This article is a brief introduction to the G20 – its origin and power dynamic, membership, structure, mandate, and governance mechanisms for accountability.

Click here for the Spanish version of the Introduction to the G20

I.  Origin and Background of the Group G20

In 1999, in the wake of the Asian Financial Crisis, the Canadian Finance Minister Paul Martin  and German Finance Minister Hans Eichel hosted the first meeting of G20 Finance Ministers and Central Bank Governors in Berlin.  US President Clinton’s Treasury Secretary Larry Summers – working with Martin and Eichel – chose the G20: 19 countries, plus the European Union.  At the Berlin meeting, Asians – still emerging from their 1997-98 financial crisis – sought help from the West.  The 1999 G20 communique appears here.

In 2008, after the US-triggered global financial crisis, the G20 met for the first time at the “heads of state” level in Washington, D.C.  At this G20 Leaders Summit, Western countries sought help from emerging market economies, such as China, with its large budget and trade surpluses in order to avert a global depression.  This event decisively shifted the balance of power from West to East.

After the G20 Summit in Washington, D.C., Leaders Summits were held in London and Pittsburgh in 2009 and Toronto and Seoul in 2010.  The communiqués of these Summits and of the meetings of Finance Ministers and Central Bankers appear here.  

Now, the G20 meets once a year.  G20 Summits will be held in Cannes, France in November 2011 and in Mexico in the first half of 2012. 

II.   Structure and Dynamic

A.   Who is in and who is not  
Members of the G8 include Canada, France, Germany, Italy, Japan, Russia, United Kingdom, and the United States.  In addition, the G20 includes:

• Australia and Saudi Arabia
• 9 emerging market countries: Argentina, Brazil, China, India, Indonesia, Mexico, South Africa, South Korea, and Turkey   
• the European Union 

Among these countries, power continues to shift to “surplus” countries, such as China and Germany, and away from “deficit” countries, such as the U.S.

The G-20, itself, categorizes its member countries as follows:

• advanced surplus countries: Canada, France, Germany, Japan, and South Korea;
• advanced deficit countries: Australia, United Kingdom, and United States, and the euro area minus France, Germany, and the Netherlands;
• emerging surplus countries: Argentina, China, and Indonesia;
• emerging deficit countries: Brazil, India, Mexico, South Africa, Turkey, and other European Union countries; and
• major oil exporters: Russia and Saudi Arabia

B.  “Informal” participants

Countries.   The Netherlands and Spain used to participate informally in the G20; now, only Spain does.

Country Groupings.  In 2010, the leaders of the following groups were informal participants: 1) the African Union; 2) the New Partnership for Africa’s Development (NEPAD), 3) the Association of Southeast Asian Nations (ASEAN), and 4) the Global Governance Group.*  In 2011, a representative of the Gulf Cooperation Council will also attend the G20 Summit.

International organizations.  Representatives of the following international organizations participate:  International Monetary Fund and World Bank and two committees related to these institutions: International Monetary and Financial Committee, Development Committee of the International Monetary Fund and World Bank. ), the United Nations (represented by Secretary-General Ban Ki-Moon), the World Trade Organization, and the Financial Stability Board.

C.  Business and Civil Society

In conjunction with both the Toronto and Seoul Summits in 2010, the G20 held formal meetings with chief executive officers (CEOs) of major corporations.  In Seoul, the Business Summit brought together the heads of some 120 of the world's leading companies from 34 developed and developing countries, with combined total sales of over 4 trillion U.S. dollars annually.  The Business Summit met for the two-days prior to the Summit and issued a call for G20 countries to take actions to support free trade, bolster foreign investment, facilitate green growth, nurture small- and medium-sized enterprises (SMEs), improve energy efficiencies, and increase youth employment.

In addition, the International Chamber of Commerce launched a G20 Advisory Group, which consults with companies around the world in order to consolidate business positions in advance of Summit meetings.

The G20 has formal relations with businesses, informal relations with civil society, and almost no relationship with parliaments.  The informal relations with civil society are due to the fact that some autocratic G20 governments do not believe that civil society groups are legitimate participants in their deliberations. 

Civil society groups have encouraged the G20 to follow the example of the G8, which holds Civil G8 meetings prior to its summits.  On behalf of the G20, the government of South Korea organized an informal Civil G20 meeting one month before the November 2010 Summit.  Civil society organizations are asking the Government of France to hold small, thematic meetings on the Summit agenda in addition to a Civil G20.

D.  Levels of Summitry

The G20 calls itself the “premier forum for international economic cooperation” and works at several levels.  The highest level is that of G20 Leaders, who meet for an annual Summit. In addition, throughout each year, there are regular meetings of:

• G20 Finance Ministers and Central Bankers
• Sherpas.  Each Head of State has a representative called a “sherpa” and, for each Summit, these individuals meet regularly do the heavy work of negotiating the agenda, the analyses of issues and the outcome documents.

Ministerial Meetings.  In addition to Finance Ministers, the G20 may convene meetings of other Ministers.  In 2011, French President Sarkozy has called for meetings of G20 Agriculture Ministers in June and G20 Labor/Employment Ministers in September.  These meetings will issue statements and recommendations to the G20 Leaders Summit in November. 

Working Group Meetings.  Some of the G20 Working Groups include:

• “The Development Working Group” chaired by South Africa, South Korea, and France
•  “The Working Group on the World Monetary System” co-chaired by Germany and Mexico
• “Anti-Corruption Working Group” co-chaired by France and Indonesia  
• “Global Economic Imbalances” co-chaired by Canada and India
•  “Reforming the IMF” co-chaired by South Africa and Australia 

Co-chairs have invited experts from relevant international financial institutions, standard setting bodies, non-G20 countries, business, and academia to advise the working groups.  Members of parliaments and civil society have largely been excluded from working group processes.

