Change is coming to the G-20. Nearly a quarter century ago, the world’s 20 largest economies joined together to respond to the global financial crises of the 1990s. Though the group includes many countries from the global south, its wealthy Western members have often exercised the greatest influence while leaving the developing world’s priorities off the table—making it one of many examples in which the West has dominated global affairs at the expense of the rest of the world.
But now, as its leaders convene in India on the heels of Indonesia’s presidency and the eve of Brazil’s, the G-20 is poised to usher in an unprecedented era of not only influence, but also economic justice, for the global south.
Imbalanced international leadership, at the G-20 and more broadly, has produced a system that simply doesn’t work for everyone: It puts overlooked countries financially—and sometimes literally—underwater. Developing nations find themselves burdened by debt, disproportionately impacted by climate change, and unable to weigh in on issues that concern them most, while the comparatively wealthier West wields a heavy hand over their fates. Many have only a fractional say in the World Bank, International Monetary Fund (IMF), and other financial institutions that set the terms of their economic lifelines. And while they face the same global health crises and grapple with the same emerging technologies as the rest of the world, it’s clear from their uneven digital infrastructure and devastating impacts of COVID-19 that they don’t have the same access to solutions.
Sovereign debt has become both a cause and effect of global inequality. Sixty percent of low-income countries and a quarter of middle-income countries are debilitated by debt and forced to repay in interest what they would otherwise spend on health care, education, and infrastructure for their people. Nigeria spends more than 95 percent of its revenues on repayment alone, while richer countries pay significantly lower interest rates and spend only a small fraction of their wealth to service their debt. Last year, the United States spent just 2 percent of its GDP on national debt. Finding a more equitable framework for international finance is not just an economic necessity, it’s a moral one, too.
The G-20 is well positioned to lead this charge and promote change across borders and global decision-making bodies. It holds significant sway in the United Nations and with the multilateral development banks that lend to indebted countries, and its member countries represent 65 percent of the world’s population and 80 percent of its GDP. But if the G-20 wants to solve age-old problems, it needs to embrace new ideas and more inclusive leadership—in New Delhi and beyond.
It’s encouraging to see India, the world’s fifth-largest economy, use its G-20 presidency to focus on issues impacting the global majority, particularly those related to economic justice.
Earlier in its presidency, India co-convened both debtors and creditors in a potentially promising, first-of-its-kind Global Sovereign Debt Roundtable, co-chaired by India’s finance minister and representatives from the World Bank and IMF. Pressure from the G-20 can accelerate debt relief to distressed countries, bringing together a broader array of creditors beyond the traditional suite of developed nations known as the Paris Club. It can also help mobilize greater concessional financing, including low interest and grant financing as well as private investment.
Many G-20 countries are creditors themselves, which gives them an opportunity to improve upon the G-20’s Common Framework for debt relief. They can also regulate private capital within their borders, encouraging more equitable participation in lending agreements. With an agenda that includes everything from loan restructuring to debt forgiveness, the roundtable has the potential to take important steps toward reforming how financing is provided to the developing world.
Development finance reform will feature prominently at this year’s G-20 summit, building on Indonesia’s push to reexamine the lending limits of multilateral development banks during its presidency. This year, the G-20 is calling for all member countries and partner organizations to unlock more robust, predictable, and sustainable investment for emerging economies.
One potential source of additional funding may come from Special Drawing Rights (SDRs)—a form of asset issued by the IMF to supplement currency reserves. Underutilized by wealthier nations and underallocated to those who need them most, SDRs can increase developing countries’ liquidity during critical periods of economic recovery. Pressure is growing at the G-20 for wealthier countries to redistribute these assets to poorer countries to ensure that resources are allocated more equitably, based on need as opposed to the size of national economies.
Beyond reforming development finance, the G-20 can lead the charge for a fairer global financial system by lobbying other countries and the private sector to embrace higher international corporate tax rates and greater investment in global public goods, such as environmental conservation and technological development. In doing so, the G-20 can support investments in developing nations that pay dividends for all.
India has also leveraged its G-20 presidency to amplify voices from the global south that have been denied a seat at the table. Most notably, India has thrown its support behind a proposal to grant the African Union (AU) full, permanent membership in the G-20—a move that’s long overdue. The proposal also has the backing of Brazil, Japan, South Africa, and the United States, among other members. The AU’s absence, especially given the European Union’s long-standing membership, undercuts the legitimacy of a supposedly representative forum. Including the AU would add the valuable and long-excluded perspective of one of the world’s most dynamic, fastest-growing regions.
To be sure, decision-making in this expanded body could become unwieldy. But this dynamic will only mirror the state of global governance itself, which has evolved out of necessity beyond the centralized, exclusionary status quo of the 20th century. The G-21 may be messier than the G-20, but it would also be more credible, since it captures the interests of both the Western-dominated G-7 and the emerging—and expanding—BRICS powers (Brazil, Russia, India, China, South Africa, and several new members). Only by reflecting the collective interests of such a dynamic group can it produce strategies that will meaningfully serve it. (Courtesy: Foreign Policy magazine, Washington DC, USA)
Darren Walker is the president of the Ford Foundation
