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Business News/ Opinion / The G-7 is dead, long live the G-7?
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The G-7 is dead, long live the G-7?

It is entirely possible that an entirely new G-7 comprising Australia, Brazil, Canada, European Union, India, Japan and South Korea could emerge

Photo: AFPPremium
Photo: AFP

The Group of Seven (G-7) nations—Canada, France, Germany, Italy, Japan, the UK and the US, once a koinonia of the Western liberal model—is dead. It was killed not by external foes but in a rage of fratricide by its own progenitor. The destructive attack on the group leading up to the summit in Charlevoix, Canada, by US President Donald Trump was by no means the first, but it is, perhaps, the final, fatal blow.

Conceived in the 1970s at the height of the Cold War, the G-7—a brainchild of the Richard Nixon administration—served two purposes. First, to address economic, political and security differences and manage crises among the members. Second, to reinforce the dominance of the Western democratic and liberal economic model in the global order. These twin objectives were evident in that these democracies retained their position among the world’s top economies and, at the end of the Cold War, accounted for nearly 70% of the global GDP (gross domestic product).

However, the 1996-97 Asian financial crisis revealed the limitations of the G-7 in managing the challenges posed by globalization, and led to the establishment of the Group of Twenty (G-20) of the world’s top economies. The subsequent decision in 1997 to expand the G-7 to include an economically and politically floundering Russia was contrary to two of the group’s fundamental principles. First, Russia (with an economy smaller than that of China and even India) was not even among the top 10 economies when it was admitted and, second, its democratic credentials were weak. Thus, the enlargement to the G-8 was driven primarily by geopolitics rather than geoeconomics and contributed to a weakening of its common purpose. Russia’s eviction from the group in 2014 following its annexation of Crimea was also justified on geopolitical grounds. Thus, the ill-conceived G-7 enlargement and contraction made it increasingly unfit for either geoeconomic or geopolitical purposes.

The dramatic 2008 global financial meltdown—triggered by the policies of some of the G-8—made the group part of the problem rather than the solution and led to the empowerment of the G-20, which was better suited to address at least the geoeconomic challenges. Today, the G-7’s share of global GDP is around 47% and only five—the US, Germany, Japan, UK, and France—are among the top 7 global economies, while Italy and Canada have been upstaged by China and India. Thus, as one observer noted, even before Trump’s inhumane euthanasia, “the G-7 was already dead".

While not many tears are likely to be shed over the demise of the G-7, especially by countries that were never part of it and even some that were, such an ad-hoc and exclusive group is likely to revive. This revival could take several different pathways.

The first and most obvious route would be for the G-7 to be permanently replaced by the G-20. This transition would work if the primary objective is to address immediate financial and economic crises. However, if the objective is also to address geopolitical issues and uphold the democratic liberal model, then the G-20 is unsuitable. Many of its members are not exactly exemplars of democracy and also have competing geopolitical interests. Besides, the G-20 is much too unwieldy to manage all global governance and peace and security issues, which can only be effectively addressed by a much smaller and select group.

The second approach might be to reform the G-7 based solely on the criteria of the size of the country’s economy. On this measure alone, the reconstituted G-7 would include China and India (instead of Italy and Canada) plus the five original members. Such a G-7 would be reflective of current geoeconomic realities and might be more effective in managing differences. However, this G-7 might no longer be the rule-based custodian of the democratic liberal order. Instead, if the democratic criterion is embraced, then the reconstituted G-7 would have to exclude China. Such an exclusion is not unprecedented. During the Cold War—the heyday of the original G-7—the Soviet Union was excluded from this club though it was among the world’s top 3 economies. While Trump has indicated his disdain for the democratic criterion by calling for the return of Russia to re-establish the G-8, it is unlikely that he will accept China into the fold.

The third option might be the creation of a new G-6 around the Brics (Brazil, Russia, India, China, and South Africa) group. With a combined global GDP share of nearly 30%, the Bric nations are among the world’s top 10 economies. However, without the US—which accounts for around 24% of global GDP—this group’s geoeconomic clout is likely to remain limited. Although the possibility of the Brics joining hands with the US is not inconceivable under the Trump administration (if they can resolve differences with China), this grouping is also unlikely to uphold the liberal democratic order.

Finally, it is also possible that an entirely new G-7 comprising Australia, Brazil, Canada, the European Union (EU), India, Japan, and South Korea, with a combined global GDP share of nearly 40%, could emerge. Such a grouping would be both a significant economic powerhouse and a paradigm of the liberal world order. However, the perilous state of the EU and the economic and security ties of most of the others to the US will make this option unlikely.

Whatever the route, a new G-7 will likely emerge. Long live the G-7?

W.P.S. Sidhu is professor at New York University’s Center for Global Affairs and non-resident senior fellow at the Brookings Institution.

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Updated: 18 Jun 2018, 03:01 AM IST
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