The way the world tries to solve its economic problems needs to be rethought amid today's global crisis, including turning the Group of Seven into a Steering Group that empowers rising economic states, World Bank Group President Robert B. Zoellick has said.
Referring to the upcoming U.S. election, Mr Zoellick said the new president would have to move beyond "the firefight of financial stabilization" to address the "economic aftermath"; saying that whoever won the White House should work with others in modernizing the multilateral system as there needed to be a greater shared responsibility for the health and effective functioning of today's global economy.
" The G-7 is not working. We need a better group for a different time. For financial and economic cooperation, we should consider a new Steering Group including Brazil, China, India, Mexico, Russia, Saudi Arabia, South Africa, and the current G-7," Mr Zoellick said in a speech to the Peterson Institute for International Economics in Washington D.C
A release from the World Bank Office in Accra said Mr Zoellick was speaking ahead of the Annual Meetings of the World Bank Group.
He said the new Steering Group should be more than just replacing the G7 with a fixed-number G14, as this would be using old world methods to remake the new. The Steering Group should evolve to fit changing circumstances, including new emerging powers, while serving as a network for frequent interaction. "We need a Facebook for multilateral economic diplomacy," Zoellick said.
Warning about the effects of the financial crisis, Zoellick said: "The events of September could be a tipping point for many developing countries. A drop in exports, as well as capital inflow, will trigger a falloff in investments. Deceleration of growth and deteriorating financing conditions, combined with monetary tightening, will trigger business failures and possibly banking emergencies. Some countries will slip toward balance of payments crises. As is always the case, the most poor are the most defenseless."
The former U.S. Diplomat, Trade Negotiator and Financial Executive said economic multilateralism needed to be redefined beyond its traditional focus on finance and trade. Energy, climate change, and stabilizing fragile and post-conflict states were economic issues and not just part of the global dialogue on security and the environment.
Mr Zoellick said the New Multilateralism must give an equal value to development as to international finance otherwise the world would remain an unstable place. But the aid system was not working well enough and it needed to move much more quickly and effectively to help those who were most vulnerable when crisis hits.
The World Bank Group also needs reform. Mr Zoellick announced the creation of a High Level Commission under the leadership of former Mexican President Ernesto Zedillo to consider modernizing the governance of the World Bank Group.
Turning to multilateral trade talks, Mr Zoellick said the Doha round "has hit the rocks" and countries should therefore consider trade facilitation as another way of cutting the costs of trade, adding "here are opportunities to cut costs of trade far in excess of those imposed by tariffs and other trade barriers".
Describing world energy markets as "a mess", Zoellick called for a "global bargain" between energy producers and consumers. Both sides could share plans for expanding supplies, improving efficiency and lessening demand; assisting with energy for the poor; and considering how these policies related to carbon production and climate change policies.
"There could be a common interest in managing a price range that reconciles interests while transitioning toward lower carbon growth strategies, a broader portfolio of supplies, and greater international security," Zoellick said.
He said the World Bank Group was developing Energy for the Poor initiative with a number of donors to help the poorest countries to meet energy needs in efficient and sustainable ways.