G8/G7 and Global Governance.

At the center of the current debate of global governance is the G8/G7, a self-constituted forum of the major free-market democracies, whose deliberations and declarations have come to shape key decisions in the management of global political and economic affairs. While its yearly declarations are mostly empty promises, most of the world's major economic and security initiatives are discussed first by the leaders of this elite forum and their ministers before the international organizations take action.

The G8/G7'S origins can be traced to the economic turmoil of the early 1970s, when the Bretton Woods' monetary system collapsed and the world was hit by the first OPEC-induced oil crisis. This was also a time when U.S. post-World War II hegemony was being widely challenged by an emerging movement of nonaligned countries, proponents of a New International Economic Order, and third world insurgent forces, notably in Cuba and Vietnam. The type of control the U.S. exercised over the global economy and institutions of global governance was also being challenged by other industrialized nations, who were increasingly competitors with the U.S. for international markets. At home, the U.S. was suffering stagflation, while its external affairs also looked grim, with no end in sight to the Vietnam war and with its first trade deficit since 1947.

In 1971 President Nixon delinked the dollar from the gold standard, thereby unilaterally destroying the prevailing monetary system. Under this system, member countries pegged their currency to a fixed quantity of gold--but only a handful (in practice mostly the U.S.) actually committed to selling gold on demand to the central banks of other members at that price. By saying it would no longer sell its gold reserves for the surplus dollars held overseas, Washington sent a clear signal that the U.S. could no longer be counted on to ensure the stability of the world's capitalist economies.

In April 1973 the finance ministers of the U.S., West Germany, France, and the United Kingdom met in the White House library to discuss the tumultuous state of the international economic order. This "Library Group" quickly evolved into regular ministerial meetings and an annual summit of the leaders of the most powerful capitalist nations. Beginning in 1975 as the G6 (with the inclusion of Japan and Italy), this elite group of industrialized capitalist nations became the G7 in 1976 when the U.S. insisted that Canada be invited to the leaders' summit. Together these industrialized nations assumed the responsibility for ensuring the stability of a new monetary system of floating exchange rates.

While its initial focus was the coordination of the macroeconomic policies of its members, the G7--all cold war allies--soon also began discussing political/security issues, condemning the 1979 Soviet invasion of Afghanistan, for example. During the Reagan years in the 1980s, cold war issues received new prominence in G7 meetings, although the G7 was at the same time deeply involved in advancing the Uruguay Round trade talks and formulating multilateral strategies to address the acute debt crisis in Latin America.

Following the collapse of the Soviet Union, the G7 invited Russia to a post-summit dialogue in 1991. Initially excluded from the financial discussions of the G7 leaders, Russia officially gained full membership in 1998, and the annual gathering became known as the G8. Russia's nuclear status and President Yeltsin's commitment to democratization and economic liberalization were cited as reasons for granting Russia membership in this group of major powers. But it was the triumphalism of the cold war victors that may best explain the willingness to include Russia as a member of the elite club of capitalist nations, despite its weak economy and uncertain dedication to democratic principles. G7 countries have continued to hold ministerial and informal presidential meetings that exclude Russia. Moscow's dependence on IMF financing, its unstable transition to capitalism, and its war in Chechnya are among the factors that separate it from its partners in the G8--hence the schizophrenic designation "G8/G7."

By virtue of its combined economic, military, and diplomatic power and influence, the G8/G7 exercises tremendous influence over the multilateral institutions of global governance. This power gives the G8/G7 great influence on the policies, programs, and decisions of the UN Security Council, World Trade Organization (WTO), International Monetary Fund (IMF), World Bank, and Organization for Economic Cooperation and Development (OECD). This is the case despite the fact that, unlike these institutions, the G8/G7 has no permanent staff, no headquarters, no set of rules governing its operations, and no formal or legal powers. For those negatively impacted by the policy agendas advanced by the G8/G7 and for countries excluded from its deliberations, the G8/G7's influential role in global governance is highly resented and frequently criticized.

At the 2000 Summit in Japan, the G8/G7 reaffirmed its commitment to initiate a new round of WTO negotiations. Attempting to answer globalization's critics, the leaders announced a series of promises to help poor countries reduce their debt burden and increase their access to better education, health care, and information technology. But they offered few details on how they would fulfill these ambitious promises.

Key Points

* A forum of industrialized nations established in 1975, the G7 focused initially on macroeconomic policy coordination but has steadily increased its consideration of political/security issues.

* Today the G8 is central to the debate on global governance, as the other multilateral organizations--IMF, World Bank, UN, WTO, and OECD--look to the G8 for direction in virtually all international decisionmaking.

* G8 is beset with concerns about its representation and legitimacy as it promotes policy agendas affecting all the world's peoples and nations.

Tom Barry ([e-mail]), a senior analyst at the Interhemispheric Resource Center, is codirector of Foreign Policy In Focus.