The Bali Summit of the Group of 20 (G20) has delivered a brave and reassuring outcome. Brave because Indonesian President Joko Widodo has not bent under the pressure of the West to eject the Russian Federation out of the G20. And reassuring because, after flirting with every issue under the pressure of activists, the Indonesian presidency has steered the G20 back to its core objective—fixing a faltering global economy.
The most honest line in the 17-page, 52-paragraph, 9,651-word G20 Bali Leaders’ Declaration is situated in Para 3: “…the G20 is not the forum to resolve security issues.” The routine and expected condemnation “in the strongest terms the aggression by the Russian Federation against Ukraine” is mentioned as an echo of a March 2, 2022 Resolution adopted by the United Nations General Assembly, where 141 countries voted for and 5 against the resolution, with 35 abstentions and 12 absent. There were no new condemnations.
This wise line is as much a statement as an introspection that finally lays clear the idea that the forum for global security issues is the United Nations in general and the UN Security Council (UNSC) in particular. Unfortunately, its capture by the P5 (the five permanent members of the UNSC) and the institution’s resultant failure is a blot of blood that has been spreading, from Iraq to Libya to Syria to Ukraine. Countries that comprise the General Assembly of the UN have been devalued into becoming bystanders, twiddling their thumbs around an alternative, wondering, “If not the UN, then who?” While a more equal, more inclusive new world order awaits its turn, it is the G20 that has been providing multilateral succour, creating spaces for more productive conversations and crafting cushions for soft landings.
But howsoever efficient the G20 might be for raising issues, having bilateral talks, and providing platforms for leaders of the world’s 19 largest economies plus the EU, it is at best a necessary condition for discussions. The lack of legitimacy and an enforcement mechanism ratified by the rest of the world prevents it from deriving institutional sufficiency to administer security. Can the powers of the G20 be expanded to counter the UN? Not in the visible future. On the other hand, can the arrogance of the P5 continue till eternity? Absolutely not. Institutionally, that’s the bridge the G20 represents; it is the middle ground, a platform for intergovernmental discussions. The G20 will be evaluated for its economic steering, not for ensuring security.
On the other hand, security, as Europe and the US are now experiencing, is crucial for economic engagement. That US-led sanctions on the Russian Federation would lead to unintended economic consequences is something the West is finally coming terms with. Perhaps, experience as one of the legs of knowledge is important before such revelations happen. For instance, the best the EU could come up with when China attacked India was to seek a “peaceful solution”—it did not condemn China for this aggression. And despite China being the biggest threat to the US and the EU, they continue to dance with the dragon.
Further, it attempts to burn the bear, declaring Russia a ‘terrorist state’ but ignoring the hub of terrorism, and the terrorist state of Pakistan that’s been getting cover fire from China, five times in four months. Go figure. While talking about it at the third No Money for Terror Ministerial Conference is a good start, persuading the G20 to go beyond holy words and imposing real “costs upon countries that support terrorism” remains a work in progress.
The resurgence of the G20 following the 2008 Trans-Atlantic economic crisis—mislabelled the global economic crisis through smart narratives that the globe swallowed whole—attempted to make a difference. And initially, it did. But over the 14 years since then, the G20 had become a garden of distractions. It has taken upon itself the responsibility to turn countries green in the April 2009 London Summit, embraced climate change in the September 2010 Pittsburgh Summit, and terrorism in the November 2015 Antalya Summit. The November 2022 Bali Summit, therefore, is hopefully the first step of the G20 leaning towards its core focus—steering the global economy while adapting distractions into an economic narrative.
That doesn’t mean the diversions are missing. We have the full course of issues. The climate crisis is contained in five paragraphs but comes embedded in the energy crisis. It also comes with a dash of irony: “We stress the importance of ensuring that global energy demand is matched by affordable energy supplies.” With energy sanctions on the Russian Federation by the West, matching affordable supplies remains an open question. Similarly, for health and its relationship with finance. But both these have become parts of an economic conversation; they are no longer standalone agendas—unlike gender and infrastructure, for instance, which has been cleared in a line.
