Last Wednesday, Brazil’s G20 presidency opened up as a slugfest about global governance – a totally inappropriate agenda item for the world’s only economic forum.

Predictably, a gathering of foreign ministers (sic) had nothing to say about the ailing developed economies and their systematic macroeconomic mismanagement.

That, clearly, was not their brief. The only thing they could talk about was the war in central Europe, and their inability to stop the ongoing human catastrophe in the Middle East.

To make the matters worse, Brazil’s presidency vowed to stage another G20 confrontation on world governance during next September’s U.N. General Assembly. Brazil apparently wants a replay the blame game about the slaughter of innocent civilians around the world, with a hopelessly divided Security Council and the rest of U.N. agencies.

It should be obvious though that nothing can be done without addressing the root causes of bloodshed, hunger and world’s human miseries. But U.S., China and Russia don’t want to talk. They are at war – directly, or in proxy and hybrid forms.

G20’s original mission

The next opportunity to address those issues would be after the new U.S. administration takes office in the spring of 2025.

Meanwhile, the G20 should stick to its original mission: Provide a high level professional economic forum -- backed up by the heads of state and government – to coordinate monetary, fiscal and structural policies that will support growing jobs and incomes.

And there is plenty that can be done about that, without raging, bellicose and gratuitous rhetoric by people who know nothing about economics and finance.

Consider, for a change, the hypothetical G20 discussion of U.S. and Chinese economies, and the contribution they are making to global welfare.

Perhaps the only bright spot in the U.S. economy now is its monetary policy. By maintaining an approximately neutral credit stance with its real policy interest rate at an empirically validated level of about 2%, the Federal Reserve is supporting the U.S. economy, world trade and international asset markets.

That will not do much to quickly “normalize” the Fed’s monetary base (the liability side of its balance sheet), or to bring down the U.S. core consumer prices (CPI less food and energy prices) from 4%. But the U.S. economy will stay afloat in the months ahead, and there will be plenty of liquidity to absorb an avalanche of paper to finance America’s estimated budget deficit of $2 trillion (7% of GDP) and its gross public debt of $34.5 trillion (123% of GDP).

America’s public finances are not in good shape. And nothing will be done about that in the months ahead. Debts, deficits and inflation will be left for the next administration(s).

China’s potential GDP growth is 5%

The U.S. structural economic problems will also be part of that legacy that keeps the country’s potential and noninflationary economic growth at a paltry 1.6%.

Such physical limits to growth can only be solved by increasing the stock and quality of human and (physical) capital. That’s a tough challenge when 38% of the U.S. civilian labor force (100.3 million people) is out of the labor market, and when the productive capital stock is growing at an annual rate of 1.4% -- less than half the long-term trend of 3%.

Washington has to think how the U.S. can compete in world markets with those numbers.

China, by contrast, has no structural or cyclical economic problems to maintain an average annual growth rate of 5% over the medium term. In fact, China’s current potential and noninflationary growth rate is estimated at 5%, based on a labor productivity growth of 4.8% and its productive capital stock increasing at an annual pace of 7%. China also has a high savings rate of 46%, partly due to a weak social safety net and a relatively low level of urbanization.

With a core inflation rate of 0.7% in 2023, and still a bit of price deflation last month, China has plenty of room to maintain supportive monetary policies. That will also help to strengthen the financial system and fiscal reforms, to manage excess supplies in the real estate sector and to tackle debt problems of local authorities.

Urbanization and a broader social safety net will become increasingly important as China confronts problems of an aging population. By the end of last year, urbanization has reached 66.2% and is expected to rise rapidly in the years ahead. China’s population problem is much more serious. Births per woman are now approaching 1, far below the replacement rate of 2.1 that would maintain China’s current population levels.

This is the sort of an opening G20 discussion. Accounting for half of the global GDP, the U.S. and China are the main drivers of world economy. Problems of debt relief for low-income countries, decarbonization, trade frictions and geoeconomic fragmentation are also the G20 core issues.