G7 performance on macroeconomic policy
Although deliberation on macroeconomic growth has dwindled over the years, there are demonstrated ways that the G7 can increase its compliance in order to continue playing a vital role
Strong macroeconomic management is essential for the G7’s effectiveness in global governance. With over a year having passed since the outbreak of the COVID-19 pandemic, the G7 can be a stabilising force in fostering global macroeconomic growth, and can do so with precise and selective commitments. This should be taken into account when assessing the United Kingdom’s macroeconomic growth priority at the G7 Cornwall Summit in June 2021.
CONCLUSIONS
Although the G7 consistently pays attention to macroeconomic growth, its deliberation on macroeconomics has noticeably declined over time. This can be measured by the size of the summit’s conclusions on macroeconomics in its annual outcome documents. At the 1975 summit, 52% of the words in its communiqué were dedicated to governing macroeconomic policy. From then to 1984, deliberation fell significantly, averaging 29%. It continued to fall over the next two decades: from 1985 to 1994 it averaged 14%, and from 1995 to 2004 it averaged only 6%, hitting an all-time low of 0.2% of words in 2006. Deliberation remained under 10% from 2007 to 2018. But it spiked to 31.1% at Biarritz in 2019.
COMMITMENTS
Since 1975, the G7 made 277 collective, politically binding, future-oriented commitments on macroeconomic policy, accounting for 5% of the 6,015 commitments identified by the G7 Research Group. Similar to the G7’s performance on deliberation, the number of commitments on macroeconomic policy declined over time. Between 1975 and 1984, commitments on macroeconomics averaged 19% of the total commitments. Between 1985 and 1994, this percentage dropped to 13%, and then fell to 2% between 1995 and 2004. Between 2005 and 2014, these commitments rose only slightly, averaging 5%. From 2015 to 2020, the number of commitments dedicated to macroeconomics peaked at 6% at the 2016 summit, then fell to 2% in 2017, 5% in 2018 and hit an all-time low of zero in 2019. In March 2020, at their emergency summit responding to the COVID-19 outbreak, G7 leaders made eight commitments on macroeconomic policy, representing 32% of the total of 25 commitments at that summit.
COMPLIANCE
G7 members’ compliance with their macroeconomic commitments has remained stable since 1975. On the 18 macroeconomic policy commitments assessed for compliance, the average was 86%. The three commitments assessed from the 1998, 1999 and 2000 summits averaged 100% each. Compliance dropped in the following decade, hitting 63% in 2003 and an all-time low of 61% in 2004. In 2011, compliance with the only assessed commitment was high at 95%. It remained relatively high with an average of 85% for the four assessed commitments from 2012, 89% for the two assessed at 2013 and 91% for the two assessed from 2015. Compliance fell again in 2016, with the one assessed commitment scoring 63%, only to climb back up to 82% for the one assessed commitment from 2017. On the one assessed commitment from 2018, compliance reached 100%.
CAUSES AND CORRECTIONS
To improve compliance on its macroeconomic commitments, the G7 should choose specific features that catalyse higher compliance. For instance, the 2012 commitments assessed for compliance contained instructions embedded in the text on how to fulfil the commitment, and achieved 100% compliance. Conversely, the 2004 commitment that ranked the lowest in compliance, at 61%, contained no precise guidance. In addition, increasing the number of finance ministers’ meetings prior to a summit has also been shown to increase the G7’s compliance with its macroeconomic commitments. Most top-performing years had, on average, a higher number of finance ministerial meetings in the lead-up to the summit.
