G7 performance on macroeconomic policy

Although the G7 started as an economic summit, its focus on macroeconomics has markedly declined. Alissa Wang, researcher, G7 Research Group, looks at the tools available to the G7 that have been proven to catalyse higher compliance in this area

Economic governance has been at the heart of the G7’s mission since its founding. As a club of the world’s major industrialised democratic countries plus the European Union, the G7 has always given global economic issues, in particular macroeconomic policy, an important place on its agenda. However, as the G7 developed into a more expansive global governance institution concerned with a broadening range of subjects, its focus on macroeconomics has gradually declined.

Conclusions

G7 deliberation on macroeconomics has declined markedly over time. At its first summit in 1975, a substantial 51% of total words in its communiqués were dedicated to macroeconomics issues. In the first decade of G7 summitry, from 1975 to 1984, average deliberation was at 29%. By the second decade, from 1985 to 1994, deliberation declined to 14%. By the third decade, from 1995 to 2004, it declined further to just 6%. Since 2005, deliberation has dropped even more to 4%. Deliberation on macroeconomics hit an all-time low of under 1% in 2006. Although it has risen since then, the rise has remained under 10% in recent years.

Commitments

Since 1975, the G7 has made a total of 259 collective, politically binding, future-oriented commitments on macroeconomic policy. This amount accounts for 5% of the total 5,525 commitments identified by the G7 Research Group. Macroeconomics ranks ninth among all 33 issue areas in terms of the overall number of commitments made. The number of commitments on macroeconomic policy peaked at 18 at the 2016 summit; however, the highest percentage came at the 1982 summit, where of the total 24 commitments, the nine focused on macroeconomics constituted 38%. As with the number of words, the number of commitments has declined over time. In the first decade, the average percentage of commitments on macroeconomic policy was substantial at 19%. In the second decade, the percentage dropped slightly, but remained substantial at 13%. In the third decade, the percentage plummeted to 2%. Since 2005, this percentage has risen slightly to 4%.

Compliance

The G7 Research Group has assessed compliance with 16 of the total of 259 macroeconomic policy commitments made at G7 summits. At 85%, average compliance on macroeconomic policy is higher than the overall average of 75% across all issues. Compliance with macroeconomic policy commitments is among the strongest of the 27 issue areas assessed: it is in fourth place, after commitments on the Heiligendamm Process to institutionalise dialogue between the G7 and its outreach partners in first place, migration and refugees in second place, and social policy and information and communications technologies tied in third place.

Over time, compliance with macroeconomic commitments was relatively stable, with a few slight drops. The two commitments from 1996 and the one assessed from 1999 averaged 100%. Compliance dropped in 2003 to 63% and 2004 to 61%, hitting an all-time low. However, compliance with the one assessed commitment from 2011 was 95%, followed by an average 85% for the four assessed commitments from 2012 and 89% for the two commitments from 2013. Most recently, average compliance was high at 91% for the two assessed commitments from 2015, dropped to 63% for the one assessed commitment from 2016, and climbed back up to 82% for the one assessed commitment from 2017. Six months after the 2018 summit, compliance on the one assessed commitment related to macroeconomics was 94%.

Corrections

To improve its macroeconomic policy compliance, the G7 should consider careful and selective use of commitment features that catalyse higher or lower compliance. For example, placing a commitment in the preamble of an outcome document corresponds with lower compliance, as demonstrated by the two lowest complying commitments from 2003 and 2004. However, two catalysts that correspond with high compliance are involving private-sector cooperation and specifying a country or region. The 2012 commitment that contained both these catalysts ranked highest in performance at 100%. In addition, increasing the number of macroeconomic policy commitments made at a summit could have a slight positive effect, as the top-performing summits in terms of compliance made more macroeconomic commitments overall. Finally, increasing the number of finance ministers’ meetings before a summit could also have a positive effect on compliance, as the top-performing summits had, on average, a slightly higher number of finance ministerials.