[Ed. Note – I apologize to all the loyal readers of Rising BRICSAM blog who have noticed the silence.  I think the “well” went a little dry after Deauville and the G8 Summit.  But we are back at it and hopefully such pauses will be few a far between ]

It is frequently forgotten that the Gx system – most notably the G20 Leaders Summit – is not just about leaders.  In fact there is a fair complement of personal representatives, ministers, other officials, IFIs and other IOs plus global regulators that make the Gx system work – or not.  I’ve called this enlarged structural view of global governance “The Iceberg Theory” of Global Governance.  This past week we’ve had two instances of work by these organizations – both reasonable steps forward but continuing alertness to the rhetoric quotient – worry that in the case in particular of the Ministerial Declaration of the G20 Agriculture Ministers, “Action Plan on Food Price Volatility and Agriculture” a product of the  meeting of the G20 Ministers on June 22nd-23rd may prove to produce more rhetoric than action.  Indeed readers are encouraged to review Jennifer Clapp’s and Sarah Martin’s rather more skeptical “Feature of the Week” at the Munk School Portal.

Some time ago we were alerted to the complex structures of global governance by the then Dean of Woodrow Wilson School of Public and International Affairs at Princeton University,  Anne-Marie Slaughter (After a stint in government as the head of policy planning, Anne-Marie has returned recently to Woodrow Wilson).   As she signaled to readers in her 2004 book, A New World Order a new structure of governance was being created in international relations:

Yet to see these networks as they exist, much less to imagine what they could become, requires a deeper conceptual shift.  Stop imagining the international system as a system of states – unitary entities like billiard balls or black boxes – subject to rules created by international institutions created by international institutions that are apart from, “above” these states.  Start thinking about a world of governments, with all the different institutions that perform the basic functions of governments – legislation, adjudication, implementation – interacting both with each other other domestically and also with their foreign and supranational counterparts.  States still exist i this world; indeed, they are crucial actors.  But they are “disaggregated.”

And the meeting – for the first time – of the Ministers of Agriculture of the G20 – is an evident transgovernmental meeting of the sort that Anne-Marie was writing about those years ago.  It also reflects what I have described as the Iceberg Theory of global governance institutions.  So below the Leaders Summit which at the moment is meeting annually only, there is is this enormous – what John Kirton of the G8/G20 Research Group at the Munk School – referred to years ago as the galaxy of global governance institutions hidden away generally below the Leaders Summit.

Now we are already alert to Sherpas and Yaks – the personal representatives of the leaders of the G20 – and  ministers of finance and central bankers.  These ministers meet periodically between summits to prepare policies and recommendations.  And the leaders have working groups that advance the policy work as well.  Leaders have also tasked others – for instance the IMF and the newly created Financial Stability Board (FSB) – to prepare regulatory policies and standards that the G20 leaders can ratify and implement or pass through to other international institutions.  It does appear to be indeed a galaxy of global governance decision making and the Leaders Summit contains a decision-making structure that is barely visible at the Leaders Summits.

One instance.  At the insistence of the host – France and its President Nicholas Sarkozy – put food security and food price volatility  – on the G20 agenda.  And on in a meeting earlier in the week the ministers released an Action Plan identified above.

Among the potential joint advances was an agreement to create an international agricultural market information system to try and deal with a shocking lack of knowledge of output and stocks data.  This lack of information is hypothesized to add to food price volatility.  Further there was agreement to also create a global a agricultural geo-monitoring initiative, an international research initiative for wheat improvement (IRIWI), a rapid response forum and an agriculture and security risk management toolbox.

The devil is of course in the detail and here critics rightly raise concerns over these announced initiatives – the Action Plan will be brought to the Leaders Summit in November.  These ministers left to the finance ministers market regulation.  Also, the key to the policy making is to be found in the annexes.  In these there are numerous invitations to institutions including the private sector actors to join in – read that as not yet agreement to have these entities participate.  And while AMIS is in some ways a key initiative, there is no commitment -unlike the Rapid Response Forum – to include as they put it – senior,  capital-based agricultural policy officials from the major producing, exporting and importing countries – read that as the ministries.  This lack of commitment is serious especially as a number of countries China, Russia and India notably have been reticent in disclosing stocks and output.  This lack of commitment and detail raises concern that the objectives may never be met.  ‘Detail is king’ here just as it is national policy making.

