Effectiveness of G20 - Report Example

Title Name Institution Course Tutor Date Topic: Effectiveness of G20 Introduction The world has in so many years down the lane been transforming both economically, socially and politically. This has been manifested in the way countries interconnect and trade among themselves. It is very evident that the economies of both developed and developing countries have been tremendously expanding regardless of the limited resource endowment and factor input in the production of goods and services. The growth of these economies can be attributed to a couple of economical factors that have substantially and consistently improved the GDPs of many developing countries across the globe. In our contemporary world, people have sought to engage in trade both home trade and international trade. Where, international trade plays the biggest part in growth and development through facilitating factor mobility and capital creation. Moreover, international trade has also necessitated the need for global financial systems in order to foster international cohesion and financial lending platforms for developing countries. These global financial systems have seen many countries benefit from economic integration and regional advancement. These financial systems have resulted into the existences of several financial regulatory structures that include the G20, in a bid to stabilize the economy. In this discussion therefore, we will seek to analyze the global economic impact of controversial groups such as the G20 and their effectiveness in the stabilization of economies across the continents. The G20 is one of the groups that arose from the consequences of financial upheaval by the biggest player in the global financial systems. The questions that beg are who are the G20? Which countries fall under the G20? What role does the G20 play? And how effective is the G20 in solving global economic crisis? The G20 is a group of twenty nationalities comprising of finance ministers and governors of central banks. The G20 are considered the rising powers and their mandate is to foster international cooperation and manage financial crisis in a transparent and fair manner. There has been a need for an inclusive and balanced global economic architecture and this has made the G20 appear to be more effective since the global economic crisis in 2008. The global financial systems’ benefits cannot be gainsaid. Its benefits can be attributed to the increased investment. However, there are problems associated with these systems that have resulted into reforming various financial regulatory structures, policies and regimes to counter the negative economic effects of these systems. The G20 together with the IMF have been working closely to counteract such impacts. The G20 has importantly played a huge role in trying to stabilize economies. For instance, the financial crisis which occurred between 2007 and 2008 made the G20 in their first meeting to agree on a technical strategy to restore trust in the financial systems. The G20 has been the most appropriate forum to discuss crisis management issues and policy reforms and not the International Monetary Fund. This is because the IMF has been considered has been seen not to be an inclusive platform when resolving global financial matters. Moreover, IMF is not supported by many non-western countries like China. With the globalised financial systems, there has been on sole financial system that played an oversight role of all the economies of developing countries. The IMF has for long been acting as the lender of last resort. This means that if a country fails to meet its debt, then the IMF is there to assist in settlement of that debt. But how effective has the IMF been assisting such countries. It is evident that the IMF has lost its image and trust from developing countries and especially the non-western countries which has resulted into building their own financial systems in order to finance future emergencies that might arise. The G20 which replaced G8 was seen to be effective during the 2007 global financial crisis. It has served to reform various policies and structural aspects of the governance so as to assist in solving financial crisis. The G20 is an economic stimulant group and was established in order to counteract the problems of global finance that was vastly contributed by the IMF. Their summit in London in 2009 ushered in some of new regulatory measure and some important issues concerning the framework of the governance in the global financial market. The role of the IMF is comprehensively stated in the articles of agreement. Its role is limited to facilitating international trade and the growth of economies across the globe. Since the IMF is a western system, this has not been of benefit to so many developing countries. This is because of the doubted on whether the IMF has enough funds to finance countries in situations of emergencies and cases of discrimination. Many non-western countries have opted to join forces and establish their own systems in order to meet their needs during emergencies. The G20 which includes twenty countries with the same interest has actually seen many member countries benefit economically. The financial crisis cannot be resolved by IMF. This is because it is argued that with the growing size of financial markets, IMF cannot influence or nor have the capacity to prevent financial crisis. The biggest problem with the IMF is that it does not accept ideas from outside. Therefore the G20 is there to ensure that they formulate and implement policies aimed at stabilizing economies. The growing numbers of powerful countries and their integration has highlighted the need of international cohesion and interdependence and reforms in governance. The G20 has been in the forefront to transforming leadership in the global financial system to ensure global economic stability and transparency. G20 being a multilateral forum has turned out to best platform to not look on financial matters but it also provides an avenue of discussing other important agenda such as trade, global imbalance and climate change. Trade is expanding across regional territories and this is the outcome of financial upheaval. The G20 and several other groups seeks to overlook trade all over the world. Trade involves various aspects that have been changing over a very long period of time. The most important aspects in trade are the trade barriers. Trade barriers have led to many economies contracting as others expanded. The net effect of trade barriers is unfavorable balance of