The Influence of Government Economic Forums: G20 and G7/G8

Syllabus Topic

HSC Topic One - The Global Economy

Trade, financial flows and foreign investment

• influence of government economic forums - G20, G7/8

Economic forums like the G20 and G7/G8 are key platforms for global economic cooperation and policymaking. While they differ in structure, membership, and their focus areas, they both play significant roles in shaping international economic governance. 

THE G20: A PLATFORM FOR GLOBAL ECONOMIC COORDINATION

The G20, established in 1999, is an inclusive forum that brings together 19 countries and the European Union. Its members include both advanced and emerging economies, accounting for about 85% of global GDP and 75% of world trade. This broad membership allows the G20 to address a diverse range of global challenges, from economic stability to climate change. 

The G20 has increasingly been seen as the central forum for addressing complex global issues. In 2024, the New Delhi summit focused on global inflation, supply chain disruptions, and sustainable development. The group reaffirmed its commitment to the Paris Agreement, pledging to accelerate the transition to renewable energy. According to the International Energy Agency (IEA), global investments in renewable energy were predicted to reach $2 trillion in 2024, driven by commitments from G20 nations to meet climate goals. 

Beyond climate change, the G20 has been pivotal in economic recovery. Following the COVID-19 pandemic, the forum coordinated fiscal stimulus measures, facilitated global vaccine distribution, and focused on achieving inclusive growth. In 2024, the G20 is recognising mounting debt distress in low-income nations, such as Sri Lanka and Zambia, which face significant economic challenges, but no commitments have been taken yet. By coordinating global financial responses, the G20 can help maintain global economic stability and foster cooperation among developed and developing nations. 

The G20 also works on global tax reform, trade policies, and digital transformation, aiming to build a fairer and more interconnected global economy. In 2021, the G20 endorsed a global minimum corporate tax rate, which aims to prevent tax avoidance by multinational corporations and ensure that profits are taxed fairly across jurisdictions.  

THE G7: A FORUM FOR ADVANCED ECONOMIES

The G7, which originated in the 1973, consists of the world’s largest advanced economies: the United States, Canada, Germany, France, Italy, Japan, the United Kingdom, and the European Union. The G8, which previously included Russia, has been replaced by the G7 since Russia’s suspension in 2014 following the annexation of Crimea. 

The G7 focuses on issues that primarily affect developed economies but has considerable influence on global economic trends. At the 2024 G7 summit in Apulia. Italy, leaders addressed geopolitical issues, particularly the Russia-Ukraine conflict, resulting in them imposing additional sanctions on Russia.  

The G7’s influence also extends to global financial governance. In 2024, it led efforts to reform the International Monetary Fund (IMF) and World Bank, pushing for better representation of emerging markets. Additionally, the G7 advocates for technological innovation, such as the development of central bank digital currencies (CBDCs), which could reshape the global financial system by enabling faster, more secure cross-border transactions. 

CONCLUSION

Both the G20 and G7 forums are vital to global economic governance. The G20’s broad membership allows it to tackle diverse challenges, from climate change to global debt crises, while the G7, representing advanced economies, focuses on global financial stability and security. Together, these forums shape the future of global trade, climate action, and economic policy, ensuring that the global economy remains resilient and interconnected. 

SOURCES:

International Energy Agency (IEA): About 

World Bank: What We Do 

G20: Overview

G7 Italia 2024: Official Website