Do we really need the G8?

published 19 June 2007

What exactly is the G8?

Essentially, a two-day talking-shop and social club for the leaders of eight rich nations America, Japan, Germany, Britain, France, Italy, Canada and (since the late 1990s) Russia. Originally convened in the mid-1970s to counter the economic threat of soaring oil prices, today's G8 summits involve a select group of rich nations getting together to discuss the major economic issues facing the world climate change, world trade, poverty, and international property rights and to agree policies to resolve them. The eight leaders who attend appear to value the chance to network and do business in a relatively relaxed and informal setting a kind of geopolitical mini-break. Critics complain that the G8 is exclusive, smugly complacent, and summits are no longer an effective means of steering world politics and the global economy.

Last week's summit, which focused on climate change and the environment, provided plenty of ammunition to those who argue that the G8 is past its sell-by date. That's because the two countries which should be heavily involved in any discussion about these particular issues, China and India, are not members. Without radical and sustained action from both countries, there is no chance of slowing climate change.

Two-thirds of China's energy and half of India's comes from burning coal, a known source of massive carbon emissions, and neither country seems willing or perhaps able to reduce its dependence. Quite the reverse. By building two new plants a week, China is actively contributing to global warming. Given the importance of this problem and the central role the Asian giants must play in any solution, they should have a major role at the G8 summits. But they don't. In fairness, since 2005 at Gleneagles, leaders from the "Outreach 5" countries China, India, Brazil, South Africa and Mexico have briefly been allowed to join the talks, but this is largely window-dressing. This elite club is not about to open its doors to new members, even though its leaders must know that unless they can engage more fully with the emerging powers, they stand to lose legitimacy, to say nothing of failing to tackle climate change or any of their other challenges.

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While China is ambivalent about joining the G8 it fears the other nations would gang up on it India is clearly unimpressed by the status quo. For all the talk of a new deal with the Outreach 5, Manmohan Singh, the normally reserved prime minister of India, swiftly punctured the mood of self-congratulation at last week's summit. He was scathing about travelling to Germany only to be treated as a junior partner and let into the talks once the main decisions had been taken. He made it clear he would not be travelling to another G8 merely to be used for PR purposes. When the leader of a billion-strong democracy thinks the G8 is an anachronism, it's time to be worried.

The fact that the nature of global capitalism has changed. Last week, the management consultant firm McKinsey published a report called What Matters, arguing that we have entered a radically new phase of economic globalisation in which emerging markets not developed countries set the pace for global growth. Increasingly, the BRIC' economies of Brazil, Russia, India and China are the ones that really matter.

G8 summits started in the 1970s, but look at how the world has changed in just the last decade. Before 2000, no Indian company had ever made a substantial international acquisition, but in 2006 they made more than 100. Here in the UK, for example, India's Tata bought up Corus, formerly British Steel. Last year, the largest initial public offerings were all Chinese and Russian rather than American. McKinsey calls all this the "globalisation of globalisation" and it is this process, critics say, that the present G8 is incapable of coping with. Just as the World Bank and IMF are essentially outdated post-war Euro-American institutions, so the G8 is essentially a 1970s institution, no longer capable of providing global leadership on any issue.

Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published Customers.com, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.