payments. For some reasons, most developing countries had to liberalize their markets in order to facilitate free trade and growth of financial and commodity markets. The World Trade Organization was established in order to oversee all the aspects of trade at international level, Narlikar (2004, 7) This proves the legitimacy and effectiveness of G20 in dealing with matters of trade. The G20 summit that was hosted in Australia provided a platform for many leaders to address matters that would foster economic growth and development. Leaders from various nationalities saw the need to support economic recovery as the global economy shifts beyond financial crisis. The main objective of the summit was to prioritize economic growth, merging economies, investment and infrastructure among other objectives. In other G20 summits, the topic of economic recovery still ruled the day. Factors that would foster economic growth were discussed and detailed. For instance, in the summit that was held at Cannes, measures to increasing job opportunities and building a more stable and resilient international monetary system was a major concern. This evidently supports the effectiveness of the G20 in the contemporary economic situation of various countries. The G20 has been in the road to assist member countries in strengthening their economies and transforming economies. The IMF has in the recent century not been a center of reliance by developing countries that are part of the G20. The global financial crisis can effectively be handled by the G20 than the IMF. This is because developing countries which are part of the G20 are becoming more stable and flexible to deal with such macroeconomic issue. The IMF uses its tools to regulate trade and its tools does not enable it tackle such a global macroeconomic problem effectively. The G20, IMF and WTO have the responsibility of ensuring that economies are growing and developing at a promising rate. However, the question of how effective the G20 is still lingers. The claim that the G20 actually played the biggest role in tackling the financial crisis is not welcomed by many especially countries from the west. It is argued that the important aspect of crisis management program was the U.S. intervention as the lender of last resort. The U.S authorities played an important role and if not for them, then the global financial crisis would have been worse. The IMF plays a global role and it aids any country in short-term finances. It is criticized that the G20 only includes the powerful countries that are developing and does it is not clear whether other developing countries will be included. The current group represents 65 per cent of global GDP and 65 per cent of the global population, which is far more inclusive and representative. The G20 has a significant impact on the way other international bodies operate since its mandate crosses other players’ roles. The position of G20 in global crisis management still remains to be very strong. However the threats to G20 still remain to befall criticism. The main threat is lack of domestic legitimacy within the member countries. This is due to the problems of accountability and transparency. Many leaders who are members of the G20 are perceived to be self-centered and they do many deals behind the doors which make people lose trust on them. Therefore, some developing countries end up not being part of the group or rather discriminated. Those who benefit from the G20 are the member countries and their interest conflict from political popularity to fight for power. G20 provides an appropriate platform to discuss various matters. What is still not clear is whether it is constraint to financial matters only. There are a lot of global issues that need to be addressed and the G20 have not been seen effective to address certain issues. This still compromises the legitimacy and the need for G20. The policies that are formulated by the group may not guarantee full eradication of certain macroeconomic agents. This is because such policies may be directed towards addressing economic issues without involving key players that should be part of it. The G20 has been criticized of too much talk than actions. This is due to poor implementation strategies. The G20 has been coming up with new policies to manage financial crisis and improve governance but have failed to make these work. This is attributed to the increasing cases of poor governance and lack of accountability. However, the G20 has been discussing matters that concern economic growth and development and the need to practice good governance in all sectors. In the summit held in Cannes, it was said that the economy recovery has weakened despite discussing matters of strengthening economy recovery in the previous summit. This was evident with the increasing rates of unemployment at an unacceptable level and tensions in the financial markets. This therefore questions the efforts of the G20 in tackling with macroeconomic issues and also their domestic legitimacy. The G20 has not yet done much. They need not to blindfold people with their empty talks. Policy implementation has been the greatest challenge that the group is facing and indeed the matter of integrity and accountability arise. Their failures to strengthen economy recovery were actually attributed to poor coordination and cooperation among countries that are members of the G20. Conclusion The G20 has been an effective forum to discussing important matters regarding transformation and recovery of economies and managing global macroeconomic crisis. The G20 summit during the 2007 global financial crisis sought to put the G20 on the spotlight and was seen as the most appropriate platform to formulating policies and reforming global financial system architecture in a bid to solving the global financial crisis. The g20 has also seek to improve governance in various sectors. The G20 also is more inclusive than the IMF in decision making and implementation unlike the IMF which is solely controlled by the westerns. The G20 is a means to an end as it is. Through proper consultation and observance of professional ethics that entail integrity and professional due care, the economy recovery program will be successful with time. Political and other related interest should not be the course of failure of the G20. In my view, G20 is the best and an effective forum. . References Narlikar, Amrita, and Diana Tussie. "The G20 at the Cancun Ministerial: Developing countries and their evolving coalitions in the WTO." The World Economy 27, no. 7 (2004): 947-966. Read More