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August 11, 2009 |  12 comments |  Print | E-Mail Your Opinion  

The Myth of Western Decline and G7-OECD Obsolescence

Ira Louis Straus: Despite widespread belief in a decline of the West and obsolescence of G7-G8, the actual statistics show that G7-8 remains overwhelmingly important, both as a vehicle for mutual cooperation and a guide for the world economy. A G14 or G20 could not provide an adequate substitute for it.

The statistics demonstrate conclusively that the changes in the world economic balance are much smaller than advertised. The basic realities are still the old ones. The group of the industrial democracies of the world - OECD, with G7 as its informal executive committee - has a whopping 77% of global GDP. The G20, or G7 + 13, adds a mere 10% more, claiming 85-90% of global GDP. BRIC (Brazil, Russia, India, China), the group of new economic powers, has only 12% of global GDP.

Clearly, the weight of the emerging powers, whose economic clout is said to be rendering the G7 obsolete, is much less than usually assumed. Ideology, not fact, motivates the assertions that G7 and OECD, in order to stay relevant, must take in new members and turn themselves into North-South dialogue platforms.

Replacing the G7 by a G14 or G20 would bring a host of problems. The G14-20 are forums; it is only the G7 that is a "group" in the meaningful sense of the word: a collectivity that sticks together regularly enough, in its policies, that its economic weights can be added together and understood as a collective weight for global purposes.

The societies in the G14-20 have fundamental differences of interest, amplified by different ways of life and divergent perspectives. These differences would make a merger of their societies suicidal for many of them; they allow for episodic cooperation, but not for reliable integration or creation of strong joint authority structures. Integration is possible when it is a matter only of overcoming separate raisons d'etat not separate raisons de societe. The differences in raison de societe among the G20 members preclude a deep integration that encompasses them all, and in the absence of integration, their differences of interest continue to get translated into opposing strategic orientations and power politics. That is why their 85-90% total means very little, far less than OECD's 77% total.

The G7 countries, indeed practically all the OECD countries, have a profound underlying unity. Their socio-economic structures and conditions are so similar that they could be considered almost a single society. Their commonalities of societal interest are potentially overriding of the opposing interests of state; and this potentiality has been largely realized through their joint institutions. This is why the deep European integration, and the more loosely organized but still substantively deep integration of the trans-Atlantic arrangements, has occurred within the OECD space, but not in the global space. Integration is possible in this era within the OECD space, not in the G20 space or the UN space.

OECD has corresponded to the largest group possible at any time with such deep unity. The group keeps growing over the decades, as more countries become homogenous with the original trans-Atlantic core. It has thereby not only not declined, but increased its share of global GDP, even while emerging economies also grow; and has kept its coherence at the same time, making its 77% share a meaningful statistic.

Raising the share still further, from 77% to 90%, would add little new capability; as it would be done by throwing out the coherence, it would subtract far more. This is the one thing that could truly render the G's obsolete. It would destroy their capability to provide a measure of consistent guidance to the world economy. Out the window would also go the trend of cumulative global security and growth that the G7-OECD leadership has provided over a number of decades. It is easy to deprecate this achievement in the current moment of downturn. Nevertheless it is this achievement that has allowed the rise of the BRIC countries in the first place.

This in no way negates the use of the G14-20. G14 has had value as a G8 outreach, or G8 + 6. G8 has had value as a G7 + 1, with a truly cohesive core. But were this well articulated structure to be dissolved into an undifferentiated G14, it would lose its coherence, and most of its public utility with it. G20 has been used as a venue for raising funds for stimulus at this moment of financial crisis, and as a forum for the major economies of all parts of the world: a negotiating platform between North and South. Specific bargains are needed at this time; a forum is needed. But it is just that, a forum, not more; above all not an an option for replacing G7.

Dr. Ira Louis Straus is coordinator of the American branch, Committee on Eastern Europe and Russia in NATO.

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Florian  Kuhne

August 11, 2009

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Dear Mr Straus,

thank you for your article. But I need to say two or three things from my point of view.

