while the Europeans moved the other way. The Asian powers of China, Japan and India, now joined as equals in the top-tier group, were the continuing great stabilizers, serving as producers of global financial security since the 1997 start.

Common Characteristics: The fourth cause of the G20’s growing performance is convergence on the domestic principles and practices of political openness and their components and consequences.[30] It helps explain why not all systemically significant candidates made it in as full members. At the beginning Indonesia but not Nigeria passed the additional test of behaving as a recognizably democratizing polity. By the time Nigeria did, the G20 was frozen in its now familiar membership. Few agreed that a non-democratic Egypt should be added as a substitute. The two non-democratic members of Saudi Arabia and China shared with their G20 colleagues the core conviction about the centrality of political stability, based on underlying social stability and economic and financial stability. G7 leaders valued this quality to lock in the post-1975 democratic revolution in Asia, the Americas, Russia and Turkey in 1997–2001, and then in Europe itself from 2008 to 2013.

Domestic Political Cohesion: The fifth cause, which helps explain the G20’s great leaps forward in 2001 and 2008–13, is its members’ domestic political cohesion, specifically its participants’ political capital, control, continuity, financial-economic competence and personal commitment to the G20 forum. They were led by Paul Martin, who was a CEO before entering politics and then Canada’s finance minister from 1993 to 2002 and leader in 2003–06. Martin was accompanied by Larry Summers as the U.S. treasury secretary in 1999–2001 and economic advisor to Barack Obama in 2009–10. They were aided by Gordon Brown, who was Britain’s chancellor of the exchequer from 1997 to 2007 and leader from 2007 to 2010, George Bush as U.S. president from 2001 to 2008, Manmohan Singh, who had served as India’s finance minister three times and had been the prime minister since 2004, and Hu Jintao, President of China from 2003 through 2012.

The Club at the Hub: Finally the G20 increasingly became the efficient, effective, legitimate club at the hub of an expanding network of global governance, fostering the global sensitivity and collegiality that allowed many member to lead, adjust and govern for their own and the world’s greater public good. Dense, diverse, overlapping combinations of advanced and emerging country representatives, which were leaders in many other plurilateral summit institutions of global relevance, met with intensity. In doing so they slowly started to bond together as individuals, moving the G20 toward an interpersonal club they cared about as a core element of their personal sense of interest and even identity in some respects.

