The G20 should set membership rules now

With a full plate of economic issues facing them, President Obama and 19 other world leaders meet this weekend at the G20 summit, a moveable feast taking place this year in Brisbane, Australia. 

The world’s premier economic forum, the G20, currently is focused on pulling down trade barriers, increasing infrastructure investment, reforming financial systems, and meeting a five-year goal of adding $2 trillion to global GDP by 2018. 

{mosads}But before it undertakes any of these challenges, the G20 needs to look inward. The first order of business at Brisbane should be to establish clear criteria for membership – a task the group has avoided for 15 years. 

The Group of 20 was founded in 1999, in the wake of the Asian financial crisis, when the G7 – an alliance formed in 1976 among the United States, Japan, the United Kingdom, France, Germany, Italy, and Canada – expanded, with no rules or guidelines, to include 12 other countries and the European Union. 

For nearly a decade, the organization drew only finance ministers and central bank governors. But following the global economic crisis of 2008, President George W. Bush gathered together the G20 heads of government for the first time, aiming to avert a financial catastrophe and, in the long term, promote economic growth and stability. 

But without any admissions criteria, the G20 has suffered from a lack of legitimacy and trust among the nearly 200 nations that are not part of the group but are deeply affected by its decisions. Without legitimacy, the G20 cannot lead. Many scholars have commented on the downside of the G20’s arbitrary membership. In a recent edited volume on the G20 published by the Brookings Institution, for example, Paola Subacchi wrote that the group functions as a permanent crisis committee, allowing it “to ignore its ‘birth defect’—that is, issues of legitimacy and accountability.… Without greater legitimacy, the G-20 will have difficulty achieving full implementation of any agreement, which would likely be perceived as the decisions of a self-selected group of countries.” 

There is an easy answer to this crisis of confidence: establish transparent membership metrics. In a paper sponsored by the National Taxpayers Union published in June 2012 and updated this autumn, we did just that. 

Based on the G20’s own stated goals of restoring global growth and strengthening and reforming the international financial system, our current report used World Bank and International Monetary Fund (IMF) metrics to create an index with seven equally weighted criteria in three broad categories: economic size (GDP, imports and exports), rule of law (indices of control of corruption, regulatory quality, and rule of law itself), and financial interconnectedness (from the IMF’s measure of a nation’s systemic importance). Using these metrics, we assessed which countries warrant membership in the G20. 

Our analysis led to two conclusions: First, most of the current G20 nations deserve membership. Second, there are four countries – including one clear outlier – that should not be in the group. 

The outlier is Argentina. Argentina ranks lowest among current G20 members in economic size, is the worst or among the worst in rule of law, and, with three others, is not considered by the IMF to be systemically important. Argentina has long been a bad economic actor. In the largest sovereign default in history, the country renounced its debt in 2001, and this year again defaulted on its debt obligation. Argentina has spent more than a decade defying court orders, flouting the World Bank’s International Centre for the Settlement of Investment Disputes, and acting as a global financial renegade. Objectively or subjectively, Argentina doesn’t belong in the G20. 

The other three current G20 nations that fail to qualify for membership under our criteria are Indonesia, Saudi Arabia, and Russia. Replacing the four ousted countries would be Chile, Singapore, Switzerland, and Norway – all smaller countries with strong economies and global respect. 

Establishing membership criteria (the ones we propose, or some variation) and adjusting the composition of the G20 accordingly are not enough. The group should reevaluate its membership on a regular basis – we recommend every five years. 

The United Nations, the IMF, and other multilateral institutions are all encumbered with their own political and operational baggage. The G20, with its flexibility and lack of stultifying bureaucracy, is well-suited for its critical role if it were perceived as a legitimate leader among nonmember nations. Setting straightforward, objective membership criteria is essential to securing the G20’s legitimacy so that it can achieve its critical goals. 

Glassman, former U.S. undersecretary of State for public diplomacy and public affairs, is a visiting fellow at the American Enterprise Institute, a conservative think tank. Brill, former policy director and chief economist of the House Committee on Ways and Means, is a resident fellow at AEI.