The most fundamental seems to me this quote:
"This is the one thing that could truly render the G's obsolete. It would destroy their capability to provide a measure of consistent guidance to the world economy."
It is interesting how deep the sense about "Western leadership" is rooted. All we can think of is a system in which the advanced rule. They shall rule the terms of trade, the rule how other societies should act, they make up a system in which they (means we) earn more and more (as you point out) and do not seem to think about a fairer distributed share. Isnt it a concerning fact for itself, that 7 or 8 countries "value" 77% of world GDP? I just can always and ever again tell you: Think about it! (Do they/we have the right f. e. to tell other countries how to spend their money for paying debts?)

Another question emerges with your argument, the OECD is a homogenous space as far as society/thinking/system is concerned. I cannot agree with that narrow point of view. Maybe it is more possible to compare Italy to Germany than to India. But all the countries mentioned (including China) have elected capitalism as the system to rule. And Brazil for example can be compared very good to Spain or the other G7 countries. What I want to point out is, that we need to put down our eurocentrical/atlanticist view of the world. I think all of the countries of G14 could be integrated, IF WE TRIED TO. But as long as there is no political will to do that (and with articles like these you foment arguments like this) it will not happen.

I request all of you to think about what "the West" can do after hundreds of years of exploitation, to give something back and to integrate countries like India and Brazil and later all the rest in a FAIR world system. (I know that a fair system needs changed structures and may be not possible, but for the start...). Your article seems to me like a call for staying with the status quo: Dont let others emerge, we know what is the right way for the world, keep all others down and by no means let them share the pork barrel.
 
Colette Grace Mazzucelli

August 11, 2009

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Dear Ira,

Many thanks for your commentary. It's Colette Mazzucelli. I remember our lunch well in Washington, DC many years ago!

I would like to follow up on the initial comment to your analysis by Mr. Florian Kuhne. It strikes me that a country like Brazil, for example, has much to offer the global system in terms of the choices it has made in recent years: first, to put its own house in order and second, to implement policies that can provide food, for example, to feed the many in poverty, particularly in Africa.

The rise of Brazil as a key player, in my understanding, is as much about its policy choices, and the subsequent actions the country may be able to take on the global scene, as about the need to integrate Brazil into a new institutional order, which reflects the challenges the world faces today.

The difference you describe from 77% to 90% I see in terms of population represented in that percentage differential, which amounts potentially to millions, if not billions, of people over time. I believe that industrialized countries (we can question increasingly the actual coherence of the "West") must come to terms with this reality in human, not just institutional, terms.

Is the question only a matter of whether the G7-OECD leadership is relevant? Or must it also be whether that leadership is just given the world of 2009 and its human problems?

Yes, the G14-20 have fundamental differences of interest. And I would suggest, respectfully, that the longer the G7+1 remains an exclusive grouping, the more opportunity and time there will be for those differences to widen. That reality, in my view, is the fundamental dilemma we face collectively in the global system.

All the best and greetings from New York, Colette
 
Clayton  Macdonald

August 11, 2009

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It seems to me that Ira Louis Straus asserts that since the G7, backed up by the OECD, remains the economic hegemon of the world, it not only can exclude others from decisions, it is the G7's “white man's burden” to do so. He seemed to suggest that the riffraff of minor players from the newly moderately rich are really still so economically and politically poor that they are not worthy of being let into the civilized club rooms where the real players make the important decisions over glasses of good brandy after having dined well.

I would suggest exactly the opposite analysis. Precisely because the G7 remains so dominant, it is under obligation to seek ways of opening the doors to those who have thus far been excluded. It must seek to decentralize its power in a way that makes its claims of loving democracy seem far less of a hypocritical joke. It must eschew, with vigor and courage, even the shadow of elitism both within the G7 and without.

This is not a policy concept driven by “ideology,” as Ira would have it. This is a calculated decision to promote a more prosperous survival. While it may seem counter-intuitive to those few who presently enjoy skimming the cream, societies that have very wide disparity of wealth, and very insulated processes of making decisions (a.k.a., elite decision making), have tended to be very unstable. Today, these are precisely the characteristics of world society: extreme disparity of wealth and highly insulated decision making processes. And it would take much more convincing arguments than those presented by Ira to make me believe that the current situation is stable and that stability is primarily the result of exclusivity in the decision making process.

