Ditch the G7

The annual economics summit known as the G7, which began Sunday, is “a moribund institution” that “should be scrapped” because it has become useless as “an instrument of the internationalism it was set up to pursue,” writes economics analyst Larry Elliott at The Guardian.

Elliot continues:

It takes a number of ingredients to make an international body work. There have to be problems that need solving. There has to be some degree of unanimity about how those problems should be solved. And there has to be leadership to ensure that unanimity when it is not immediately forthcoming.

Only the first of those ingredients currently exists. The G7 has plenty to talk about: Greece; Ukraine; the next set of development goals and how to finance them; climate change; trade; the weakness of the global recovery; how to engineer the exit from the zero interest rate environment of the past six years; combating systematic tax evasion; and tackling inequality. David Cameron wants the Fifa scandal to prompt a wider discussion about corruption.

What it does not have, and has not had since 2010, is a common view about how to go about achieving any of these aims. When the global financial crisis was raging, ideological differences did not matter. The G7 all cut interest rates and they all ran bigger budget deficits in an attempt to stimulate growth. But the consensus did not last, and divisions opened up. The Americans said growth should take priority over deficit reduction; the Germans, backed by the British, said that without a rapid return to fiscal rectitude there could be no sustainable growth.

Nor has a dominant figure emerged who is prepared to take charge, someone prepared to chivvy the reluctant into agreeing to be ambitious in those areas where there is a degree of consensus, such as the repeated promises to support development in the world’s poorest countries.

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— Posted by Alexander Reed Kelly.