Special Assignment on Sources of Innovative Finance.  President Sarkozy asked Bill Gates (as an individual, not as co-chair of the Bill and Melinda Gates Foundation) to prepare a report for the Summit on sources of innovative finance, including finance for climate change.  Through his Foundation, Bill Gates carried out global consultations with civil society groups on this topic.  Many civil society groups hope that the Gates report will promote acceptance of the financial transactions tax (FTT) among G20 countries.

III.  Priorities for the French Presidency of the G20

The French Priorities for the G20 Agenda in 2011 (see here)

1.   Reforming the international monetary system (IMS)
The recent past has witnessed high exchange rate volatility, growing imbalances and ever-increasing stockpiling of foreign exchange reserves by emerging countries which may be confronted by the sudden, large-scale flight of international capital. The French Presidency would like to reform the international monetary system in order to establish collective responses to these deficiencies and adapt to the massive changes in the global economy, particularly given the increase in importance of the major emerging countries. Establishing a more stable and robust IMS also requires reducing imbalances and increased coordination of economic policies within the Framework for Strong, Sustainable and Balanced Growth.

2. Strengthening financial regulation
Although governments should be undertaking reforms to help ensure that another global recession or depression does not occur, the power of the financial industry is preventing many important reforms.  Nevertheless, the French Presidency is attempting to strengthen financial regulation in areas where it has proved insufficient, for example in the commodity markets.

3. Enhancing Food Security and Combating commodity price volatility
The G20 agriculture ministers met in June 2011 in order to identify solutions for strengthening food security and enhancing agricultural productivity.

In addition, the French presidency will help identify collective solutions in order to reduce excessive commodity price volatility - particularly of agricultural and energy commodity prices - which undermines world growth and threatens food security.  

4. Supporting employment and strengthening the social dimension of globalization
The French are promoting four priority goals in this field: employment, particularly for young people and the most vulnerable; the consolidation of the social protection floor; respect for social and labor rights; and more coherent strategies by international organizations. The labor and employment ministers will meet to discuss this agenda at the end of September 2011.

5. Improving global governance
Our economies need modernized international institutions that are capable of effectively regulating globalization. France will seek to support the G20 in its role as the premier economic cooperation body. France will also strive to foster more consistent economic, social and environmental actions by the dedicated international institutions, and to identify areas in which this governance is inadequate. In particular, synergy between the G20 and the United Nations will be strengthened.

6. Acting for development
In November 2010, at the G20 Summit in Seoul, South Korea, the G20 adopted a Multi-Year Action Plan on Development.  In implementing this Plan, the top two priorities of the French Presidency are infrastructure and food security in the most vulnerable countries. To help finance the Plan, the French Presidency is promoting new sources of innovative financing, particularly the financial transaction tax (FTT).
Despite this focus on infrastructure and agriculture, the Action Plan has almost no environmental dimension.  Unless this changes, the Action Plan is likely to contribute to global warming! 

IV.   Governance

A.   G20 Accountability.  The G20 is only accountable to itself.   The body prepares “Progress Grids” that show its progress toward each objective to which it has made a commitment.  The G20 has also commissioned the preparation of regular reports on their progress from:

The International Monetary Fund.  The IMF’s regular report -- the “Mutual Assessment Process” (MAP) reports on the performance of each G20 member countries in carrying out designated actions for promoting growth and rebalancing the global economy.  This involves tracking whether “advanced deficit” countries are cutting their fiscal deficits; “advanced surplus” countries are expanding their domestic demand; and countries are cutting minimum wages and dismantling collective bargaining mechanisms, among other things.  The IMF MAP prepared for the April 2011 meeting of G20 Finance Ministers and Central Bank Governors appears here. 

Trade bodies.  The WTO, UN Conference on Trade and Development (UNCTAD), and Organization for Economic Cooperation and Development (OECD).  These bodies prepare a regular “Report on G20 Trade and Investment Measures”, which notes protectionist actions on the part of G20 countries and identifies new Bilateral Investment Treaties and International Investment Agreements.  Protectionist measures include actions, such as Brazil’s restrictions on rural land-ownership for foreigners; China’s increased threshold for approval of foreign-invested projects; and actions by Brazil, Indonesia and Korea to reduce the volatility of short term capital flows.

B.   Controversy over G20 legitimacy.  There are 173 UN member countries which are excluded from the G20, but many people believe that the creation of the G20 improved global economic governance by expanding the G8.  In addition, they claim that the G20 has legitimacy because its member countries account for 85% of global output and two-thirds of the global population.

While a G20 may be preferable to a G8, the G20 lacks balanced regional representation.  For instance, the continent of Africa is represented only by South Africa.  And, for the most part, each G20 country represents its own interests, not those of its neighbors.  

The G20 has established itself at the pinnacle of global governance structures and given mandates to dozens of other global institutions which, in turn, become accountable to the G20.  For instance, the G20 governments control about 65% of the votes on the Executive Boards of the IMF and World Bank.  Therefore, the G20 can effective give a mandate to these organizations, but this practice further marginalizes those countries which hold the other 35% of votes. 

The United Nations is designed to make decisions in a democratic way, with each nation holding one vote.  Therefore, when the G20 countries assign mandates to UN agencies, it can undermine their democratic nature.

Nancy Alexander is Director of the Economic Governance Program at the Heinrich Boell Foundation