Cooperation between countries to ensure global economic growth: a role for the G20?

The global economic recovery is on course but remains weak. Many analysts and policymakers - including those from emerging markets - have recently called for international cooperation in the setting of macroeconomic policies. A global growth target has been adopted by the G20 to aid such cooperation. But advanced counties are unwilling to abandon fiscal policies which are driven by austerity, monetary policy is incapacitated, and demand in emerging markets economies is not growing rapidly enough. As a result, cooperation in the promotion of growth appears elusive. However microeconomic reforms have been added to the G20 policy mix: reforms which, for example, promote competition, liberalise trade, and support increased investment in infrastructure. A new form of cooperative process is thereby emerging. Countries have been asked to pursue such reforms, in ways which both promote the growth of productive potential and encourage the growth of aggregate demand. The aim is to create a global environment of 'concerted unilateral reform'. Beneath the umbrella of a global growth target, counties are being encouraged to embrace reform, and to expand demand, in the light of the opportunities which are created by the pursuit of similar reforms elsewhere. This is a valuable experiment in international economic cooperation, and a successful outcome will be of particular value to emerging-market economies.