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Coverage of the G-20 Summit in London dominated the media for much of a week. Several people have asked, “When did the G-8 become the G-20?” Most of us want to know: What difference does this make in my life?
First, the difference between the G-8 and the G-20. According to the University of Toronto G-8 Center, the G-8 group of major economies includes these countries: Canada, France, Germany, Italy, Japan, Russia, United Kingdom, and the United States. In addition, the rotating head of the European Union (EU) and the EU finance minister participate in G-8 meetings. G-7 was this group without Russia.
While G-20 economists and finance ministers have been interacting since 1999, the first G-20 leaders’ summit was held last November in Washington, DC. Given the awkward political situation in the United States, accomplishments by world leaders at the first meeting were limited. In contrast, work produced by finance ministers and leaders preparing for the London meetings transformed the group. Prior to the April summit, this was an informal economic policy wonks’ discussion group. Now the G-20, through participation by heads of state, has been imbued with significant power. The group is producing substantive work intended to guide economic reform required for an effective turnaround of businesses and economies worldwide.
They describe themselves: “The G-20 is made up of the finance ministers and central bank governors of 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States of America, and also the European Union who is represented by the rotating Council presidency and the European Central Bank . . . The G-20 brings together important industrial and emerging-market countries from all regions of the world. Together, member countries represent around 90 per cent of global gross national product, 80 per cent of world trade (including EU intra-trade) as well as two-thirds of the world’s population.”
Three working documents were produced by the G-20 April meeting. The press has focused on the 9-page, London Summit – Leaders’ Statement. Based on this premise, “We start from the belief that prosperity is indivisible,” it is a global clean-up philosophy and policy statement to help businesses around the globe, with these pledges:
- Restore confidence, growth and jobs
- Repair the financial system to restore lending
- Strengthen financial regulation to rebuild trust
- Fund and reform our international financial institutions to overcome this crisis and prevent future ones
- Promote global trade and investment and reject protectionism, to underpin prosperity
- Build an inclusive, green, and sustainable recovery
The G-20 conclude: “By acting together to fulfill these pledges we will bring the world economy out of recession and prevent a crisis like this from recurring in the future.” All of their goals center around actions to promote business and economic growth.
In addition to their policy statement, the G-20 also released two additional documents, a Declaration on Strengthening the Financial System and a Declaration on Delivering Resources Through the International Financial Institutions.
As business owners, we care about these documents because they create the beginning of enforceable international ethics and banking policies which require high levels of transparency, even from typically secretive firms such as hedge funds. Places where corporate and personal funds can be hidden offshore are abolished. High risk financial instruments that mislead the public are prohibited. Financial standards of excellence are established. Ethical lending practices and available funds are recognized as essential to the growth of businesses.
Included in the trio of G-20 documents are the seeds of a new, highly coordinated, action-oriented international monetary system which ensures world economic stability by establishing standards, oversight, and swift intervention to stop any corrupt practices before they’re allowed to poison world financial systems and destroy business climates.
In the U.S., the most significant early changes will occur with our major, international banks. As a result of their previous failed policies, which wreaked havoc on much of the world, their business practices will be carefully scrutinized. Because funds for loans are essential to grow our businesses and move our economy (and economies of other countries) forward, the first obvious evidence of G-20 impact in the U.S. is likely to be greater availability of funds to borrow – especially for businesses.
The G-20 leaders committed to meet again before the end of 2009. During intervening months, member countries’ economic and finance leaders will coordinate efforts to foment change that revitalizes business growth.