This is not to disagree with the warning against simply throwing the doors open. That would indeed be likely to lead to even more anarchic decision making than we now suffer. But the options are not limited to simply throwing the doors open or retaining exclusivity.

Elite decision makers are repelled by the idea of enhancing democracy – they guess it would not work in their favor. The question is, do the preferences of the elite lead to a durable stability, and do their preferences coincide with the preferences of society?
 
Colette Grace Mazzucelli

August 11, 2009

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Dear Clayton Macdonald,

Thank you for your comments. In response to the question at the very close of your reflections, this makes me think of Russell Hardin's "corporate democracy" analysis.

In Hardin's explanation, the answer to the question is "no" in that the preferences of the elite coincide more with their own interests than with the needs of the members of society whose votes put the so called "representatives" in office.

I would argue that in a national context, this is an inherently unstable situation. In a global context, given the enormity of the human challenges we face - poverty and pandemics just to cite the most obvious -, it can be revolutionary.

As we know well, a smaller and smaller percentage of the world's population controls more and more of the resources and wealth without much prospect for either cultural assimilation, in terms of institutions, or economic integration, in terms of regions that purposively block open, free trade, of those excluded from the "rich man's club".

What is inherently durable or stable about this scenario for any global system? A comparative analysis of empires in history would suggest upheaval is on the horizon...

Sincerely yours, Colette Mazzucelli
 
Donald  Stadler

August 11, 2009

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Reading all of this educated debate about G7 vs G8 vs G-14 vs G-20 leves me with a nuner of questions.

Firstly, does this all matter that much? I understand the basic thesis that the G-7 still control 77% of world GDP give or take, but the fact seems to be that the G-7 as a body actually control nothing. The nations comprising the G-7 may comprise 77% of global GDP, but seems to me it has been quite a while since anything was actually decided at the G-7
conferences, much less in the G-14 or G-20. Is this not so?

I read newspapers and magazines, and there seems to be a strong trin of thought that the G-8 meetings are mostly a junket, an opportunity for national leaders to get together at a nice 5-star resort together and posture, but real decisions get taken elsewhere, mostly within the EU or bilateral talks between nations. Sometimes I think the only groups which take the G-8 seriously are the anti-globalisation demostrators who also congregate at these conferences and try to dodge past the police to throw a stunt on officials attending the conference.

So if the G-8 (or G-14, or G-20) don't matter that much, then why not let new participants in? Seems to me that Brazil is now as important economically as almost any European nation except Germany, and a few more years of Brazilian growth will see it pass Germany. China's economy is as large as any European country, and again - it is growing. India is a player=, and there are others. Why not let them in to have their day in the spotlights, their chance to preen and posture with their European counterparts?

So please tell me - why does the composition matter so much?
 
Unregistered User

August 12, 2009

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My (Limited) Reply

So many questions and comments, so many interesting understandings and misunderstandings... It would take way too much space to answer properly.

Probably best to refer you good people, for an explanation on at least some of these questions, to my Christian Science Monitor piece on the G8, http://www.csmonitor.com/2009/0720/p09s02-coop.html It's the other side of the coin of my www.atlantic-community.org piece, each deals with major considerations that I had to leave out of the other.

Both were extracted from a much more comprehensive ur-article that tried to explain everything in proper context. But of course, that was way too long for this kind of website.

Maybe I should start blogging, then I could just give a link to long articles like that where I've dealt with the various issues raised here.

I have to thank the editors at atlantic-community.org for doing such a good job of extracting a short article from my long one, and giving it a good sharp provocative wording that gets people's attention, even if this meant getting some people, well, provoked.