And detail appears to be what we can expect from the Basel Committee on Banking Supervision (BCBS).  It would appear that a consultative paper will be released to the FSB in July to deal with measures for globally systemically important banks, according to a June 25th press release from the Group of Governors and Heads  of Supervision (GHOS) the oversight body for the BCBS.  Thus we are likely to see what measures – additional reserves – systemically significant and globally systemically significant banks will be required to carry.  The measures once agreed upon and issued represent likely the most important banking reform measures since the outbreak of the global financial crisis.

Much good global governance work appears to be underway – largely hidden away.  But the ‘devil is in the detail’.

So Deauville has come to end; on to the G20 in Cannes on November 4th-5th 2011.  But the continuing question here at the International Media Center, and among some of the delegates is – why the G8?  What is the added value and consequences of G8 discussions; what is the relevance and scope of the G8 agenda?  More pointedly – why hold a G8 meeting separate from a meeting of the G20 leaders?

Assessing the Deauville declaration the answer appears evident.  The strongest statement of the G8 leaders  – and critically including the the Russian president – we’ll see if Prime Minister Putin will go along – says:

Qaddafi and the Libyan government have failed to fulfill their responsibility to protect the Libyan population and have lost legitimacy.  He has no future in a free, democratic Libya.  He must go.

This statement could not have been concluded I anticipate at a G20 conclave.  Beyond that the G8 leaders focused on a number of critical peace and security issues including a commitment to the extension of the Global Partnership against the Spread of Weapons and Materials Destruction launched in 2002 – focused on the destruction of nuclear weapons in the former Soviet Union – but now focused on: nuclear  and radiological security, bio-security, scientist engagement, and facilitation of the implementation of UN Security Council Resolution 1540 on the trafficking of WMD by  terrorists  Extension of funding needs still is required along with securing new partners but the commitment is a significant step in the global efforts in anti-proliferation.

These two elements of the peace and security agenda – the accepted mandate of the G8 suggest the dilemma inherent in identifying the areas of G8 competence.  Libya and the democracy process in the Middle East probably could not usefully be addressed in the larger G20 leadership – as noted earlier.  But the proliferation questions could very easily be dealt with in the larger leadership forum.  Many of the near economic issues – like economic promotion in the Middle East etc., probably could also be addressed there.

Then why the split.  Well obviously it is partly historical.  The G8 has existed as a global governance institution for some time.  And international organizations are seldom killed off.  But there is more apparently.  Liz Alderman of the NYT summarized views from some of the  the G8 leaders at Deauville (“Group of 8 Pledges to Aid Egypt and Tunisia”,  NYT May 27, 2011)

But in their closed-door discussions, the G-8 members agreed that while emerging markets, especially China, were beneficial to global growth, they were not ready to take on a leadership role in major global issues, the diplomats said. Indeed, the G-8 members said emerging markets still needed to assume greater discipline and play more by the rules of the international frameworks they wish to influence, the diplomats said.

It is both unclear who said this – and indeed about whom.  We know China is positive about the G20 – and participating there.  We are confident most of the other leaders hold similar views.  But we also know that China, for example, does not want to expand the mandate of the G20.  And I have suggested elsewhere that China is still a part-time global leader. It would seem that other G8 leaders and their officials still question the willingness of G20 leaders to step up to take greater leadership.

For many – leaders included – this confirms the gap and the global governance deficit.

The challenge to G8 leadership today – apparent here in Deauville at the G8 leaders summit – is not only the rise of the large emerging market economies – India, Brazil, China, etc., – but the growing constraint of domestic publics – on the leaders who are here in this Normandy summit location.  As Philip Stephens of the FT suggests in his column:

The demand for a strategic perspective is colliding ever more frequently with the day-to-day pressures of domestic politics. … The challenge is to square the enlightened internationalism that slips easily into a communique with a mood among electorates that has been turning against the notion of global interdependence.

The limits of collaboration are evident at this G8 summit meeting – most notably in providing economic support for the emerging democracies in the Middle East and North Africa (MENA).  The G8 will in their declaration announce the Deauville Partnership.  This partnership is built on two pillars – a political process that will support the democratic transition and foster government reforms; and an economic framework to encourage sustainable and inclusive growth including the creation of jobs especially for the young.

