Every G20 host country likes to have a signature initiative, and Australia's was the Brisbane Action Plan to lift the economic growth performance of all G20 countries in a sustainable fashion. This was a laudable initiative, and certainly one of the best possible targets for G20 attention in the circumstances of sub-par economic growth in many countries in the wake of the global financial crisis.
The Brisbane Action Plan aims to increase growth of the G20 countries' economies (not the global economy, but close to it) by 2% by 2018. To be clear, this does not mean a 2% annual economic growth rate, or a 2% addition to annual growth, but that the level of GDP will be 2% higher by 2018 than it otherwise would have been. Measured from the 2013 base year, the target implies an addition of about 0.4 percentage points to the average annual growth rate that would otherwise occur.
This is modest but realistic, given the difficulty in getting twenty countries to agree to any concrete action at all. Some countries that are clearly performing well below their potential, such as India and Brazil, could easily boost their growth rates by much more than 0.4% a year with the right policies.
Although the Brisbane Action Plan is commendable in principle, the details do not stand up well under close scrutiny. Leaving aside doubts about actual implementation, some of the specific measures to which countries have committed are vague or would have occurred anyway. The effects are so difficult to quantify that the 2% figure should not be taken too seriously. And given that the target is expressed as an outcome relative to an unknown counterfactual, nobody will ever know whether it has been achieved.
Most importantly, it is difficult to see how some of the measures will promote growth at all. A good example is the United States commitment to increase the federal minimum wage, which is more likely to damage the economy than give it a boost. The inclusion of such a proposal makes one wonder about the quality control that was exercised in putting the action lists together. No doubt the Australian officials involved did their best, but they would have been under enormous pressure to accept some pretty dodgy proposals.
The commitment of G20 leaders to setting the foundations for stronger and more durable growth would be more credible if they were not at the same time smothering their financial systems under layer upon layer of new regulation, and if they showed more purpose in reviving global trade liberalisation and putting their public finances onto a sustainable footing for the long term. Without such determination, and with Europe in a mess, it is difficult to be confident about the prospects for robust growth in the global economy.
Robert Carling is a Senior Fellow at The Centre for Independent Studies.
Home > Commentary > Opinion > G20 growth plan found wanting
G20 growth plan found wanting
The Brisbane Action Plan aims to increase growth of the G20 countries' economies (not the global economy, but close to it) by 2% by 2018. To be clear, this does not mean a 2% annual economic growth rate, or a 2% addition to annual growth, but that the level of GDP will be 2% higher by 2018 than it otherwise would have been. Measured from the 2013 base year, the target implies an addition of about 0.4 percentage points to the average annual growth rate that would otherwise occur.
This is modest but realistic, given the difficulty in getting twenty countries to agree to any concrete action at all. Some countries that are clearly performing well below their potential, such as India and Brazil, could easily boost their growth rates by much more than 0.4% a year with the right policies.
Although the Brisbane Action Plan is commendable in principle, the details do not stand up well under close scrutiny. Leaving aside doubts about actual implementation, some of the specific measures to which countries have committed are vague or would have occurred anyway. The effects are so difficult to quantify that the 2% figure should not be taken too seriously. And given that the target is expressed as an outcome relative to an unknown counterfactual, nobody will ever know whether it has been achieved.
Most importantly, it is difficult to see how some of the measures will promote growth at all. A good example is the United States commitment to increase the federal minimum wage, which is more likely to damage the economy than give it a boost. The inclusion of such a proposal makes one wonder about the quality control that was exercised in putting the action lists together. No doubt the Australian officials involved did their best, but they would have been under enormous pressure to accept some pretty dodgy proposals.
The commitment of G20 leaders to setting the foundations for stronger and more durable growth would be more credible if they were not at the same time smothering their financial systems under layer upon layer of new regulation, and if they showed more purpose in reviving global trade liberalisation and putting their public finances onto a sustainable footing for the long term. Without such determination, and with Europe in a mess, it is difficult to be confident about the prospects for robust growth in the global economy.
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