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The G20 and G Minor

Amid rising geopolitical tensions and economic uncertainty, the G20 can play a central role in preventing a much worse crisis by facilitating the coordination of fiscal and monetary policies. It could also advance a more inclusive international order by allowing smaller countries to make their voices heard.

MUMBAI – In December, India began its yearlong G20 presidency, taking over from Indonesia amid rising geopolitical tensions and economic uncertainty. Surging inflation has raised the specter of a global recession. Supply chains, made more efficient but also more vulnerable by globalization and the digital revolution, are crumbling under the weight of COVID-related disruptions and the war in Ukraine, both of which have revealed and deepened the fault lines of the international order.

During the Great Recession of 2008-09, the G20 arguably helped to prevent a worse crisis by persuading the world’s biggest economies to coordinate their fiscal and monetary policies. With the global economy at a critical juncture, following decades of relentless globalization that have made markets increasingly interconnected, the group could once again play this role.

To confront the looming global crisis, G20 countries must, first and foremost, coordinate macroeconomic policies. During and after the Great Recession, developed economies attempted to boost growth by keeping interest rates at or close to zero – or even negative. While this was necessary, ultra-low rates soon became a trap, preventing countries that wanted to raise interest rates from doing so, lest their currencies appreciate and their exports decline.