The End of American Power
Trump’s Reelection Would Usher in Permanent Decline
Over Labor Day weekend, the leaders of the G-20 countries gathered in Hangzhou, China, for their annual summit. Their goal this year: save the good name of globalization, which has recently taken a beating. In the wake of Brexit, the U.S. Republican presidential candidacy of Donald Trump, the rise of the European far right, and China’s own anti-Westernism, the G-20 leaders were supposed to renew their commitment to collective economic growth and open cross-border trade and investment.
Trouble is, few of the member countries, including China, are interested in promoting these goals in the short term. The United States’ stance on trade is growing increasingly protectionist. Both presidential candidates oppose the Trans-Pacific Partnership trade agreement on grounds that U.S. workers and industry will come out on the losing end. Chinese investment destinations such as Germany, the United Kingdom, the United States, and Africa are refusing ever more high-profile cross-border deals with Chinese companies, due to purported national security concerns. For its own part, China feels that it is not in a position given the slowdown of its own economy to champion outward-facing policies.
It is ironic, given China’s nearly gaffe-free, luxurious turn as host of the G-20, capped off by a communiqué promising all the right solutions to global problems, that the most important outcome of this summit is that it made abundantly clear that the world needs to re-evaluate the organization’s role. The sort of domestic policy coordination that it regards as a holy grail has severe limits when tested by political and economic realities on the ground. After two days of meetings, and a year’s worth of side meetings between finance ministers and other officials, the Paris Climate Agreement was the only initiative with concrete requirements on which the G-20 could agree. That is a powerful signal that other issues previously imagined as global in nature are in fact not.
FORGED IN CRISIS
The tradition of the G-20 summit was established in late 2008 as a response to the financial crisis and in recognition that emerging economic powers outside the G-7 would be instrumental to restabilizing the global financial system. At a summit in November 2008, the G-20 leaders agreed to contribute $1.1 trillion to the IMF and the World Bank, among other international financial organizations. That money would in turn be used for capital infusions to countries in times of economic distress, preventing more wide-scale contagion. The countries also agreed to stricter regulation of financial institutions, including hedge funds. Most surprising, and perhaps as a sign of the pressure the leaders felt to act in the face of the 2008 crisis, they committed to cooperating on international measures against tax evasion, an initiative that would mean ceding some sovereignty over domestic revenue generation policies.
For their part of the $1.1 trillion contribution, the new emerging market contingent of the G-20 did not leave empty-handed. Of the total amount raised, $43 billion came from China. In addition, Beijing agreed to pass a fiscal stimulus package of $586 billion. Brazil, Russia, India, and South Africa also figured prominently in the IMF’s capital campaign. At the Pittsburgh summit in 2009, the G-20 leaders agreed to increase developing countries' voting power in the IMF by five percent and the World Bank by three percent. China would then vault over Germany, the United Kingdom, and France to hold the third-largest contingent of shares and voting power at the IMF and World Bank. This acknowledgment of China’s emergence as a global leader has led to other significant achievements for Beijing as well: the yuan is now part of the IMF’s currency basket, and a heavy campaign is underway to make sure China gains market economy status at the WTO early next year. Hosting the G-20 summit for the first time was but the latest manifestation of China’s newfound stature.
The G-20’s efforts in the immediate aftermath of the 2008 financial crisis have been generally praised. For those who dreamed of full cooperation and coordination between countries to unlock the full potential of globalization, the hope was that initiatives along the same vein would continue. Without the pressure of disaster, however, the G-20 reverted to its mode of operation prior to 2008. Instead of coordinating economic policy among the world’s wealthiest countries, it broadened its scope to include climate change, investment initiatives, and human rights. Since its members are largely unable to come to a meaningful consensus on this expanded range of issues, the G-20 then became a think tank of sorts. In conjunction with other multilateral organizations such as the IMF and the Organization for Economic Cooperation and Development, the G-20 produces reports and scholarship on policy prescriptions that will hopefully inform the leaders’ actions at the summits and other side meetings.
Come 2014, however, the G-20 countries became concerned about the slow speed of recovery after the 2008 financial crisis. At the summit in Brisbane, Australia, that year, the leaders agreed to target a global 2.1 percent growth rate by 2018. According to IMF and OECD projections, a quarter of this increase would be attributable to positive externalities from the G-20 countries implementing the agreed-upon growth measures at the same time. These policies included: greater investment in infrastructure projects, fostering competition, reducing the barriers to trade and doing business abroad, and creating jobs, particularly for young people.