Colette: hi, it's so nice hearing from you again! You raise loads of points, we ought to take it all up over lunch again, next time you're down here in DC. How long since we last did that, has it been 20 years? Meanwhile a computer smile :) from me and my cats. As I remember it, you and I talked about John Pinder and his letters on the Role of the Cat in the Euro-Atlantic Community, you see how the important things stick in my mind after all these years. I think you were catted back then; hope you still are, I wouldn't want you to be without benefit of priest. The generations have passed, Alex and Lionel have moved on to be with the Great Cat in the Sky, nowadays it is Clarence and Leone who are keeping my home properly sanctified.

yours faithfully,
Ira

 
Colette Grace Mazzucelli

August 12, 2009

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Greetings Ira,

Yes, that's right, as I remember, we did talk about John, federalism in Europe, I think, and other varied topics, including the cats. You have an excellent memory of the lunch conversation. I do have one feline now. Her name is Cesca and she just turned 11 earlier this month. She is a friendly calico kitty. All the others in DC, Bonn and Brooklyn have also passed on. I will be near Washington staying at one of our family time shares in Old Town from 21-31 August. If you have time, let's catch up in person! I am well as are my parents and aunts. Time passes... It is incredible that since the last time we spoke 20 years have passed. It was before I left for one of my extended stays in Europe, as I recall. In any case, it's lovely to be back in touch. Drop me a line please at colettegrace@optonline.net and let me know if you will be in town later this month.

All the best and warm regards from New York, Colette
Tags: | a generation ago |
 
Unregistered User

August 12, 2009

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" The Myth of Western Decline...." as so eloquently discussed by the distinguished authors,
is not a question of G7+1 or G8 or G14 or G20. It is rather a question of an exclusive grouping, the G7, or more to the point the US $ grouping with its mega bank ( now ) holding companies.
Continued deficit spending through deregulated engineered liquidity allowed
a polarization of capital of unequalled proportions, which helped to create these mega
banking instituitions with a capitalization of many times GNP.( "...too large to fail...").
Whether by design or not, these mega institutions may even put the sovereignty of smaller
( dependant ) nations into question.
I could go on now to introduce The People's Republic of China as a new player, but I
rather like to refer to Thomas Jefferson and his prognosis of 1802:

"... democracy will cease to exist when you take away from those who are willing to work
and give to those who would not..."

"...I believe that banking institutions are more dangerous to our liberties than standing
armies. If the American people ever allow private banks to control the issue of their
currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up
homeless on the continent their fathers conquered..."

HRF
Tags: | athens |
 
Joshua  Posaner

August 12, 2009

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Thank you all for your comments, it's great to see that Atlantic Community can truly bring people together as well as shaping strong debates.

Mr Straus,

I agree with you that these varying groups provide perfect opportunities for different forms of cooperation and particularly like your distinction between forum and group The work of the G-7 assists the work of the larger groups. Indeed, the work these smaller groups do serves to facilitate the conclusions made by the G20. For example, the G-7 often develop a Western response to issues whilst the G-8 attempts to reconcile the international policy of these states committed to the principles of liberal democracy with Russia, who isn't. I am an advocate of developing more of these strategic groups and I think it will prove to be imperative for the US and China to set up a G-2 as discussed at this years Strategic Dialogue.

I agree that the international community should seek to be inclusive but the fact remains that the more members you have the harder it will be to come to conclusions. I'm not saying that few powers in the international community should make decisions for everyone but that it is necessary to address issues in smaller groups to become more effective at unified problem solving in the global sphere.




 
Colette Grace Mazzucelli

August 12, 2009

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Dear Mr. Posaner,

Thank you for your comments, which I understand from the argument of efficiency in decision making. I must say, respectfully, that it is Hans Reuther-Fix's explanation that strikes me from the vantage point of legitimacy, which is essential, as we know, to sustain democracies.

His point, as I understand the comments above, emphasizes the asymmetry in the relations within these groupings, however strategic they may be, and that also is open to question. Candidly, seen in this way, we could discuss the numbers, G7, G8, G14, etc., until the cows come home and the result would still be the same - the dominance of banks at the center of a system, which take less and less into consideration the disenfranchisement of more and more who are left without voice economically, and therefore politically, including those millions out of the loop in the industrialized democracies.

