Volume 3, Issue 1
Friday, June 18, 1999, 11:30 a.m.
Is the Group of Seven is an exclusive organisation and, if so, does it matter? Well, yes and...yes. The G7 has been an exclusive institution since its inception in 1975 has been the organ representing the interests and policy goals of the seven largest economies in the world. The mere name suggests a country club-like exclusivity to which those left on the outside can only aspire. And indeed the G7 has thrived on such a narrow basis for mutual decision-making. The identification of common interests has been relatively simple given the similarities in terms of levels of economic development and political systems and the high level of interdependence between their economies. More importantly the co-ordination of economic policies that has taken place since then been centred in the most important markets of the world.
The fundamental changes that the global economy has undergone since the 1970s, however, has shifted the balance of economic power in the international system. At the end of the 1990s it is no longer enough for the governments of the US, Japan, Germany, France, UK, Italy and Canada to co-ordinate their economic policies and forget the rest, in the style of noblesse oblige. At the end of the twentieth century we are faced with a fundamentally different global economic structure, one which has shifted in favour of the largest emerging markets, and in favour of private global finance. The G7 faces a fundamental challenge in the near future. It must continue its admirable record of co-operation whilst at the same time recognising that its seven members are no longer the only major players in the game. The G7 must acknowledge the rise of such emerging powers as Brazil and China if it is to reflect the changing structure of the world economy. What's more it must recognise that the future safety and soundness of the global financial system rests on factors that are beyond the national regulatory control of the developed states.
To adequately meet the challenges of the 21st century the G7 must consider expanding its policy-making process to include the largest emerging market economies. This should be done, not through the traditional medium of high-level annual summits, but rather through a consultation process involving the G24 or IMF Interim Committee. To do so would increase both the effectiveness and legitimacy of G7 decision-making, whilst at the same time being hugely popular with the governments and electorates and important constituencies in the represented emerging markets. If the G7 aims to be a true organ of global governance for the next century, it must incorporate the interests and perspectives of the developing world.
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