"Goodbye G7, Welcome G20"
The Economist, a British weekly magazine, described the first US Washington G20 Summit in 2008 with the headline "Goodbye G7, Welcome G20" as a "clear change in the existing order." The hope for a cooperative global economic order reached its peak at the second London G20 Summit in April 2009 but has since faded into obscurity. However, headlines like "Goodbye G20, Welcome G7" are nowhere to be found.
The early days of a world dominated by G7 member countries have become a distant story compared to cooperation among the G20. Global cooperation and the hegemony of advanced Western countries now seem disconnected from reality. What comes next? Unfortunately, it might be fragmentation and disorder.
This was not what the G7 Summit in Hiroshima aimed for. The Hiroshima G7 Joint Declaration addressed a wide range of issues, including the Russia-Ukraine war, arms reduction and nuclear non-proliferation, the Indo-Pacific, global economy, climate change, environmental concerns, economic resilience and security, trade, food security, health, labor, education, digitalization, science and technology, gender, human rights, refugees, immigration, democracy, terrorism, violent extremism, international organized crime, China, Afghanistan, Iran, and diplomacy. It was an all-encompassing statement that felt like representing the aspirations of the world's governments.
In contrast, the London G20 Summit declaration barely exceeded 3,000 characters. Considering the significance of the economic crisis at the time, a direct comparison would not be fair. However, scattered aspirations do not help. Prioritizing everything ultimately leads to nothing important.
The decline of US hegemony and G7 economic power is a thing of the past. Of course, the G7 remains the most powerful and cohesive economic forum among nations. All major reserve currencies belong to the G7. However, between 2000 and 2023, the global production share of the G7 (based on purchasing power) decreased from 44% to 30%, and the production share of all high-income countries decreased from 57% to 41% during the same period.
On the other hand, China's share, which was only 7%, has increased to 19%. China is now an economic powerhouse. Despite its problems with nonperforming loans, China has become the largest investment destination for emerging economies and developing countries, even more important than the G7. Brazil is an example of this. President Luiz Inácio Lula da Silva of Brazil attended the G7 Summit but could not ignore China's influence.
The G7 is expanding to include other countries. This year's Hiroshima G7 Summit was attended by India, Brazil, Indonesia, Vietnam, Australia, and South Korea. However, there are 19 countries that hope to join the BRICS (Brazil, Russia, India, China, South Africa), which encompasses Brazil, Russia, India, China, and South Africa. In 2001, Jim O'Neill, then Chairman of Goldman Sachs, first proposed the concept of BRICS and anticipated that these countries would become a powerful economic cooperation group.
I believed that BRICS primarily referred to China and India. Economically, this expectation has proven to be correct. Yet, BRICS seems to be moving toward becoming a powerful force in the world economy. It is connecting the BRICS countries as a community, independent of the United States and its allies, aiming to establish a self-reliant economic bloc.
So, how long can the G7, which represents only 10% of the global population, maintain its traditional role? Or how long should it be maintained?
Sometimes it is necessary to compromise with reality. The era of the G7, which aimed to protect democracy and national borders, should now be set aside. Today, their goal of safeguarding borders is focused on Ukraine. The Russia-Ukraine war is a struggle between the Western world and Russia. It is unlikely to escalate into a global war with more pressing issues and concerns plaguing the world. While the recent actions of Ukrainian President Volodymyr Zelensky at the G7 summit were positive, the fate of Ukraine will ultimately be determined by the Western world alone.
Let's return to the topic of the economy. The shift in perspective from decoupling to de-risking in relation to China has also been a positive development, as the former was an overly risky notion.
If de-risking can be reflected in rational and consistent policies, its impact will be even more positive. However, this is a goal that is more challenging to achieve than many anticipate. The supply chains for energy and essential raw materials need to be expanded, but simply expanding Taiwan's advanced semiconductor supply chain, for example, would be extremely difficult.
Finding the path of mutual cooperation is crucial once again when it comes to managing the global economy.
Will the International Monetary Fund and World Bank be the guardians of G7 hegemony in a world that is increasingly divided? If so, how and when will they obtain the necessary new resources to address current issues? Moreover, how should cooperation with China and its allies be approached? Would it not be wise to adapt to reality, adjust quotas and shares, and acknowledge significant changes in global economic power? China will not disappear. Why should we not expand China's voice in exchange for participating in debt restructuring negotiations? Similarly, what is the reason for not starting another controversy to obtain China's recognition of its status within the World Trade Organization?
Above all, it must be acknowledged that all discussions about de-risking are focused on trivial matters rather than the two major issues of war and climate. The G7 still needs to uphold shared values and relationships. However, even if the fate of the G7 will soon determine the fate of the world, these nations can no longer dominate the world. It is time to once again find the path of mutual cooperation.
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