Conclusion

Growing G20 governance, from its initial crisis-catalysed creation in 1999 to its global centrality by 2013, came through four distinct phases of the international institutional journey. In its first phase of generation from 1999 to 2001, the G20 established itself as an effective group of operational equals, led largely by Canada, the United States and other G7 members, governing to produce financial stability, globalization that worked for all and the suppression of terrorist finance. In its second phase of equalizing the influence from 2002 to 2007, the G20 became a more genuine group of equals in hosting and chairing, broadening its agenda to embrace emerging members’ priorities, and seeing initiatives from emerging members that met with success. In its third phase of creating the summit crisis response group from 2008 to 2009, the G20 became a successful leader-level, central, global governance group, as its relatively unscathed, rapidly rising emerging country members successfully rushed to the assistance of the now afflicted, advanced American-Atlantic-European ones. In its fourth phase of developing as a global crisis prevention and steering group from 2010 to 2013, G20 hosting passed to the emerging members; the agenda expanded on their key issues and on political-security issues; key decisions were made on fiscal consolidation, bank capital and IMF reform; and the escalating Euro-crisis was contained and controlled in its regional home. Moreover, the G20 slowly became more of a personal club of leaders, not just a convenient forum for advancing domestic preferences but as a group that they valued for taking care of themselves, their citizens and the global community as a whole. [①] John J. Kirton, G20 Governance for a Globalized World, Farnham: Ashgate, 2013.
[②] Ibid., pp. 5-6.
[③] Ibid., pp. 6-8.
[④] Ibid., pp. 8-10; Andrew F. Cooper, “Working with the Countries of the G20, BRICS and the United Nations,”in John J. Kirton and Madeline Koch eds., The UK Summit: The G8 at Lough Erne 2013, London: Newsdesk, 2013; Andrew F. Cooper and Ramesh Thakur, Group of Twenty (G20), London: Routledge, 2013; Susanna Vogt, “A Progressive Idea of Style Awaiting Its Embodiment: Global Governance between G8 and G20,” International Reports, No. 2010.
[⑤] Ibid., pp. 1-12.
[⑥] Ignazio Angeloni, “The Group of 20: Trials of Global Governance in Times of Crisis,” Bruegel Working Paper, No. 12, 2011; Alistair Darling, Back from the Brink: 1000 Days at Number 11, London: Atlantic Books, 2011; Stephen Pickford, “The G20 and Beyond,” unpublished paper, Chatham House, London, 2013; Rowan Callick, “US, Chinese Leaders Must Pull Off Market-Oriented Magic When They Meet in California,” Australian, 2013, http://www.theaustralian.com.au/opinion/columnists/us-chinese-leaders-must-pull-off-market-oriented-magic-when-they-meet-in-california/story-e6frg9fo-1226658099963.
[⑦] Pickford, “The G20 and Beyond”; Masahiro Kawai, “The G20 Leaders' Process Five Years On: An Assessment from an Asian Perspective,” Opening remarks at a conference on "The G20 Leaders' Process Five Years On: An Assessment from an Asian Perspective," Lowy Institute for International Policy Study, Sydney, http://www.adbi.org/files/speech.2013.05.22. opening.remarks.kawai.g20.leaders.five.years.on.asian.perspective.pdf.
[⑧] Risto E. J. Penttilä, Multilateralism Light: The Rise of Informal International Governance, London: Centre for European Reform,2009; Karoline Postel-Vinay, Le G20, laboratoire d'un monde émergent, Paris: Les Presses de Sciences Po, 2011; Kirton, G20 Governance for a Globalized World; Peter I. Hajnal, The G8 System and the G20: Evolution, Role, and Documentation, 2nd ed., Aldershot: Ashgate, 2013.
[⑨] Kirton, G20 Governance for a Globalized World.
[⑩] G7, “Toronto Economic Summit Economic Declaration,” Toronto, June 1988, http://www.g8. utoronto.ca/summit/1988toronto/communique.html.
[11] Kirton, G20 Governance for a Globalized World, pp. 55-92.
[12] Ibid., pp. 93-114.
[13] Ibid., pp. 115-135.
[14] Ibid., pp. 137-225.
[15] Ibid., pp. 227-268.
[16] Ibid.
[17] Pickford, “The G20 and Beyond”.
[18] Kirton, G20 Governance for a Globalized World, pp. 269-296; Darling, Back from the Brink.
[19] Ibid., pp. 297-320.
[20] Pickford, “The G20 and Beyond”.
[21] Kirton, G20 Governance for a Globalized World, pp. 321-372.
[22] Ibid., pp. 383-384.
[23] Nicholas Bayne and Stephen Woolcock, “The Future of Economic Diplomacy,”in Nicholas Bayne and Stephen Woolcock eds., New Economic Diplomacy: Decision-Making and Negotiation in International Economic Relations, Farnham: Ashgate, 2011, pp. 359–378.
[24] Kirton, G20 Governance for a Globalized World, pp. 384-385.
[25] Ibid., pp. 385-386; John J. Kirton, “Winning Together: Advanced Countries' Approach to G20 Governance,” Paper prepared for the "G20 Seminar," Shanghai International Studies University, Shanghai, 2013, http://www.g20.utoronto.ca/biblio/kirton-sisu-2013.html; John J. Kirton, “G20-G8 Partnership in Global Economic Governance,” Background paper for a conference on "From the G8 to the G20 and Beyond: Setting a Course for Economic Global Governance," Chatham House, London, 2013, http://www.g8.utoronto.ca/scholar/kirton-chathamhouse-2013. html; John J. Kirton, “How the G20 Has Escaped Diminishing Returns,” Paper prepared for a conference on “International Co-operation in Times of Global Crisis: Views from G20 Countries," National Research University Higher School of Economics, Moscow, 2012, http://www.g20.utoronto.ca/biblio/kirton-hse-2012.pdf; John J. Kirton, “Democratizing G20 Governance: Performance and Possibilities,” Paper prepared for a meeting of the Academic Research Network on “Global Governance versus Global Government: Worldwide Democracy and the G20,” Flemish Research Foundation, Leuven, Belgium, 2012, http://www.g20.utoronto. ca/biblio/kirton-leuven-2012.pdf; John J. Kirton, “The G20's Global Governance: Working for the World,” Lecture at an international workshop on “The G20 and the Democratic Challenges of Global Governance,” Leuven Centre for Global Governance Studies, University of Leuven, Leuven, Belgium, 2012, http://www.g20.utoronto.ca/biblio/kirton-leuven-lecture-2012.html; John J. Kirton, Julia Kulik, and Caroline Bracht, “G20 Social Governance,” Paper prepared for an international workshop on “Global Social Law and Policy,” University of Bremen, Bremen, 2013.
[26] G20, “G20 Leaders Declaration,” Los Cabos, June 2012, http://www.g20.utoronto.ca/2012/ 2012-0619-loscabos.html.
[27] Kirton, G20 Governance for a Globalized World, pp. 439-441.
[28] Civil 20 Task Force on Inequality, Civil 20 Proposals for Strong, Sustainable, Balanced and Inclusive Growth, CIvil 20, Moscow, 2013, http://www.g20.utoronto.ca/c20/C20_proposals_ 2013_final.pdf.
[29] Kirton, G20 Governance for a Globalized World, pp. 444-470.
[30] Marc F. Plattner, “From the G8 to the G20,” Journal of Democracy, Vol. 22, No. 1, 2011, pp. 31–38.

author： John Kirton