G20 performance on macroeconomic policy
At the Rio Summit, G20 leaders must reverse the decline in macroeconomic policy performance by fostering unity and engaging in frank, open discussions
The G20’s performance on macroeconomic policy significantly declined at its 2023 New Delhi Summit. This decline intensified the generally stagnating macroeconomic policy performance at recent summits, notably in deliberation and decision-making. Although the G20 maintained its relatively strong and stable performance on the delivery of macroeconomic policy commitments in recent years, the interim results of the 2023 compliance assessment showed a decline in delivery too. It is thus important that the G20 reflect on the causes of this decline and seek remedies in order to remain a key actor in global economic governance.
Deliberation
Since 2008, the G20 has dedicated substantial attention to macroeconomic policy, as measured by the quantity of communiqué words at each summit. Overall, it dedicated 74,965 words to macroeconomic policy across all summits, for an average of 4,165 words (29%) per summit. However, at the 2023 New Delhi Summit, the number dipped dramatically to 157 words, the lowest ever since the G20 summit’s 2008 start.
G20 deliberation on macroeconomic policy had two main phases. From 2008 to 2014, deliberation increased from 18% at the first G20 summit in Washington to an all-time high of 54% at the 2014 Brisbane Summit. In the second phase, deliberation dropped to 42% in 2015, 29% in 2016, 23% in 2017, 29% in 2018 and 22% in 2019. Despite increasing slightly to 34% in 2020, it continued to drop to 20% in 2021, 13% in 2022 and an all-time low of 2% in 2023.
Decisions
G20 decision-making on macroeconomic policy was generally strong, but also declined in recent years. The G20 has made 521 public, collective, precise, future-oriented, politically binding commitments on macroeconomic policy, putting it first among all subjects. Macroeconomic policy accounts for 15% of the total of 3,482 commitments made at the past 18 G20 summits.
Its decision-making also had two phases: the first of increasing decisions from 2008 to 2012, and the second of decline since. In 2008, the G20 made six macroeconomic commitments, for 6% of the commitments that year. Then decision-making generally increased to peak at 39% in 2012. Starting in 2013, however, it declined to 23% in 2013, then 17% in 2014, 14% in 2015, 15% in 2016 and 8% in 2017. Despite a slight increase to 16% in 2018, it dropped further to 6% in 2019, 8% in 2020, an all-time low of only 3% in 2021, a slight return to 8% in 2022 and a drop back to 5% in 2023.
Compliance
The G20 Research Group has assessed 38 of the G20’s 521 macroeconomic policy commitments for compliance. They averaged a strong 81%, well above the overall 71% average. Over time, this compliance was generally stable and strong, with a dip for the 2009 London Summit, for 2011, for 2014 and for 2016. Since 2017, compliance has remained above 80%.
However, by May 2023 it appeared the G20 risked losing momentum: compliance with the one assessed macroeconomic policy commitment was only 78%, ranking fifth among the nine commitments assessed.
By member, the top complier in macroeconomic policy was Canada at 96%, followed by the European Union in second at 92% and Germany in third at 91%.
Causes and corrections
The G20’s generally strong compliance performance on macroeconomic policy can be partly attributed to catalysts embedded in the commitment text. Of the 38 assessed macroeconomic commitments, 11 contained at least one catalyst. The commitment that referred to a past ministerial meeting had 91% compliance, those with a specified target had 89%, those with a one-year timetable 90% and those with a multiyear timetable 92%, compared to the 81% for those without any of these catalysts.
Broadly, the G20’s generally high compliance on macroeconomic policy can be ascribed to the specific subject of macroeconomic policy, which focuses on commonly accepted and relatively technical cooperation on fiscal and monetary policy. Compliance is harder on commitments that require agreement on common principles and values. Such agreement has become increasingly difficult with the intensifying divisions within the G20, particularly after the Russian invasion of Ukraine. Indeed, the commitment assessed from the New Delhi Summit focuses on the impacts of war, thus addressing this sensitive and divisive issue.
Conclusion
At the Rio Summit, G20 leaders must act to reverse the recent decline in G20 macroeconomic policy performance. This could prove difficult, as they need to tackle the most fundamental issue they face: maintaining unity. The 2023 macroeconomic policy commitment assessed for compliance highlights the challenge: “we will unite in our endeavour to address the adverse impact of war on the global economy”. The G20 can no longer rely on purely technical consensus and cooperation, tightly confined within specific areas such as macroeconomic policy. Unity is becoming an increasingly significant problem for intra-G20 cooperation. Engaging in frank and open discussions on difficult and sensitive topics, with the goal of seeking common ground, is the most promising correction ahead, both for macroeconomic policy and for the G20’s overall performance and effectiveness as a global governance institution.