Looking ahead, the Bali Summit focuses on a crypto asset reporting framework, as part of an international tax package. A timely move as crypto exchanges and crypto currencies implode under their own weight and scar greed-seeking investors, the G20 pushes for consistency in their regulation across jurisdictions. This is a good idea, as long as there is inter-jurisdictional reciprocity. The access to and interoperability of central bank digital currencies for cross-border payments is another future area the declaration pushes for.
Making holy statements and signing them into pompous change-the-world declarations is one thing. But walking the talk in times of delivery another. The Bali Summit makes the right noises about the strategic priorities of the Financial Action Task Force—ironically, less than a month from Pakistan being removed from the grey list, despite clear visibility of its terror funding, raising security issues on India’s border. All that the Bali Declaration offers is “encourage all G20 members to strengthen collaboration to adopt and effectively implement the FATF standards.” Perhaps, it’s because the West has no skin in this game. Or, perhaps, it’s just the colour of the skin that’s facing terrorism.
Because the UN has failed to do its duty and enforce peace, a security issue has become an economic challenge. Since February 2022, when the Russian Federation invaded Ukraine and the US imposed sanctions on Russian gas, Europe has become a continent that’s got busy managing the inconvenience and the politics of discomfort. This has had a cost on all its economies, all of which have seen inflation rise at an unprecedented pace. The October 2022 inflation rate in the EU as a collective has jumped to 10.9 percent from 3.4 percent a year earlier, with Estonia at 24.1 percent, Lithuania (22.5 percent) and Latvia (22.0 percent) facing the biggest assault. In India, the inflation rate was 3 percent in June 2019 and stands around 7 percent today.
As a result, interest rates across the world have jumped. In the EU, the deposit facility of the European Central Bank has shot up from zero in July 2022 to 1.5 percent in November, fixed rate tenders from 0.5 percent to 2.0 percent, and marginal lending facility from 0.75 percent to 2.25 percent. Facing a 40-year high inflation, the US Fed has increased interest rates from zero to 3.75-4.00 percent. The UK’s Bank of England has raised interest rates from 0.1 percent in November 2021 to 2.25 percent today. In India, the Reserve Bank of India raised interest rates by 50 basis points to 5.9 percent in September 2022, compared to 5.75 percent in June 2019.
Given that rising prices and higher interest rates are the core economic concerns of all countries, it is heartening to see that the G20 Bali Summit is steering the group’s focus back to economics by committing to growth that is inclusive, staying agile on fiscal matters, and through it cushioning the impact of rising food and energy prices. At some point, this is also a message to rating agencies and markets that most countries will breach fiscal deficit targets, as governments bear the brunt of rising prices on their balance sheets.
By underlining three crises—climate, energy and geopolitics—into an integrated and cohesive economic narrative, Indonesian President Joko Widodo has not only done well within the limitations of time, he has faced pressures of ejecting the Russian Federation out of G20, and he has done so from the geography and the stance of the global South. As he heaves a sigh of relief, and the conflict overhang looms, the hot potato of G20 deliberations has now shifted base to India as its takes over the G20 presidency. Here, Prime Minister Narendra Modi has his work cut out—expand Widodo’s economic narrative and not get distracted inside the G20, and help end the Russia-Ukraine conflict outside the G20. The two are linked.
Despite India’s outlier domestic performance, the threats to the global economy are not over and they will impact India too—rising energy and food prices, rising inflation, rising interest rates and slowing global growth will continue through the next 12 months. Driven by the intrusion of geopolitics into economics and the resultant global readjustment underway cannot be the new normal. And even though they seem to be fused together, the G20 under India’s presidency must find ways to decouple the two. This needs a very high degree of international consensus.
“Our agenda will be inclusive, ambitious, decisive and action-oriented,” Modi tweeted. “We will work to realise all aspects of our vision of ‘One Earth, One Family, One Future.’” As a narrative, this is as good as it gets, a well-packaged idea around planet, people and prospects. The vision statement now clearly articulated, Modi must now underline this soft narrative by hard ideas and build an international consensus that hyphenates peace with prosperity.
(This article first appeared in the ORF.)
Gautam Chikermane is Vice President at ORF. Views are personal, and do not represent the stand of this publication.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
