Originally established by the trans-Atlantic community in 1999 to deal, at the ministerial level, with debt issues and financial stability, the G20 (i.e., The Group of Twenty) has served, since 2008, as an annual summit of global economic governance.

That was supposed to be a final step in closing the gap left by the Bretton Woods Conference in 1944, and a narrow G7 summit of major industrial nations inaugurated at the Château de Rambouillet, France in 1975.

By including a broader group of developed and developing economies, the G20 was meant to be a more representative forum to address problems of international economic policy coordination in order to stabilize the world’s financial system and the global business cycle.

The next G20 summit “Recover Together, Recover Stronger” highlights the policy coordination, and is scheduled for November 15-16, 2022, in Bali, Indonesia.

Ominously, however, it seems increasingly certain that the summit’s concern about global economy will take a back seat to a cold war redux.

West’s withering power politics

That unappealing prospect was very much in evidence last week during the G20 foreign ministers’ meeting in Bali. Those top diplomats were supposed to put the finishing touches to the summit’s agenda, but instead of addressing the issues of coordinating economic policies, the occasion was used to isolate Russia, and to call China to task for allegedly supporting Russia and threatening to take its own province of Taiwan by force.

In a way, such a course of action is understandable; it reflects the sour mood of the times and a difficulty of a cooperative effort in a deeply divided world community.

At a more technical level, the international economic policy coordination has always been an academic pipedream -- even during the times when the U.S. and Western Europe fully controlled all the levers of power. The western allies simply did not trust each other enough to agree on “who should do what” to produce a stable, balanced and a steadily growing world economy.

Ultimately, that led to the demise of the gold exchange standard, based on fixed – but adjustable – exchange rates, and ushered in a “free for all” system of generalized currency floating in August 1972.

Recognizing the old principle, established by a legendary Boston politician and a former Speaker of the U.S. House of Representatives Thomas “Tip” O’Neill, that “all politics is local,” it was unrealistic to expect that Washington would accept to run its economy for the sake of its mercantilist trade partners.

Nothing has changed. We have the same situation today.

If the leaders of the G20 wanted to share the burden of a more balanced world economy, they would have to apply the long-standing rules of international trade adjustment: deficit countries should contract their economies with rising interest rates, higher taxes and declining public spending, while surplus countries should do exactly the opposite.

A useless and wasteful global jamboree

Following those rules, the U.S. – with high inflation, high public debt and budget deficits, and a widening trade gap – would have to keep raising interest rates, increasing government revenues and slashing public spending.

China – with a 2.5% inflation and an estimated current account surplus of $570 billion – would have to stimulate its domestic demand and open its markets so that deficit countries could export more to China to offset some of the depressive impact of their restrictive monetary and fiscal policies.

Germany has a core inflation rate of 3.7%, a relatively low budget deficit and public debt (3.4% of GDP and 79% of GDP, respectively), and a huge current account surplus (7.6% of GDP). All that offers plenty of room for an expansionary fiscal policy to stimulate domestic spending and import demand.

Those are simple examples of a detailed analysis to identify G20 countries that should coordinate their economic policies toward expansion or restraint -- in accordance with the rules of international trade adjustment. Since the G20 does not have its own secretariat to do that, the material can be easily prepared by the OECD, or the IMF, for further discussions by finance and foreign ministers, with policy recommendations for summit leaders.

But that’s the world that never existed and never will. The G20 is another useless and wasteful jamboree underwritten by taxpayers’ money.

Meanwhile, the U.S., with the E.U. in tow, will continue to confront Russia and China – the alleged usurpers of the rules-based world order -- while those countries’ military leaders keep talking to each other to prevent the end of humanity.