Why the shift in global economic policy?

Bob Moon Sep 25, 2009

Why the shift in global economic policy?

Bob Moon Sep 25, 2009


KAI RYSSDAL: For almost 25 years the governments of the world’s seven largest economies considered themselves the decision-makers on the global economy. That club grew to eight when Russia was invited to the party in 1997.

But today, the White House announced that the G-8, as it’s known, has decided to expand its membership even further. From now on, they said, discussions will include all the members of the G-20, not just the big mature economies, but major developing countries as well.

Our senior business correspondent Bob Moon explains the big shift in power.

Bob Moon: Including such developing economies as China, India and Brazil in the global decision-making process has been a sensitive subject. European nations fear they’ll end up losing their influence. Treasury Secretary Timothy Geithner acknowledged that during a news conference.

Timothy Geithner: What we’re trying to do is to bridge this difference between a number of nations in Europe that are going to, of course, have to adjust over time, and have that shift occur to those countries who have been for a substantial period of time among the most rapidly growing countries in the world.

And that could mean shift in power away from Europe.

Fred Bergsten heads the Petersen Institute for International Economics. He points out France, Germany and Italy each get a chair at the table now, even though they also get a seat through the European Union.

Fred Bergsten: But they still want to be represented on an individual country-by-country basis and so have multiple seats at the table. You just can’t have it both ways.

Bergsten says the G-8 represents less than half the world economy, and he’s convinced having more influential voices at the table will be more effective.

David Shorr agrees. He’s with the Stanley Foundation, a foreign policy think tank.

David Shorr: You have small European countries with a larger vote than China, so it just had to be dealt with. You know, these various policy decision-making mechanisms have to catch up with the realities of the 21st century world.

But will so many different nations be able to agree? Shorr says the group lacks the authority of, say, the United Nations or the International Monetary Fund.

Shorr: The G-20 is much less formal. It doesn’t have set decision-making rules, it doesn’t have a grounding in any permanent structure or any international legal agreement. And so, this will be the thing to watch.

The foremost question: Can they agree to this shift in power?

I’m Bob Moon for Marketplace.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.