Is the G20's Development Working Group on the right track?
As St. Petersburg prepares to host the leaders of the world’s most important economies at the annual G20 summit, financial headlines are full of worry about the “rout” in emerging markets and the emerging markets bubble popping. The optimism of 2009 and 2010 that growth in developing countries would make up for sluggish prospects in advanced economies has turned sour. Capital that flooded into EM three years ago is now flowing out. “Yesterday’s conventional wisdom is not today’s,” as Samuelson has it. It is timely, then, that G20 leaders plan to use part of this week’s summit to review the progress of their international development agenda since it was launched in 2010. Last week, Russia’s G20 office laid the groundwork for that review when it released a report prepared over the past year by the G20’s Development Working Group – ”The Saint Petersburg Accountability Report on G20 Development Commitments”.
Since the G20 became a leader-level forum in 2008 with the core mission of fostering growth in the global economy, G20 leaders have consistently recognized that international development and global economic growth are closely linked. One of the first G20 initiatives launched in 2008, to re-energize multilateral development banks like the World Bank, aimed to maintain EM growth by maintaining credit facilities. In 2009, others followed, with mixed results – including promises to conclude the Doha Development Round, promote food security and renewable energy, improve financial inclusion and expedite the recovery of stolen assets.
By the 2010 G20 summit in Toronto, the shape of the two-speed global economy had become clearer. Advanced industrial economies were stagnant or shrinking while EMs had quickly returned to growth. Massive unconventional monetary policy sharply reduced risk premiums. Rising resource prices even drew investor attention to low income countries. Korea, which was slated to be the first EM to host a G20 summit in the fall of 2010, successfully pressured G20 leaders to take on a broader and more deliberate agenda for international development. Since, leaders believed, boosting global economic growth required “narrowing the development gap and reducing poverty,” they struck a Development Working Group of officials to set an international development agenda and propose multi-year action plans to the Seoul Summit.
The Development Working Group would enter a crowded space. Older development institutions like the OECD, the World Bank Group and the regional development banks had deep expertise and financial muscle. Newer institutions, the “vertical funds” like The Global Fund and large scale philanthropic actors like the Gates Foundation, were setting out new approaches to development. Some emerging market countries were massively ramping up their own development budget, often outside frameworks crafted by the advanced industrial countries. The entire field was gripped by vigorous, even vicious, debates about the “Washington Consensus”, the Millennium Development Goals (MDGs), aid effectiveness and models of sustainable development.
The G20’s membership encompassed the leading advanced industrial countries and the largest emerging market countries, and as it became the world’s premier forum for international economic coordination it had the opportunity to devise a new global game plan. By the time of the Toronto Summit, G20 members were, collectively, capable of crafting a development strategy that encompassed the aspirations of traditional and emerging donors, leading the effort to learn from the MDGs and draft a post-2015 global development agenda, while synthesizing the principles of aid effectiveness and sustainable development agenda. Such a breakthrough could have harnessed private capital and public spending to propel the global economy forward.
The Development Working Group almost immediately started to fall short of its potential
Officials from G20 countries and many international organizations worked feverishly in the months following the Toronto Summit to draft a set of G20 development principles, the Seoul Development Consensus for Shared Growth, and a more detailed blueprint for advancing those principles, the Seoul Multi-Year Action Plan on Development. The Seoul Development Consensus set out six principles for the G20 development agenda.
1. Economic growth, rather than social development, would be the primary concern.
2. The G20 would create new partnerships with low income countries rather than trying to dictate development approaches.
3. Regional or systemic issues would take priority over particular national challenges.
4. The private sector would be a welcome partner.
5. The agenda would complement rather than duplicate the work of other forums and institutions.
6. A concern for outcomes and results would dominate.
The Seoul Multi-Year Action Plan then set out nine areas where work was needed to achieve these objectives: infrastructure, human resources, trade, private investment, food security, growth with resilience, financial inclusion, domestic resource mobilization and knowledge sharing. Dozens of items were identified for action over the following three years.
The Development Working Group almost immediately started to fall short of its potential. The optimism of the Toronto Summit that the global economic crisis was passing and the G20 could turn its attention from immediate concerns proved premature. In 2011 and 2012, G20 leaders found their meeting agendas almost entirely derailed by the Eurozone crisis. Broader development issues could not compete for attention from G20 leaders and senior officials. Moreover, the Development Working Group’s mandate included issues like trade, where the G20 had already struggled to take on a meaningful role, food security and financial inclusion, where the G20 had already mandated work by finance ministers and other G20 work streams. In these areas, the DWG was reduced to monitoring and reporting on work done elsewhere.
So, overall, how has the DWG fared against its first three-year work plan? According to last week’s Accountability Report, the DWG rates itself as having achieved “significant successes.” All but one of 67 commitments made by G20 leaders are either complete or ongoing. There have been many worthy initiatives launched – the creation of the Agricultural Market Information System, the Social Protection Interagency Cooperation Board, the Global Partnership for Financial Inclusion and the High-Level Panel for Infrastructure Investment. The Report shows some promising early efforts like AgResults, a ‘pull mechanism’ to establish incentives for innovation in food security issues, and the Tropical Agriculture Platform, a set of tools to allow policy dialogue, capacity building and information sharing to expand agriculture in tropical countries. In the field of infrastructure, the G20 recognized a dozen regional projects that have the potential to drive growth, and has encouraged multilateral development banks to harmonize policies that draw private sector financial institutions into development work.
Nonetheless, G20 countries bring a wide range of approaches and assumptions to the development debate itself. It often proves impossible to reach consensus on prescriptive approaches, and in such cases the DWG has commissioned the drafting of non-prescriptive “policy toolkits” from international organization. These documents describe approaches to problems like urban mass transit and green growth but avoid formulating sharp policy recommendations. It is unclear how widely they are used, and the Accountability Report does not assess their utility.
Launching worthy initiatives and commissioning policy toolkits, however, seems to fall short of what the G20’s ambitions should be in development. The DWG has not really produced a leader-like agenda suited to the annual meeting of leaders from the twenty-odd largest economies in the world. It is hard to see how the DWG has produced more than could be produced by, say, a reinvigorated version of the Development Committee of the World Bank and IMF. The DC is an established forum where a broad group set of countries provides direction within the governance framework of two organizations with an established capacity to identify problems, devise solutions and finance programs. If other international organizations were more directly involved in the Development Committee’s work, it could provide the policy coordination and priority setting function the G20 seems to have had in mind in creating the DWG.
With emerging markets cooling off, the G20 and its DWG now face a serious challenge. Can the DWG do more to boost global economic growth through international development? Last week’s DWG Accountability Report does turn its attention to the DWG’s future. “To maximize [its] effectiveness,” it states, “the DWG agenda needs to be organized around a small number of leader-level issues at a time.” What might those issues be?
On Friday, the St Petersburg G20 Summit is expected to issue a plan for the future of its international development work. This “Saint Petersburg Development Outlook” should at least hint at what a shorter, leader-level development agenda will look like. A sharper indication of whether the G20 can have a useful development agenda is whether the St. Petersburg summit declaration will say anything specific about the upcoming debate at the UN General Assembly on the post-2015 development agenda. It will be interesting to see if the St Petersburg Declaration offers any hints on how G20 members will approach that debate.
Ian Brodie represented a multilateral development bank at the G20 Development Working Group from its inception until it wrapped up its work on the St Petersburg Accountability Report in July. The views expressed in this blog post are his own and do not necessarily represent those of any of the participants in the DWG.