Jefferson was right then and his words are true now, as our respected colleague and friend, Hans (if I may) argues. I do not see how an efficiency argument addresses a fundamental problem of legitimacy. How is it possible to square that particular circle? Many thanks again for your reflections in this matter.

Sincere regards and greetings from New York, Colette
 
Anthony  Mansell

August 12, 2009

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Dear Mr Straus,

Some very interesting points made, particularly about the continuing economic strength of the G7 in relation to the other constituent members of forums such as the G20. I do believe the composition of these other forums, with engagement of a wider geographic and, political spectrum is intended to add legitimacy rather than clout to the arguments and positions made at the meetings. There is a focus upon widening the net of inclusion away from the 'industrialized' nations and give voice to previously marginalized regions. This must also be balanced against the bloc politics that can often gridlock UN General Assembly decision making. To my mind, therefore, a G20 forum is a beneficial strategy of engagement from the large powers in international affairs, and does provide a common meeting point for an exchange of views and communication between a large group of national governments.

Of course, the subject of much discussion in recent times has been China, with many making noises about the future importance of a 'G2' between Beijing and Washington. The significance of the recent China-US Strategic Dialogue has done much to foment this talk. I would be interested to hear what Mr Straus and others think of this thought, and how it will affect the G7, in particular, going forward.

Some very intriguing and thought provoking arguments put forward, at a time when international dialogue and decision making seems increasingly critical to overcoming global challenges.

Anthony Mansell
 
Colette Grace Mazzucelli

November 12, 2009

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Hans, Ira, I would be curious to know your thoughts about this post to my Facebook pages of late by Mr. Justin Quinton, re the Federal Reserve system in the United States.

Justin is referencing an article I posted to Facebook from yesterday's New York Times, http://www.nytimes.com/2009/11/11/business/11fed.html?_r=2&th&emc=th

I hope you are well. All the best and greetings from New York, Colette

"Bernanke may have to learn flexibility on the issue... The American public does not. They should continue to demand for a full audit of the Fed, anything less represents an unacceptable risk to the democracy of this nation. What does it say for us that the most powerful man in this country right now is not the president but the Chairman of the Federal Reserve, who being unelected has the power to single handedly bring this country to its knees by manipulation of interest rates? And if you think I'm mistaken, wrong or dellusional I strongly suggest looking back to the battle between President Andrew Jackson and The Chairman of the 2nd BUS (The Federal Reserve's predecesor) Biddle. We don't know what assets the Fed holds on its balance sheets, we don't know what arrangements they've made with other central banks using OUR money, we don't know where the bailout money has gone....

I find it funny that "the chairman of the House Financial Service Committee's panel on domestic monetary policy, Rep. Mel Watt (D-NC)" gutted Ron Paul's bill to audit the Fed. Watt's "congressional district includes Charlotte, headquarters of Bank of America Corp., the biggest U.S. lender."...."Furthermore, the four largest contributors to Watt's cause were Bank of America, Wachovia Corp., American Express and the American Bankers Association."...."n fact, of $609,072 given to Watt, $217,109 - or 35.6 percent - came from the money sector, including over $187,000 - or nearly 31 percent of his total contributions - from political action committees within the finance, insurance and real estate industry. The next highest industry supporting Watt was labor, which contributed only 14 percent of his total war chest." (http://www.facebook.com/l/;www.campaignforliberty.com/blog.php?view...) Now, I don't know about anyone else here, but I for one smell a rat. One has no choice but to question Watt's motives here given that Ron Paul's bill in its original form had such wide spread support.

Again if you want a to see an in-depth look at the Fed, its found, its history, and how it operates read G. Edward Griffin's "The Creature from Jekyll Island"... It is not a small book by any means, and I can easily say it is one of the most frightening and disturbing things I've ever read. I'd also highly reccomend reading the chapter on money in Ron Paul's "The Revolution"... Have yet to read his new book "End The Fed", but trust me its on a short list of things to read."
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