Moscow’s withdrawal marks a humiliating battlefield setback that could worsen already-dismal morale.
Washington can no longer afford its self-defeating “with us or against us” attitude.
United Nations sanctions are already on the books—they just need to be reactivated.
TSMC is an economic boon, but its success makes China covet the industry while its natural resource consumption reduces resilience.
Argument: It’s Time to Expand the G-20 It’s Time to Expand the G-20…
A war in a former Soviet republic, the ruble crashing, and the bottom falling out from the Russian economy. A panicked central bank worried about an imminent default. 2022? No, 1998 and the Russian financial crisis.
In the aftermath of Moscow’s last great economic shock, global financial leaders put their heads together to prevent a repeat. The idea, hatched by then-U.S. Treasury Secretary Larry Summers and his Canadian counterpart, Paul Martin, was called the G-20. Instead of only a G-8 composed of Western nations and the Soviet successor state, emerging markets would now be brought into the fold. The goal was to help guide new power players in the global economy, including China, and acknowledge their rising clout.
Russian President Vladimir Putin would love nothing more than to accelerate the demise of the G-20. It would be just one more box checked on his to-do list of ripping apart international consensus. But instead of playing into Putin’s hands, the United States should use this moment to rebuild the G-20 and help the body finally live up to its promise.
A war in a former Soviet republic, the ruble crashing, and the bottom falling out from the Russian economy. A panicked central bank worried about an imminent default. 2022? No, 1998 and the Russian financial crisis.
In the aftermath of Moscow’s last great economic shock, global financial leaders put their heads together to prevent a repeat. The idea, hatched by then-U.S. Treasury Secretary Larry Summers and his Canadian counterpart, Paul Martin, was called the G-20. Instead of only a G-8 composed of Western nations and the Soviet successor state, emerging markets would now be brought into the fold. The goal was to help guide new power players in the global economy, including China, and acknowledge their rising clout.
Russian President Vladimir Putin would love nothing more than to accelerate the demise of the G-20. It would be just one more box checked on his to-do list of ripping apart international consensus. But instead of playing into Putin’s hands, the United States should use this moment to rebuild the G-20 and help the body finally live up to its promise.
For nearly a decade after its creation, the G-20 was a sleepy affair. Finance ministers and central bank governors gathered to discuss the impact of technology and demographics on productivity growth. Then the 2008 global financial crisis struck. Almost overnight, the G-20 became the headquarters for the mission to save the global economy.
The situation was too dire to leave to the finance ministers alone, so for the first time the leaders of the G-20 nations themselves decided to assemble. In the spring of 2009, then-British Prime Minister Gordon Brown rallied his colleagues for a commitment of $5 trillion in coordinated stimulus to stop a global depression. It worked.
Throughout the 2010s, the G-20 made progress in fits and starts, on such issues as International Monetary Fund (IMF) resources, debt relief for low-income countries, and even climate change. It was extraordinarily useful to have a forum where the leaders of the United States, France, Germany, India, Brazil, China, and, yes, Russia, could sit down face to face for hours or even days at a time.
I attended the 2010 G-20 summit in Seoul when the United States and its allies put pressure on China to stop manipulating its currency. A solo U.S. move would have backfired, but together more than a dozen powerful economies formed a persuasive coalition that helped shift China’s position over time.
There is no other institution like it. The G-20 represents 75 percent of international trade and two-thirds of the world’s population. It’s a far nimbler operation than the unwieldy and often dysfunctional United Nations.
So, whither goes the G-20 after Russia’s attempt to split the geopolitical order wide open? The United States has three plausible options.
The first is to walk away. Because the G-20 operates by consensus, there is no formal way to kick Russia out unless every other member agrees, and that’s not likely to happen with countries such as China and India in the fold. The United States could say it is impossible to meet with Russian leaders and finance ministers who are under sanctions and then de facto dissolve the world’s premier economic coordinating body.
It would be a defensible decision but the wrong one. We only need to look at the successor to the Trans-Pacific Partnership, to which China has moved to join, to see what happens when the West leaves the playing field to a rival.
The second option is to pretend as if little has changed. The United States can show up at the meetings, make progress on issues such as digital currency, and negotiate agreements that force Russia and China to always be in dissent. This would be a G-18+2 situation and highlight the points of division. The West could then leverage this split screen to further isolate Putin and Chinese President Xi Jinping.
This doesn’t make much sense either. It is hypocritical to freeze the assets of a central bank in one breath and then fly off to international conferences with those same central bankers in the next as if nothing has changed. It will undercut the strength of the financial hammer the world just swung down on Russia’s economy.
Which brings us to the third option. It’s time to invite new members into the room and finally live up to the original idea of the group. Despite its name, the G-20 isn’t made up of the 20 largest economies in the world. Argentina, for example, ranks 30th by GDP and owes its membership to a U.S. fear in the late 1990s that the country would have its own version of the 1994 Mexican peso crisis. The membership hasn’t changed since its founding, and that simply doesn’t make sense given the transformations in the global economy over the past two decades.
Countries such as Poland, Nigeria, and Thailand all have larger GDPs than current G-20 members and could bring welcome new perspectives into the group. The economic dynamism and relatively younger demographics of these nations (they all have lower median ages than Germany and Japan) would energize a body that will otherwise go adrift. Adding five more members would bring the G-20’s share of global GDP back over 90 percent, where it was when it first emerged as an international force in 2008. After 20 years, Africa would finally have more than one seat at the table.
Now, the United States could help lead a reformed G-20, one that acknowledges the world has changed because of Putin but not in the way he had hoped.
While the United States is helping to bring new members into the fold, it should simultaneously push for a reassessment of the status of current members. Instead of simply saying Russia should be removed, the United States can ask for a “status check” of a country’s economic weight. This would be similar to the IMF’s review process every five years. Of course, with Russia’s economy about to undergo a possible 15 percent contraction, it may not continue to qualify for membership in the years to come.
Doing this won’t be easy. Changing membership will require the host nation to be on board. Indonesia, with its deep military and economic ties to Russia, holds the chair in 2022, and then comes India, with its abstention at the U.N. General Assembly vote condemning the invasion, in 2023. But why should China and Russia protest new members? Both countries have been calling for more emerging market voices—it’s time to see if they mean it. If the two do protest, then the United States will have shown that China and Russia’s rhetoric was hollow all along. That will be an important message to the rest of the emerging markets.
One of the key lessons of the past few months is that while Putin had the military initiative and kept the West guessing, the West had the economic initiative and surprised Putin. The sanctioning of Russia’s central bank sent shockwaves throughout the Kremlin. One only need look at the imposition of capital controls, something the Russian central bank previously promised it would not do, to understand the fear.
The United States shouldn’t let up. U.S. President Joe Biden should use this moment to reset the best mechanism the world has for global economic coordination and in the process return to the ambition of the group in the first place—a true representation of the drivers of global economic growth.
Josh Lipsky is the senior director of the Atlantic Council’s GeoEconomics Center and a former advisor at the International Monetary Fund.
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