But the real question is the offer of economic and development support including from the multilateral development banks, the IFIs and bilateral support.  And it is in the bilateral support you can see the growing domestic constraints.  The US to this point has offered $1 billion in debt relief and a guarantee of another $1 billion in loans for Egypt.  The EU Commission has announced an extra $1.75 billion – from its neighborhood policy.  The UK is offering $180 million over four years including around $15 million a year to to promote democracy.  It is still  unclear what other G8 countries will offer new monies for Egypt and Tunisia and also others.

These numbers, if correct tell their own story. These are not fulsome amounts. And while the G8 leaders went out of their way to argue the summit was not a pledging session these numbers are paltry.  There is no appetite among the leaders of the G8 to be seen to advancing large sums of money for the Arab Spring while debt, budget cuts and unemployment dominate the domestic agenda.

It wasn’t on the original agenda – again.  But it has gripped discussion – okay maybe gossip –  here at the international media center (IMC): the nomination of Christine Lagarde for the IMF top post and whether this nomination is a “slam dunk” or will the newly emerging states resist the European effort to name her the managing director.

The G8 leaders are in a bit of box.  The calendar is not in their favor.  If this were a G20 assemblage as opposed to a G8 summit, there would be less of a dilemma.  Leaders would then include China, Brazil and India especially but also Korea, Indonesia and Turkey – newly emerging market states.  A public statement in such a meeting, were it to come, would represent a broader expression of opinion and policy than is possible at the G8 with only the traditional leaders in attendance.

But there is no G20 meeting.  It is a G8 gathering of leaders and the host is France. Needless to say President Sarkozy is a strong advocate for the accession of Lagarde.  And there is little doubt that the host will seek to encourage a statement of support for her.

Such a statement would be a mistake I fear.  There is strong sentiment in the large emerging market countries that alternative nominations – including those from the emerging market countries – such as Augustin Carstens,  the Mexican central bank head, Trevor Manuel former finance minister of  South Africa and Tharman Shanmugaratnam, the current finance minister of Singapore – be promoted.  These countries do not want to simply accede to the French effort to promote the current finance minister of France.

The bottom line – a collective expression of G7/8 support would appear to sanction “same old; same old”.  The G7/8 should avoid this even if Largarde is the right candidate – at least for now.

Well my colleagues David Bosco from Foreign Policy at the Multilateralist and Stewart Patrick from the new Internationalist at Council of Foreign Relations – have suddenly discovered that the G8 is upon us.Stewart has decided that notwithstanding its “declared death” in 2009 – lo it is still here.  He ends his post this way:  “But the Deauville agenda suggests there is life in the ole G8 yet.”

Well I beg to differ as the title would suggest.  The French have just released for the Summit – nothing like being here may I add – and it is gorgeous here in Deauville – the  priorities for this G8 Summit.  The old priorities were:  Innovation and Green Technology, African Development and Peace and Security including Afghanistan and other crisis points.  In the most recent release  the identified top 3 priorities are the Arab Spring, the progress of democracy in Africa and the Internet.

Furthermore  – and for good measure – the French hosts have declared that the Summit will start with an expression of solidarity for Japan and the leaders will draw lessons from the disaster at Fukushima – the debate over nuclear safety. Finally, the Leaders will discuss the global economic situation and the major political issues.

Obviously there is great flux in international relations and the French are trying to respond to a moving target.  But if the Priorities can be altered like this the question is did the French and the G8 have significant matters in their “gun sites” earlier.

This feels like a Summit looking for a reason.

This post hearkens back to two earlier posts.  The first the Conference in Nanjing at the end of last month on the international monetary system, “A Seminar on Money”  bringing together finance ministers, bankers and experts.  The second was participation by a number of  global governance bloggers over the question of the effectiveness of the G2o, “Punching Below its Weight” and “It’s About “Effectiveness” Stupid“.

So here we are a step further.  The G20 finance ministers met just last Friday during the Spring Meetings of the IMF and the World Bank in Washington.  And at the end of the meeting the finance ministers and central bankers announced their agreement on the criteria for IMF scrutiny of countries.  The communique ending the meeting repeated that the G20 had agreed on a set of indicators to be used to assess persistent imbalances:

(i) public debt and fiscal deficits; and private savings rate and private debt;

(ii) and the external imbalances composed of the trade balance and net investment income flows and transfers whilst taking due consideration of exchange rates, fiscal, and monetary and other policies.

Now the bolded element is where the real compromise in the February G20 finance ministers efforts occurred.  The Chinese wanted no mention at all of exchange rates and had forced exchange rates off the table but the final communique brought them back in this manner.

