Finding the G-Spot: How Many Economies Ought to be in the G-8 and G-20?

6 June 2011.

Calling the G-8 or the G-20 ‘irrelevant institutions’ is like calling the US economy ‘flawed’.

The whole world knows it – and has been saying it for years. The organisation itself doesn’t openly acknowledge the fact, but may grudgingly admit it in private; and despite countless calls from external parties to change the system, the organisation is resistant to change as it may hurt the interests of individuals within the system.

6 June 2011.

Calling the G-8 or the G-20 ‘irrelevant institutions’ is like calling the US economy ‘flawed’.

The whole world knows it – and has been saying it for years. The organisation itself doesn’t openly acknowledge the fact, but may grudgingly admit it in private; and despite countless calls from external parties to change the system, the organisation is resistant to change as it may hurt the interests of individuals within the system.

However, what really makes the G-8 or the G-20 stand out as a lightning rod for criticism is the exclusivity of their respective summits as well as the reserved statuses for the core members of the group.

As EconomyWatch.com previously pointed out, in Why Is Iran Not in the G20? the composition of both the G-8 and the G-20 has not changed since their inception – and is clearly politically motivated. The organisations have also generally justified their rigid stance in membership by stating the need for “effectiveness and continuity of its activity”.

Is ensuring continuity really more important than staying relevant or being more representative of the global economy?

At the conclusion of the recent G-8 summit held in Deauville, France, Guardian columnist Timothy Garton Ash  described the summit agenda as “a monumental waste of time and money”.

Having gone through the agenda ourselves, EconomyWatch.com is inclined to agree with him. The sheer amount of photo sessions and formal receptions of delegates by the French President and his wife overwhelm actual working sessions conducted at the summit.

Are we really to believe that a theme as important as Africa’s Development can be discussed thoroughly at a 1 hour and 15 minutes working lunch?

Even if we pretend for a moment that politicians are all highly efficient and rational beings that are capable of making informed decisions for the good of the entire world, the G-8 and the G-20 still cannot escape the fact that a number of its members are rapidly losing credibility to be considered among the largest and most influential economies in the world.

At present, the G-8 core membership consists of Canada, France, Germany, Italy, Japan, Russia, the UK, and the US, including a representative from the European Union. The G-20 on the other hand is made up of the G-8 members alongside Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Saudi Arabia, South Africa, South Korea and Turkey.

Nations that are among the top 20 economies in the world but are not core members of either organisations include Spain – 12^th according to GDP(current prices, US dollars), Netherlands – 16^th, Switzerland – 19^th, Poland – 20^th, Republic of China (Taiwan) – 18^th according to GDP (PPP) and Iran – 19^th. Out of these countries, only Spain and the Netherlands have been invited to attend a G-20 summit.

[quote]Clearly political reasons are behind the exclusion of certain countries. Still, does a country like Italy for example, deserve a place in the G-8 compared to China, the second largest economy in the world? Similarly, doesn’t a country like Switzerland, at least deserve an invitation to attend the G-20 summit?[/quote]

In some way, EconomyWatch.com can understand the rationale behind the core members of the G-20. Every continent is represented by at least one member and it ensures, or at least creates the façade of, diverse opinions.

The G-8 on the other hand is more like an old boys club. Although the core members of both organisations are reflective of the global economy at the time when the organisation was created, the make-up of the G-8 in particular is increasingly getting more and more outdated with the commencement of every annual summit. Furthermore, as emerging economies, and in particular BRICS, continue their march up to the higher echelons of the world economy, the present form of the G-8 would only be seen as a desperate attempt by certain G-8 members to cling on to their last vestige of power.

Proponents of the G-8 point to the close ties between member nations and the implied effectiveness of having a smaller group of leaders as valid reasons for the existence of the G-8. [quote]Canadian Prime Minister Stephen Harper declared after the 2010 G-8 summit, “I have never seen a G-8 more fundamentally united in purpose.”[/quote]

Yet herein lies the fundamental problem of the G-8 and G-20. From their inception in 1975 and 1999 respectively, the unity and exclusivity of the core members have created a structural rigidity that invokes diplomatic problems whenever the need for change arises.

Which member of the G-8 for example, would dare to tell Italy, Canada or Russia that they could no longer be a part of the G-8 so so as to include China?

This problem can only be solved through hard decisions by the member nations. They have to make a choice. Either avoid diplomatic conflicts and persist in its current form, but risk becoming increasingly irrelevant; or navigate through a diplomatic nightmare but remain relevant to the world economy.

If they choose to pursue the second option, then the next sensible step to take is to develop an open and transparent membership policy based on meritocracy. In that way, there can be little argument over who should or shouldn’t be invited to a summit.

The likelihood of this happening though is slim. Instead, according to David Bosco of Foreign Policy magazine: “there is a significant chance that this (the Deauville summit) will be the last major G-8 summit meeting.” As it turns out, there is a third option: if something isn’t working, just take the easy way out and quit.

EconomyWatch.com examines what the G-8 or thee G-20 would look like in 2016 – if members were chosen based on a transparent meritocracy with a purview to their global significance.

Criteria:

a. 2016 economic forecast

b. Largest economies in the world based on GDP (PPP)

c. Include significant regions in the global economy 

Share of world’s total GDP (PPP):

1. China (18.002 percent)
2. Representative from European Union (17.772 percent)
3. US (17.77 percent)
4. India (6.632 percent)
5. Representative from Middle East (5.081 percent)
6. Japan (4.953 percent)
7. Representative from ASEAN 5 (3.85 percent)
8. Germany (3.356 percent)
9. Russia (2.941 percent)
10. Brazil (2.88 percent)
11. UK (2.605 percent)
12. Representative from Sub Saharan Africa (2.585 percent)
13. France (2.494 percent)
14. Mexico (2.062 percent)
15. Italy (1.979 percent)
16. South Korea (1.923 percent)
17. Canada (1.582 percent)
18. Indonesia (1.574 percent)
19. Spain (1.573 percent)
20. Turkey (1.242 percent)

Find out more about the world economy’s 2016 forecast on our Econstats Database.

What do you think about EconomyWatch.com’s list? Could you create a better list of nations?

Raymond Tham

EconomyWatch.com