How the G20 became a premier forum for international economic cooperation

These members represent around 85 per cent of the global GDP, over 75 per cent of global trade, and about two-thirds of the world population. As a forum for international economic cooperation, it plays an important role in shaping and strengthening global architecture and governance on all major international economic issues.

Unlike the UN, G20 does not have a permanent secretariat or staff. Rather, the G20 Presidency rotates annually among the members – the Presidency is responsible for bringing together the G20 agenda, organising its workings and hosting summits. India holds the Presidency from December 1, 2022, to November 30, 2023.

A need for a new global order

The G20’s emergence in the international order was not “the outcome of a carefully designed plan” by world leaders to address pressing international issues. As writer Karoline Postel-Vinay puts it in the book The G20: A New Geopolitical Order (2014), “The emergence of the G20 in the international order arose from a combination of chance and necessity. It is partly the product of improvisation. It is also a logical consequence of the socioeconomic evolution of the world.”

In the 1990s, as the “spectre of communism” became a thing of the past and vibrant economies emerged in the Global South, there was a need for reform in world institutions that had hitherto been dominated by nations from the Global North.

“World institutions such as the UN and the International Monetary Fund (IMF) had not managed to overcome the North-South divide in their mode of deliberation… the G8 … perpetuated this dichotomy,” Postel-Vinay wrote. “For large countries that were both rich and poor, such as China, India and Brazil … from the standpoint of the world order, the North-South divide was no longer as clear … the G20 offered an initial response to the need for reform,” she added.

Thus, the G20 emerged in the context of a growing recognition among Global North nations (specifically the G7) that emerging economies in the Global South were not adequately represented in global economic discussion and governance.

Aftermath of the Asian financial crisis

The G7 was set up in 1975, in the aftermath of the twin exchange rate and oil crises of the early 1970s. Originally comprising France, West Germany, Japan, Italy, the UK and the US, Canada joined in 1976. Finance ministers and central bank governors of the G7 meet annually to discuss important economic issues and challenges.

In 1997, the Asian financial crisis ripped through some of the fastest-growing economies in East Asia. It soon spread to Latin America, another hub of rapidly developing Global South nations. It was in the context of this crisis that the G22, G20’s earliest iteration, was set up in 1998. While initially conceived as a one-time crisis-response meeting, in early 1999, two more meetings were convened including 33 members (G33) to discuss reforms of the global economy and the international financial system.

The dissatisfaction with the ad hoc nature of the G22 and G33 processes, however, led to the eventual formation of the G20 in late 1999. The joint communique issued by finance ministers of the G8 (Russia was added in 1997 and removed in 2014) on September 1999 read:

“[W]e propose to establish a new mechanism for informal dialogue … among systemically significant economies … in December in Berlin, we will invite our counterparts from a number of systemically important countries from regions around the world to launch this new group.”

Between 1999 and 2008, it operated, mostly outside the public eye, with annual meetings between members’ finance ministers and central bank governors. Another crisis would catapult it to its present status.

The global economic crisis of 2008 and the creation of the G20 leaders’ summit

The earliest proposal to create a G20 leaders’ forum was championed by Canadian Prime Minister Paul Martin in 2005, but opposition from the US slowed progress.

“Everybody was onside, except the United States. George Bush himself was reluctant, he went back and forth, he wasn’t against it but he wasn’t for it. I was very sure, as were a number of us, that it would take a crisis to bring it to the leaders’ level, and that’s exactly what happened,” Paul Martin said in an interview in 2018.

In 2008, the world saw perhaps the greatest economic crisis to hit since the Great Depression (1929-39). France, which held the EU presidency at the time, backed by the UK, argued for an emergency summit meeting to address the crisis. But whom to invite?

The G8 was not sufficiently influential on its own to stabilise a crisis on this scale. Typically, there would be extensive discussion among various countries to decide the invitees. But there was simply no time to go through that.

The G20, which had been functioning for nearly a decade by that time, was the obvious answer. As Postel-Vinay put it: “In 2008, it [G20] was in the right place at the right time.”

The first G20 leaders’ summit (the ‘Summit on Financial Markets and the World Economy’) was convened in Washington DC in November 2008. In addition to the 20 members, the heads of the IMF, the World Bank and the United Nations were invited, along with Spain and the Netherlands. Annual summits have been held ever since.