With this Friday communique (April 15th) , G20 finance ministers agreed on indicative guidelines against which each of the indicators will be examined.  A number of modeling approaches was identified.  And it was then agreed that where at least two of the four approaches showed large imbalances those countries will be assessed in greater depth.  In carrying out the assessment, the communique indicated that, “we will take due account of the exchange rate and monetary policy frameworks of members” – read this as China and the United States.

And the finance ministers and central bankers agreed on a list of countries to receive special scrutiny from the IMF.  While the list was not published the measures chosen indicate that these countries will include: the United States, China, Japan, Germany, France, the UK and the EU.

Another incremental step – and that is all – but step by step the G20 is building a new framework to evaluate global imbalances and then seek, hopefully, to recommend changes to current macroeconomic policy.

[Editor: This is the first of hopefully many blog posts by my colleague Art Stein of UCLA and the host at Grand Strategy.]

The Colin Bradford piece in FP, “Seven New Laws of the G-20 Era”, Dan Drezner’s blog comment, “Learning to Embrace the Policy Deadlocks” and then Bradford’s rebuttal – again in FP – “Don’t Judge the G-20 by Its Summits,” and finally the Alexandroff retort in Rising BRICSAM “Punching Below Its Weight” strike me as eliding omitting [editorial comment – you can tell this is one smart academic] the crucial issue: is disagreement in a broader venue such as the G20 a problem for global governance, and especially economic governance?

The original Bradford piece argued that disagreement is not so bad.  The G20 should not be judged by outcomes but as constituting a process and one that was broader and more diverse.  The argument contains a core implicit argument – one never articulated, much less examined and substantiated.  More on this below.

Drezner’s critique was largely focused on mass public reactions to G20 disagreements.  Interesting, but tangential at best.  Mass reaction would presumably be secondary to the concrete consequences of such disagreements.

The Alexandroff reaction to the Bradford-Drezner exchange is to focus on “effectiveness”, and this gets closest to the heart of the matter.  He notes that disagreement is a feature of the G7/8 as well.  Even the small number G set exhibits all kinds of “varieties of capitalism”:  more or less corporatism;  larger and smaller welfare states;  more or less industrial policy.    A substantial variety of types existed/exist even in that small club.

The core issue, then, is whether for the G8 or the G20 disagreement and divergence over policy options are preferable to agreement, coordination, and a concerted response.  There is a small literature among economists about whether macroeconomic policy coordination makes things better or worse.  Implicit in Bradford’s argument is that disagreement and its policy consequences are not so bad and, implicitly, to be preferred to agreement between a less diverse set of actors.  Perhaps.  But what is the evidence?  Is that true for every policy?  From the perspective of one of the world’s largest economies – California – dysfunctional politics does not seem so great.

All this reminds me of the argument about whether market failure or government failure is worse.  Government action is often encouraged to deal with market failure.  But government failure is also a problem.  Is government failure a problem in global economic governance?  Is the failure to coordinate and sustained disagreement preferable?  That was certainly the argument of states that wanted to impose capital controls and thought the Washington consensus was wrong and that they should be free to experiment with a different policy.  The acceptance of policy divergence and experimentation did mean that the experience of the global financial crisis of 2008 was not same everywhere.

So, whether the G20 works or not depends on: the issue, and what is required to deal with the particular problem.

1) It will depend on the nature of the disagreements, whether they are fundamental (about the desirability of markets), substantive (about how to deal with a specific problem), or distributional (about how to allocate the costs).

2) It will depend on how the parties respond to disagreement.  Will the response be 20 separate uncoordinated responses to problems?  Will the response to disagreement among the 20 be to form smaller clubs of agreement, say a G7 and a G13 set of separate responses but coordinated within each subset?

3) It will depend on time and the consequences of delay.  One proposition: the larger the group the greater must be the crisis to generate a consensus response, and the greater the delay in responding to crises.   The consequences of delay are also likely to vary.  Note the national responses undertaken before the first G20 meeting was even held.

In short, the commentaries and blog posts are correctives.  Yes, a stampede of lemmings is undesirable.  Yes, disagreements can lead to better policy.  There is an argument known in business schools as the “Abilene paradox” about the consequences of “mismanaged agreement” (the international relations literature refers to this as “groupthink”).  So we should not respond in despair to disagreement.  After all, bargaining occurs in situations of disagreement and it takes time to arrive at bargaining solutions, and initial disagreement and even stalemate do not preclude eventual agreement.  But sometimes, available bargains are not struck and the even when they are, the costs of delay are enormous.  Few international conferences result in an agreement at the first meeting and in immediate resolutions to problems.  Yet many international conferences have resulted in breakdown, a failure to deal with underlying issues, and, in the national security sphere, as precursors to war.

