All or Nunavut
On February 5, the Finance Ministers of the Group of Seven industrialized nations will converge on Iqaluit, the remote northern capital of Canada’s Nunavut Territory. It will be the first formal G7 meeting since last September’s G20 summit in Pittsburgh where the Group of Twenty industrialized nations declared that it, and not the G8 or G7, would be the “premier forum for our international economic cooperation.”
The Pittsburgh Declaration was generally regarded as a blow to Canada. It prefers the privileged status of G7/8 membership to being relegated to the mid-pack of the G20. If the G7 is rendered irrelevant by the G20 assuming responsibility for global economic policy, then, presumably, Canada will have less of a voice in shaping that policy.
Yet Canada is presented with a great opportunity in Nunavut. As the host of the G7 conference, Canada controls the agenda. The first item on that agenda will be global financial reform. This happens to be Canada’s strong suit. Properly executed, the Nunavut Summit will serve to affirm the continued relevance of the G7, reestablish Canada’s leading role in global financial reform and ensure for Canada a leading role in shaping global issues, whether it be through the G7, G8, or the G20.
Ready to Save the World … Again
Eighteen months ago, the G7 Finance Ministers, and the rest of the world, were gushing over Canada and its ability to escape relatively unscathed from the global credit crisis. At this time, the World Economic Forum listed Canada as having the soundest banking system in the world. The Financial Times reported that the Canadian Banks were the “Envy of the World.” Both the U.S. and Great Britain sought to institute banking reform using the Canadian regulatory model. While banks everywhere were nearing failure, Canadian banks, as Newsweek reported, were “positively thriving.” Canada, recognized the world over as holding the key to global regulatory reform, stood ready to lend its expertise.
Thereafter, there were three meetings of the G20, the Washington, London and Pittsburgh summits. Despite the fact that global financial reform was the leading topic at each of these summits, no specific agreements on reform were reached and no significant global financial reform was, or has since been, implemented.
On the other hand, during this same time period, the G7 answered the call to action. In September 2008, the U.S. asked the G7 to back its $700 billion financial relief package to save U.S. banks. The G7 immediately coordinated the intervention. Through 2009, G7 countries continued to lend liquidity support by injecting capital to financial institutions, pledging resources to the IMF, supporting increases in lending and protecting deposits.
A declaration that the G20 will be the premier body for international economic cooperation must start with the foundation that 20 disparate nations can actually operate effectively as the premier body for global economic cooperation. There is no such foundation here. Fifty years ago, British historian C. Northcote Parkinson theorized that any committee, cabinet, or other such body decreases in efficiency as it grows in size. Interestingly, Mr. Parkinson’s research indicated that the most powerful and effective body is one consisting of between 5 to 8 members. A body consisting of over 19 members, on the other hand, was found to be “manifestly inefficient”.
Parkinson’s Theory has been borne out in the past year in a comparison of the accomplishments of the G7 and the G20. Accordingly, a G20 that is intent on being the effective forum of choice for global economic governance is going to need an executive committee, i.e., the G7, to do all the work. Therein lies the continued relevance of the G7.
The Nunavut conference will allow Canada to take the lead in advocating for the G7’s role as a relevant and necessary committee to the G20. At Nunavut, Canada can highlight the inefficiencies of the G20, the efficiencies of the G7 and, most importantly, Canada’s tried and true solutions to the most pressing issue facing global economic health today. Nunavut will keep financial reform on the front burner and provide Canada a platform to sell its sterling brand of financial reform to the G7 and, ultimately, the G20.
Canada and the G20
Any such success at Nunavut will secure for Canada a leading role in the G20. Canada will leave Nunavut as the G7 leader in global financial reform, an issue of critical importance to all G20 members. Moreover, with the G20 summit a mere four months away, the momentum of Canada’s success will help carry Canada straight into a leading role at the G20 summit. Canada’s leading role will be further cemented by the fact that Canada will be hosting the G20 summit. It will take place in Toronto. Accordingly, like the G7 meeting, Canada will set the agenda for the G20 meeting.
After three failed attempts to implement any meaningful reforms, the G20 should welcome Canada’s and the G7’s efforts to cast the Nunavut summit as the G20’s committee on global financial reform. It is the only way that any real consensus on financial reform will be reached. With the importance attached to financial reform, the fact that all of the world’s financial centers are located within the G7 countries, and with Canada’s record and expertise in financial reform, implementation by the G20 of any consensus reached at Nunavut should be assured.
In light of the Pittsburgh Declaration and the simple truth that more emerging powers demand a voice in global economic governance, many predict that Nunavut will indeed be the last G7 summit. No worries though. If the mantle is passed to the G20, Canada can be assured that, with a successful effort at Nunavut, it will be poised to assume the same role in the G20 as it has had in the G7: a leading one.