How the G20 Should Lead, Again
Following a virtual summit on March 26, the G20 is now working to devise an action plan for addressing both the COVID-19 pandemic and the resulting economic crisis. While the task today is more difficult than it was after the 2008 global financial crisis, we know from past disasters that solidarity is the only solution.
SEOUL – The COVID-19 pandemic has cast a pall over the global economy, making it impossible to anticipate even the near future. Restrictions on cross-border movements, along with national lockdowns, are rapidly reducing global production and consumption, and disrupting value chains. Growing uncertainties are creating a vicious circle, as the contraction in the real economy spills over into the financial sector, in turn reducing credit to non-financial firms. There are good reasons to worry that the economic shocks caused by COVID-19 could be greater and longer lasting than those caused by the 2008 global financial crisis, perhaps even the Great Depression of the 1930s.
At this critical juncture, the world is turning, once more, to the G20 for leadership. Established in the wake of the 1997 Asian financial crisis – which it went on to resolve – the G20 began as a gathering of member-state finance ministers and central bankers. It then evolved into a forum for heads of state and government during the 2008 crisis, and has since played a crucial role in the world economy by facilitating international cooperation and providing invaluable guidance in times of crisis. Faced with the unprecedented COVID-19 shock, the G20, which comprises countries accounting for some 90% of global output, needs to get busy again.
Since mid-March, when South Korean President Moon Jae-in called for an emergency virtual G20 summit, which was held on March 26, governments have been rapidly marshaling a response to the crisis. During that meeting, G20 leaders committed to pursuing close coordination in four major policy areas: health, economy, trade, and international cooperation. They also vowed to take the initiative to work together as global firefighters. Now, all governments and international organizations, led by the G20’s minister-level consultative bodies, are working together to prepare a concrete action plan to meet national leaders’ stated commitments.