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On February 25, Bank of Norway Governor Svein Gjedrem delivered an interesting and important speech at the Peterson Institute for International Economics. He analyzed and critiqued multilateral approaches to today's global economic challenges. He advocated: (1) effective collaboration by the systemically important countries; (2) anchoring such collaboration in a "statutory-based system of representation," such as that of the executive board of the International Monetary Fund (IMF); and (3) the use of constituencies with rotating representation as the preferred structure.
Governor Gjedrem's speech posed the question of the role and legitimacy of caucuses in multilateral decision-making. He questioned the legitimacy of the Group of 20 (G-20) while at the same time praising its accomplishments to date. Three points should be made in this context. First, caucuses are not unilateral. They are multilateral. Second, multilateralism does not mean universalism. Third, the G-20 meeting at the leaders' level certainly is more multilateral than the European preference at the time, which was the Group of 7 (G-7).1
Of course, the G-20 is not a decision-making body. It operates by consensus. Any agreements have to be formally implemented by other bodies such as the IMF. True, the G-20 countries have a majority, but less than 85 percent of the votes in the IMF. Also true, in the IMF, when votes are taken, which is rare, they are preceded by many informal meetings—in other words caucuses.
The crucial point, acknowledged by Governor Gjedrem, is that the G-20 has supported the IMF and the IMF has supported the G-20. To date, the two institutions, one informal and the other formal, have complemented each other. The world has been better off as a consequence. Is the ultimate test substance or symbolism? Results matter. Moreover, the G-20 has dealt and should deal with issues that are not directly part of the mandates of the Bretton Woods institutions, such as trade and climate change. I agree, however, that some economic issues, including food security and global poverty, are not appropriate for the G-20. I also hope that the G-20 does not follow the G-7/8 and become a forum to discuss a host of global political issues.
The IMF formula for representation is not necessarily appropriate in all areas. The constituency approach may be more representative, but not necessarily more legitimate or more effective. The G-20 was created on the model of the so-called G-22 that operated on an ad hoc basis at the level of finance ministers and central bank governors in the wake of the Asian crises. The view of the participants in the G-22 was that their deliberations were deeper and more effective because they were unconstrained by constituency obligations.
Legitimacy and perceptions of legitimacy are important issues in today's complex world, and Governor Gjedrem was right to raise them. However, as Governor Gjedrem also noted, there are issues of legitimacy with respect to the IMF itself, as well as with respect to the G-20. Some regard legitimacy at the IMF as a larger issue precisely because it is a formal, decision-making institution. In this connection, I was disappointed that Governor Gjedrem endorsed the current size of the IMF executive board and its representation. Many of us believe that Europe is overrepresented on the boards of the Bretton Woods institutions and also in the G-20.
Notes
1. There is some dispute on this point, but most observers credit the United States for insisting on a meeting of the leaders of the G-20, not the G-7, in Washington in November 2008.
