Dr. Ludger Schuknecht, Chief Economist at the German Finance Ministry
By LUDGER SCHUKNECHT
The G-20 was established by finance ministers and central bank governors of the twenty leading economies in 1999 in response to the Asian crisis. Since then, globalization and digitalization have offered vast opportunities, spurred economic growth, and increased prosperity for many people around the globe. But as the world has become more complex, an increasing number of people feel overwhelmed by these global forces, and some even feel left behind. This has led to a growing skepticism towards globalization, together with an increasing level of distrust aimed at politicians, business leaders, and the media. It has also given rise to right-wing populism that questions the very foundations of liberal democracy.
These developments cannot be ignored. We must make globalization work for everyone and shape it to deliver sustainable and inclusive growth. This requires global economic governance and rules. Given the increasing complexity of economic and political forces and interdependence, the only forum that can achieve something close to global economic governance - or global Ordnungspolitik as we call it in Germany - is the G-20.
Since its inception, the G-20 has contributed to coordinating and stabilizing the global economy. It has catalyzed improvements in financial market regulation in response to the global financial crisis and in international tax rules and tax fairness. And developing and emerging economies have received a greater voice in global governance and in the international financial architecture. The German G-20 presidency in 2017 builds on these achievements.
The German presidency has three key priorities in the area of finance:
- Enhancing resilience: We need to move away from the prevailing debt-financed growth model and focus on structural reforms. We aim at strengthening the resilience of economies through the development of resilience principles and country-specific measures.
- Compact with Africa: We want to promote sustainable development and employment through improving the conditions for investment in the private sector and in infrastructure. In this regard, we encourage individual African countries together with international organizations and partner countries to agree on so-called investment compacts.
- Shaping digitalization: We want to focus on opportunities and risks of digitalization in the financial sector and improve financial inclusion through digitalization.
In addition, we will progress on standard G-20 topics. We will continue to implement and further develop the G-20 financial market regulation and tax agendas. We aim at improving the environment for remittances and further enhancing the fight against terrorism financing and money laundering. And we propose that all G-20 members join the OECD Code of Liberalisation of Capital Flows so as to promote an orderly management of such flows.
International cooperation in the G-20 is not an aim in itself, but rather the foundation for global prosperity and security. Common rules are not only to the benefit of the world as a whole, but also to the benefit of every single member. A good example is international tax policy. It not only improves tax fairness at the global level, it also provides countries with the capability to better enforce their tax laws and strengthen domestic revenue collection.
Germany together with our European partners advocates a rules-based international economic order with sound multi-lateral institutions. We stand by the G-20 commitment to free trade, the free flow of capital, and market-determined exchange rates. The European Union is an excellent example of how these elements have brought prosperity to a formerly war-torn region. European economic integration—from Portugal to Estonia and from Lapland to Sicily, and with the Single Market at its heart, and despite its ups and downs, is certainly among the biggest growth engines the world has ever seen.
The way forward is cooperation and open markets. It is important now more than ever that we continue to work to-gether in forums such as the G-20 and show to the world that globalization and international cooperation actually work for all. The German G-20 presidency will safeguard and promote the G-20's role as driving force for global economic and financial governance. We know it is a big responsibility. We will do our very best.
The article was first published in the International Economy Magazine in Winter 2017.