If you’re not on the A-list, then it’s tough to get through the door.
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You how it works; if you are not in, you can’t hang with the cool crowd. It’s like being perpetually sentenced to the kids’ table when you’re pushing 50.
Russia used to be a wannabe. Then it made the cut.
Now several of the world’s emerging economies want to crash the party, and it’s going to be tough to keep them out.
As the Group of Eight convened its annual summit in L’Aquila, Italy, five countries with almost half the world’s population — China, India, Brazil, Mexico and South Africa — demanded a greater stake in the management of the global economy. This confrontation, led primarily by China, dramatized the ascendancy of these emerging economies and a drift in power away from the financially wracked West.
Mission Never Changes
This is the fifth year in five that leaders of the group, loosely called the G-5, have appeared at the yearly economic conference to pressure the U.S. and the other members of the G-8 to consider their agenda.
Between them, the G-5 represents nearly 3 billion people and a combined gross national product of about $7 trillion. Although the G-8 countries only have a pooled populace of 882 billion, at an aggregate total of $32 trillion, the output of the G-8 still dwarfs that of the interlopers.
While the G-8 economies are expected to continue contracting, however, countries like China and Brazil are still experiencing significant growth. The Chinese expansion has considerably slowed during the past 12 months. But it still is expected to grow by about 4.7 percent this year. Brazil’s growth rate is projected to be even higher.
Because they hold nearly $1 trillion in U.S. debt, the Chinese, in particular, feel that they should have a permanent seat at the table.
With the U.S. having run up a $2.3 trillion debt since the start of the financial crisis, China and its fellow party crashers have been increasingly vocal in their challenge to the virtually perpetual dominant role of the dollar as the world’s main reserve currency.
Members of the parallel G-5 summit also took aim at the environmental policies being advanced by the G-8.
Specifically, they argue that the goal of a 50 percent reduction in greenhouse gasses by 2050 will limit the ability of these up and coming economies to lift their heaving masses out of poverty. Although they remain opposed to the measures intended to reduce global warming, China and company also sought both money and technology from the G-8 countries to address the problem.
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Because the G-8 members still are scrambling to cope with the worse economic crisis since the Great Depression, their ability to stave off the challenge to their continued supremacy has been significantly undermined.
President Obama and the U.S. delegation are in a dicey spot.
The President and his people know that they soon may be forced to go back to the well for an additional round of stimulus borrowing. This means that the Americans will rely even more heavily on the Chinese to finance our debt.
Shifting Power?
In a show of their newly found power, the G-5 “warned” the industrial world against backsliding on its aid commitments, and pushed for a new regime in “global governance.” Their demands also included a greater voice in the International Monetary Fund (IMF) and the United Nations.
You have to wonder whether China and its other G-5 compatriots had ever really studied Marx – Groucho not Karl.
As the mustachioed, cigar-chomping comic philosopher was often heard to say, “I wouldn’t want to join any club that would have me as a member.”
And then there were nine.
John Cohn is a senior partner in the Globe West Financial Group, based in West Los Angeles. He may be contacted at www.globewestfinancial.com
