The G20 and Global Economic Leadership

Seoul, South Korea | September 27, 2010

Before beginning, I hope you will allow me on behalf of all of us to congratulate the Korea Development Institute, Dong-A-Ilbo and the Brookings Institution for sponsoring this conference; the importance of which I believe will become manifest over the next couple of days.

There have been three steps in the evolution of the G20 to date. The first not surprisingly was its founding during the turmoil of the Asian Crisis over a decade ago when the G20 finance ministers met for the first time. The second was the series of G20 leaders’ summits beginning in Washington two years ago arising out of the current financial upheaval. And the third step which occurred this year was the announcement that Korea would be the first non-European – non-North American country to host a G20 summit – a decision which spoke in a way no communiqué ever could, to the fact that the G20 had come of age and that its perspective extends to an horizon far beyond that of the G8.

This became immediately evident when Korea championed the need for global financial safety nets, a need most recently experienced by those economies sideswiped by the Lehman Brothers bankruptcy. In this context the recent enhancements to the IMF’s crisis prevention instruments and the discussions about a global stabilization mechanism are most welcome and are a clear indication of Korea’s influence on the file.

Korea’s initiative was evident again when it put poverty on the G20 agenda whereas in previous meetings it had been largely absent and it will be even more evident when the host as one of the few aid recipients to become a donor brings its own unique insights to the issue of development. This is not an idle statement. What Korea has done within a generation is virtually unprecedented. The focus on education, infrastructure and the synergy between government and the private sector – the three pillars of Korea’s economic growth carries with it a lesson that is irrefutable for both recipient and donor alike!

All of this to say, as the G20’s evolution continues apace it is now critical that it complete the cycle from global crisis responder to global steering committee for that is what is required if globalization is to work. This is the challenge of the forthcoming summit.

The G20’s success in this role depends on three things: first – the breadth of issues it addresses and the results it achieves. Let me be clear. The G20 must pick its spots and they must be the ones that count. But there can be no upfront restrictions placed on its scope. The reason the G20 came into being was because the G8 without China, India, Brazil, Korea and others at the table, was no longer able to function as the world’s steering committee. Thus the only restrictions on the issues the G20 can accept should be those that arise from the priorities it sets for itself at any given point in time.

Nor is it mandatory that each meeting result in symbolic agreement. There must be true commitment to whatever is agreed. The reason for creating the G20 was not simply to have more people in the leaders’ photo-op. There are real differences between nations and they must ultimately be bridged if globalization is to work. But this will not happen if those differences instead of being confronted are perpetually covered over by pretty words signifying nothing.

The second key will be the G20’s capacity to coordinate the response to the crisis of the day whatever it may be, while at the same time organizing to look ahead to mitigating if not to preventing the crises on the horizon; the needed economic recovery with unequivocal bank regulation at its core being a priority of today’s crisis; climate change and food security being the most immediate examples of the need to deal with the next ones.

The third key is the preparedness to reach out to those who are not at the G20 table. Here Korea has once again taken the lead and is to be congratulated. G20 multilateralism must mean more than a camouflaged concern only for a country’s narrow national interests.

The world’s new steering committee came into being because the interdependence of nations has changed the paradigm. The G20’s members are members because they have power and position, but they also have a responsibility to the rest of the world, a responsibility they must live up to, a responsibility that begins by listening to what others have to say. For example – the failure of adequate financial regulation in the USA and Europe, the moral hazard this represented and the devastating contagion that ensued was an infringement on the sovereignty of every country on every continent in the world. Those populations have the right to be heard.

In summary therefore, what is the measure by which the November meetings and indeed the G20 itself should be judged?

The answer I believe, for the many of us in this room who pushed for its creation is the degree to which it improves the way globalization works in the here and now and in the way it prepares for the road ahead. This is not an academic yardstick. The goal was to relieve the gridlock that is paralyzing the international system, and that on issue after issue is the litmus test the G20 will be called upon to meet.

The future of globalization is the great issue of our time. The issues we will discuss here over the next two days are all manifestations of the need to make it work better. Even more to the point how the November summit deals with them will provide an indication of how the G20 will deal across the board with the interdependence of states in the future.

Now and over the years to come the issues the G20 will have to confront will be as varied as there are pebbles on the beach. But whether they will be successfully dealt with is another question, one that will depend on a fundamental truth.

Bargaining at the G20 will inevitably begin as it does everywhere else, on the basis of the self-interest of nations. No one who witnessed the disarray at Copenhagen or the never ending disagreements over bank regulation between and within the United States and Europe over the last two years should be under any other illusion.

But in the end, success can and will be achieved if the member countries recognize that in today’s highly interdependent world the furtherance of a country’s self-interest depends more than ever before on the degree to which it furthers the global interest. This I would submit to you is the central message that must come from our discussions over the next two days.

Thank you.