Academic journal article Global Governance

The G-20 and International Economic Governance: Hegemony, Collectivism, or Both?

Academic journal article Global Governance

The G-20 and International Economic Governance: Hegemony, Collectivism, or Both?

Article excerpt

Following the East Asian crisis of 1997-1998, much attention was paid to financial sector reform. While little of substance has changed in the intervening years, a number of potentially important new forums were established to facilitate international cooperation. By drawing on and modifying theories of hegemony, this article provides a theoretical context within which to explore one of these institutions: the Group of 20 (G-20). The key question examined is whether institutions like the G-20 are likely to provide genuine mechanisms for cooperation and inclusion or simply become instruments of "hegemonic incorporation." The argument here is that despite the continuing "structural" dominance of the international system by the United States and the Group of 7 (G7) nations, the G-20 provides some scope for other nations to influence outcomes. KEYWORDS; G-20, hegemony, governance, institutions, international financial system.

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The contemporary international financial system in recent decades has expanded greatly in size, reach, and liquidity. At the same time, however, it has become much more susceptible to crisis and instability, not only in emerging markets but more recently in the developed economies as well. (1) The financial crisis that engulfed East Asia in the late 1990s was especially important in highlighting the potentially devastating effects of exposing immature domestic financial systems to highly volatile international capital flows. Debates about a "new financial architecture" and new coordinating institutions followed in the wake of these events. (2) A report by the Bundesbank's president, Hans Tietmeyer, was endorsed by the Group of 7 (G7) in 1999 and led to the creation of the Group of 20 (G-20) and the Financial Stability Forum (FSF). The focus of this article is the G-20, a forum designed to promote dialogue on financial and global economic governance issues in which nations of both the North and the South come together to discuss and attempt to manage common systemic problems. Its key participants are finance ministers and central bankers from the traditional G7/8 countries as well as from Australia, Argentina, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, the Republic of Korea, Mexico, the Russian Federation, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union (EU). These are countries that together represent over 85 percent of world gross domestic product (GDP), 80 percent of world trade, and two-thirds of the world's population. The G-20 also has representatives from the EU, the International Monetary Fund (IMF), and the World Bank.

To help frame our analysis of the political dynamics of the G-20, we utilize two conceptualizations of the politics of international coordination and inclusion: hegemonic incorporation and collectivist cooperation. Both are potential vehicles for coordination but on different terms and via different logics of interaction. Hegemonic incorporation implies US and G7 dominance, which Alison Bailin refers to as "group hegemony," involving an "incorporationist" logic applied to the non-G7 members within the G-20. (3) This logic encourages the adoption of a broadly neoliberal consensus and policy model by emerging market economies, not only in the interests of overall coordination and a safer world for the lead economies and their economic and financial interests, but also in terms of the conditions under which emerging market economies gain access to key trade and financial flows. However, collectivist cooperation involves an institutionalized voice and new role, especially for the non-G7 members of the G-20. The creation of the G-20 ostensibly suggests a collectivist and inclusive logic in international politics aimed at functional and normative goals: a more diverse and inclusive membership increases the prospects for consensus and effective policy coordination, while simultaneously enhancing credibility and legitimacy through a wider representation of interests. …

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