How the G20 Represents the Growing Clout of Emerging Markets
Following the 1973 oil crisis, leaders from five of the world's major industrialized democracies (the United States, the United Kingdom, France, West Germany and Japan) gathered in Washington D.C. to discuss international policy coordination and possible solutions to emerging global challenges. This unofficial Group of Five (G5) became the G6 in 1975 when membership was formalized and extended to Italy. Over time, membership in the club was also granted to Canada (1976) and Russia (1997). By 1998, one year after Russia's accession, the G8 accounted for approximately 70 percent of global gross domestic product (GDP).
By 2004, however, the G8 countries only accounted for 44 percent of global GDP. As of May 2012, this number had fallen further to 42.5 percent. What explains this decline?
Although the G8 countries (and, indeed, advanced economies worldwide) have suffered from a host of internal weaknesses over the past decade, the erosion of their power is, more than anything else, a testament to the strength of emerging markets.
According to some estimates, over the next few years emerging markets will account for roughly 70% of global growth. In addition, IMF projections suggest that emerging markets may have a total GDP that exceeds the total GDP in developed economies by 2014. What is more, figures from Ernst & Young indicate that emerging markets currently account for nearly 50% of global inflows of foreign direct investment (FDI).
Hence the growing importance of the G20, a group of nineteen countries plus the European Union formed in 1999 to represent these stark changes in the structure of the global economy. Along with the original G8 countries, membership in the G20 includes Argentina, South Africa, Australia, Mexico, Turkey, Brazil, India, South Korea, Indonesia, Russia, China and Saudi Arabia. Taken together, the G20 nations represent 90 percent of global GDP, 80 percent of international global trade and 64 percent of the world's population, according to figures from G20 statisticians.
As noted by United States President Barack Obama in an editorial piece published by Oxford Business Group, a consultancy focused on emerging markets, €Gone are the days when seven or eight countries could determine the direction of global markets. That is why the G20 is now the centre of international economic cooperation, that emerging economies have a greater voice and bear greater responsibility.€
Indeed, the greater responsibility assumed by emerging markets in the global economy was on display in June 2012, when the G20's annual summit was held in Mexico. As might be expected, discourse at the conference was dominated by the sovereign debt crisis in Europe and risks this development poses to the international system.
Key to reducing this risk, many G20 attendees emphasized, is ensuring that the crisis intervention fund established by the International Monetary Fund (IMF) has sufficient capital. With the United States electing this year not to inject any capital into the fund, G20 President Felipe Calderon noted, €It's going to be the first time the fund is capitalized without the US, which reflects the importance of emerging markets.€
By 2004, however, the G8 countries only accounted for 44 percent of global GDP. As of May 2012, this number had fallen further to 42.5 percent. What explains this decline?
Although the G8 countries (and, indeed, advanced economies worldwide) have suffered from a host of internal weaknesses over the past decade, the erosion of their power is, more than anything else, a testament to the strength of emerging markets.
According to some estimates, over the next few years emerging markets will account for roughly 70% of global growth. In addition, IMF projections suggest that emerging markets may have a total GDP that exceeds the total GDP in developed economies by 2014. What is more, figures from Ernst & Young indicate that emerging markets currently account for nearly 50% of global inflows of foreign direct investment (FDI).
Hence the growing importance of the G20, a group of nineteen countries plus the European Union formed in 1999 to represent these stark changes in the structure of the global economy. Along with the original G8 countries, membership in the G20 includes Argentina, South Africa, Australia, Mexico, Turkey, Brazil, India, South Korea, Indonesia, Russia, China and Saudi Arabia. Taken together, the G20 nations represent 90 percent of global GDP, 80 percent of international global trade and 64 percent of the world's population, according to figures from G20 statisticians.
As noted by United States President Barack Obama in an editorial piece published by Oxford Business Group, a consultancy focused on emerging markets, €Gone are the days when seven or eight countries could determine the direction of global markets. That is why the G20 is now the centre of international economic cooperation, that emerging economies have a greater voice and bear greater responsibility.€
Indeed, the greater responsibility assumed by emerging markets in the global economy was on display in June 2012, when the G20's annual summit was held in Mexico. As might be expected, discourse at the conference was dominated by the sovereign debt crisis in Europe and risks this development poses to the international system.
Key to reducing this risk, many G20 attendees emphasized, is ensuring that the crisis intervention fund established by the International Monetary Fund (IMF) has sufficient capital. With the United States electing this year not to inject any capital into the fund, G20 President Felipe Calderon noted, €It's going to be the first time the fund is capitalized without the US, which reflects the importance of emerging markets.€
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