Sarkozy’s bid to save the G20, and himself

The FT argues that it was a bad year for global governance efforts, and particularly the G20:

With the US declining in relative terms as a hegemon, the days have passed when it could turn up to international summits and railroad through decisions without bothering to win the argument in advance. While emerging markets have shown their willingness to veto policies they do not like, they have generally yet to put forward coherent alternatives. The Bric nations (Brazil, Russia, India and China) hold heads of government summits but, divided by evident yet unacknowledged divergences of interest, they agree on little except attacking richer countries.

Creating new structures is all very well, but structures do not make policy. Governments cannot avoid addressing differences of opinion by appealing to process or shuffling off the responsibility to agencies such as the IMF, which have plenty of technical expertise but a shortage of political heft. Governments in 2011 need less talk about the potential for the G20 to revolutionise global governance and more focus on what it can actually achieve right now.

This largely tracks with what I’ve heard from close observers of the G20 process. The shine came off the group this year, and it’s an open question how useful it will be outside of crisis environments like that the world encountered in 2008-2009.

For good or ill, G20 leadership has now passed from South Korea to France, and French president Nicolas Sarkozy hopes that his year of international leadership will boost his bleak domestic political prospects. In typical Sarkozy fashion, he’s talked about a hyper-ambitious G20 agenda that goes well beyond limited trouble-shooting.

[H]e has vowed to reinvigorate a dynamic of reform that seems to have lost some steam over the last year. He has said that he will resist any temptation to shift the G-20 into “management mode” and instead recapture the momentum of 2008 meetings that, in the eye of the economic storm, spurred breakthroughs in financial regulation.

His proposed agenda includes achieving large-scale financial sector reform–and perhaps even a new Bretton Woods agreement. He also wants to move the world away from reliance on the dollar as a reserve currency.

France, which took over the presidency of the G20 group of industrial and developing nations last month, is sounding out governments on ways to reform a monetary system dominated for decades by the U.S. dollar with the aim of creating greater global stability.

"We need to start thinking about the relevance of a system based on accumulation of dollar reserves," Sarkozy said, adding that France would float proposals during the next year.

"Does not this system make part of the world dependent on American monetary policy? Should we not reflect on the role of the SDR (Special Drawing Rights) and on the internationalisation of other currencies?" asked Sarkozy, in a speech to mark the 50th anniversary of the Organisation for Economic Co-operation and Development (OECD).

And that’s not all. Sarkozy has also hinted at plans to rework international security by reforming the UN Security Council. That latter element will almost certainly drop away; I’ve been told that in recent meetings several key members rejected out of hand the idea of negotiating Council reform in the G20 context. Unfortunately, that rebuff may be a sign of things to come. At this point, the G20 needs to show leadership on complex nuts-and-bolts issues–not grand visions of a new international architecture.  It’s not clear that Sarkozy is the man to provide that.