Who’s Leading the World?

The simple but disturbing answer is: nobody.

Our world has over a billion people still living in extreme poverty. There are 25 million jobless in Europe. Jihadists control half of Iraq. The Doha Trade Round is in its 13th year without producing any major benefits. And we are burning carbon ever faster, bringing ourselves closer to global warming disaster.

Meanwhile the G7 seems focused on reviving the Cold War, while the G20 is stuck in first gear working mainly on institutional reform in the mega-banking sector. G2 is a non-starter: the USA and China have very different worldviews.  Despite a recent boost for the UN’s leadership in transposing old MDGs into new Sustainable Development Goals for 2015-30, ultimately it is a tired and underfunded family of institutions. Even the BRICS—who are key to future global leadership—are in defensive mode and starting to create their own parallel world of institutions.

We prefer to revel in the fantasy of the G7 as the world’s natural leaders, while countries of much greater significance (e.g. China and India) sit by in a hamstrung G20.

This is not anarchy: things are being done, and some crises are being tackled (especially when they hit the CNN headlines). But leadership and vision are absent. We are seeing institutional frameworks that should complement each other instead struggling to protect old turf. Competition, rather than partnership and co-ordination, is still the norm. Meanwhile, jobless growth in often unequal societies is squandering the potential of the next generation, driving the young towards social apathy and even terrorism.

Much of the flawed leadership can be linked to the 2007 global financial crisis, which transformed a modest club of finance ministers into the Leaders’ G20. The crisis proved beyond the capability of the G7 alone: it was China’s economic weight (and its four trillion dollars of US Treasury bonds) that proved key to financial rescue.

The G20 rescue plan was too single-mindedly focused on stabilization (i.e. saving those “too big to fail” banks); creating jobs was only a secondary consideration. As a result, the crisis still casts a cloud over the world economy. Global stagnation has become the new norm: seven years into the crisis, the IMF has just lowered its 2014 world growth forecast.

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And now the global governance framework is getting into deeper geo-political trouble with Russia’s expulsion from the G8 for its actions in Crimea. The likely tragic error of an incompetent Ukrainian separatist shooting down the wrong plane has raised Cold War tensions to heights not seen in decades.

Almost at the same time, there was a critical action in Brazil at the latest BRICS Summit. This group now represents over a quarter of the global economy, outshining the old G7 in growth. Reflecting their frustration at the failure of Western governments to deliver on promised first steps towards rebalancing power within the World Bank and the IMF, BRICS leaders announced two new global instruments. One is the New Development Bank (NDB), a World Bank clone designed to finance infrastructure and other development projects, with an initial $50 billion in capital and a $100 billion Contingent Reserve Arrangement to replace key functions of the IMF. By 2016 the NDB will move into a glossy HQ tower in Shanghai under its first president, an Indian.

So where are we going with global governance?

The news seems uniformly bleak. The G8 is dead, leaving the G7 as an old Western clique. The G20 is underperforming even in reforming global financial systems. Now this year’s chair (the Australian PM) again wants to expel Russia, a move that could shatter the organisation. Meanwhile, the BRICS are racing ahead building a parallel governance framework driven by the global South.

Even the conservative editors of the Economist, according to their commentary last month, think the North is missing the boat in blocking the South from its fair share of leadership in the world of multilateral organisations. On the urgent issues of trade reform, political reconciliation and climate change, G7 leaders seem to want such items kept off the G20 agenda because that wider forum would be too ‘unmanageable’ (i.e. would not meekly buy into the G7’s worldview). And is it just coincidence that in the first nine G20 meetings, the summit has never been hosted by any of the developing countries who constitute 8 of its 20 members?

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Sadly, neither North nor South seems ready for change. Drift seems to be the favoured scenario, even in the face of growing global challenges. Both hide from the reality that global economics and politics are increasingly intertwined. They grumble at indecision in the UN Security Council (UNSC), a body unaltered since it was created to include only World War II victors. Critically, no existing or aspirant member wants to give up their blocking UNSC veto. The concern is that the North will sign on to bold Post-2015 goals in the UN, but then refuse the funding and other actions needed to implement them.

Canada, once a leader in the multilateral domain, is now seen as a spoiler and foot-dragger. We were the biggest cheerleader for expelling Russia from the G8, and now we and the Australians seem to oppose any idea of broadening the G20’s mandate. We prefer to revel in the fantasy of the G7 as the world’s natural leaders, while countries of much greater significance (e.g. China and India) sit by in a hamstrung G20.

It would seem that Canada and others in the G7 find it difficult to deal with nations holding a different—and increasingly important—worldview.  It might be a bold move for Canada to encourage a more inclusive G20, with a voice for the weakest as well as the most powerful. At present, however, political insecurity is keeping a weakened North distant from its future partners in the South.

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