The G20's economic leadership deficit

Abstract

Few have heard of the Baltic Dry Index. It measures the demand for bulk shipping carriers, used for international trade. It usually attracts little attention. But nine years ago this index had the undivided attention of the 20 most powerful leaders in the world.

It was when the global financial system was on a precipice. Stock markets were crashing. Credit markets were freezing. Rolling failures across financial institutions were shattering confidence. Unable to wait for monthly trade data, the Baltic Dry Index showed in real-time what many leaders feared: global trade and commerce were grinding to a halt.

Leaders faced the real prospect of another Great Depression. But they were determined not to make the mistakes of the past. They resisted a return to protectionism. They slashed interest rates and buttressed the International Monetary Fund and development banks. Over the next three years, they implemented US$5 trillion of co-ordinated fiscal stimulus, the largest in history.

That leadership is needed again today. The risks leaders face at the latest G20 meeting in Hamburg, Germany, might not be as serious as those the leaders who met in Washington faced back in 2008. But the risks are present, and leaders are disengaging with the G20’s ever-expanding agenda. They are more likely to use the G20 for cheap political point scoring than for advancing co-operation on critical global challenges.

Australia can play a role in helping the G20 to deliver this leadership.