One’s view of the consequences of disagreement will thus depend on one’s answer to some of the questions posed above and to the specific issues and experiences (not surprisingly, Pacific island nations fearing their disappearance have been the ones most urgently pressing for responses to global warming).

And a comparison with historical assessments of other institutions should make us wary both of snap judgments or even generic views.  Think of NATO, and all the times people decried its disagreements, the problems in obtaining consensus, and the divergent assessments depending on the issue.  I would guess the G-20 will look no different, assuming it has some successes.

Colin Bradford of Brookings and CIGI, has set out in FP what he – possibly the editor calls – “Seven New Laws of the G-20 Era“.  Daniel Drezner in his blog post “Learning to Embrace the Policy Deadlocks” takes Colin to task – rightly I think – for trying to apply spin to the question of effectiveness for this new global governance institution.

But Colin has come back in a Rebuttal at FP called “Don’t Judge the G-20 by Its Summits“. Colin’s basic position is there is a continuous interaction of G20 officials and that the “G-20 in other words is not an event.” Colin argues that the “G-20 is a process — communicating, consulting, and even, on good days, coordinating among 20 countries, not eight.”  Well Colin makes a valid point that there is a continuing effort by officials to describe and reach agreement  and that to just look at the Leaders summits misses the decision-making structures and negotiating behaviors. But in the end the G20 will be judged on effective decision-making and the communiques at the end of the summits set out what has been agreed to by leaders. That – the commitments – plus then national implementation – is the stuff of global governance today.  It is what can be measures and evaluated.

It is rather trite to point to the divergences of this enlarged club made up of rising powers and traditional G7 powers and suggest that in fact these differences can be positive.  It is not like there weren’t differences between leaders in the G7.  In general I would not regard them as positive but the inevitable outcome of interest differences.  What needs to be accomplished then is a concerted effort to negotiate agreed outcomes despite these significant and numerous differences.

Now Colin does point out – and I and others have pointed out as well – the persistently negative international financial press – read this as the WSJ, the NYT and the FT at least. Differences are always played up; and agreements are generally characterized as inadequate.  And it is here that Dan and I differ.   Dan insists on adding his own spin – that is he characterizes the efforts of the G20 in 2010 as “a friggin disaster’.  Now talk about spin!

So the G20 has to prove its effectiveness – that is agreement on global imbalances – how to reduce volatility in the global economy –  and further collective agreement on international financial reform.  The G20 can reasonably judged on that.  But some time needs to be granted to the leaders summit.  And success needs to be acknowledged.

Today in Nanjing – March 31st – the G20 have brought together the G20 Finance Ministers and Central Bankers for what is billed as a Seminar on the International Monetary System.  The seminar has been organized by the French President as host of the G20 Leaders Summit scheduled for November in Cannes – and says the press invitation – with close cooperation with the Chinese authorities.

Only one problem – the Chinese do not want to discuss the Chinese policy with respect to the renminbi.  As is evident from commentary and analyses from many finance ministers in the G20, they see China’s renminbi policy as a major element of the global imbalances.  The criticism of the undervaluing of the renminbi is strongly expressed by US officials but it is not limited the traditional advanced countries.  It is also an object of criticism by rising powers including most notably Brazil – see this week’s Feature of the Week by Roberto Luis Troster  at the Munk School Portal entitled, “Brazil’s Currency Strategy Problem“.

The described issue is of two sorts.  The Chinese – and the French Presidency – have pressed for reform of the global monetary system.  Read that as finding a way to end the reserve currency status of the United States dollar.  At best this policy is a long term policy change.

Additionally, the French support the effort to structure a global economic system to reduce volatility in the current global economy – to deal with global imbalances – in other words.  In this discussion most agree that there is a need to move the renminbi from a fixed rate to a market rate currency.  The US has pressed this strongly and to varying degrees many other G20 countries see the undervaluation of the renminbi and the collateral enormous reserves of China as a continuing aspect of that volatility.

So the French continue to push both issues – one favored by China; one favored by the United States.  Such is the complexity of global governance.