G7 performance on macroeconomic policy

G7 decision-making on macroeconomic policy has dropped in recent years, but compliance has held relatively steady at a high level. If performance in deliberation and decision-making is improved, the economic gains could be significant

Since its first summit in 1975, the G7 has placed macroeconomic policy at the core of its agenda. However, over time, there has been a gradual and steep decline in the G7’s deliberation and decision-making on this subject. At Elmau, G7 leaders must increase their attention and action on macroeconomic policy and reinvigorate the compliance of their governments with their macroeconomic policy commitments.

Conclusions

Since 1975, G7 leaders have devoted 27,288 words to macroeconomic policy in their communiqués. However, this deliberation has declined over time. The leaders started in 1975 by devoting 52% of the communiqué to this subject – the all-time peak. Afterwards, there was a gradual decline to 12% by 1981. Deliberation spiked to 48% in 1982, then declined in 1983 and 1984 to 19% each. It spiked again to 33% in 1985, followed by a long decline from 1986 to 1992. The next spike came in 1993 with 21%, and another in 1998 with 18%. Then came a long decline to 2019 to 2%, followed by a spike in 2020 to 30%. It dropped to 16% and 6% at the two summits in 2021. The first summit in 2022 had 15%.

Four phases thus stand out. First, from 1975 to 1982, G7 leaders dedicated an average of 32% of their communiqués to macroeconomics. Second, from 1983 to 1993, they gave on average 15%. Third, from 1994 to 2019, they averaged a low 5%. Fourth, following this dramatic decline, since 2020, deliberation on macroeconomics rose to a medium level of 17%.

Commitments

Between 1975 and February 2022, G7 leaders made 305 public, collective, precise, future-oriented, politically binding commitments on macroeconomic policy, as identified by the G7 Research Group. This constitutes 5% of the 6,520 commitments made on all subjects. Compared to other subjects, macroeconomic policy ranks 11th, after development, health, energy, environment, terrorism, climate change, trade, gender, non-proliferation, and crime and corruption. It ranks higher than the other 23 subjects G7 leaders have made commitments on.

G7 decision-making on macroeconomic policy has passed through two phases. First, from 1975 to 1987, each summit averaged a high of 21% of its commitments on macroeconomics. Second, from 1987 to 2022, this dropped to a low of 6%. However, within this second phase, the virtual summit on the COVID-19 crisis in March 2020 dedicated 32% of its commitments to macroeconomics, and this declined to 19% and 4% at the 2021 summits, and 6% at the summit on 24 February 2022, as Russia’s invasion of Ukraine began.

Compliance

G7 members have complied with the 22 macroeconomic policy commitments assessed by the G7 Research Group at a high level of 83%. This is higher than the G7’s all-time average compliance across all subjects of 76%.

Over the years, G7 compliance has been relatively stable at this high level. The first three assessed commitments, made between 1996 and 1999, had compliance of 100%. Subsequently only three dips came. For commitments made in 2003 and 2004, compliance was 63% and 61%, respectively. For 2016 compliance was 63%. For the 2020 virtual summit, during the COVID-19 crisis, compliance was 75%.

By member, the highest compliance on macroeconomics come from the United States, Canada and France, each at 87%. During the G8 from 1998 to 2013, Russia led with 95%.

Causes and corrections

To improve compliance on their macroeconomic policy commitments, G7 leaders can use low-cost accountability measures that have coincided with higher compliance.

The inclusion of a reference to the private sector in a communiqué correlates with higher compliance. The two commitments that contained such references averaged compliance of 97%, much higher than the overall compliance rate on macroeconomic policy commitments.

Although there is no strong correlation between the number of finance ministers’ meetings and compliance, the top-performing summits had at least three pre-summit meetings of finance ministers. The highest performing summits, in 1996, 1999 and 2008, with average compliance of 100%, had four, seven and three finance ministerial meetings, respectively.

More broadly, beyond compliance performance, G7 leaders should also reverse the long-term trend of declining performance in deliberation and decision-making on macroeconomics, as they did in 2020.