Seating signage for the U.S. delegation is displayed ahead of the opening plenary session of the G20 Finance and Central Bank Deputies Meeting at the Cape Town International Convention Centre, in Cape Town, South Africa on Feb. 24.Nic Bothma/Reuters
John Rapley is a contributing columnist for The Globe and Mail. He is an author and academic whose books include Why Empires Fall and Twilight of the Money Gods.
Convening a G20 Summit without the Americans is like holding a papal conclave without the pope.
Yet here we are. South Africa this year assumed the rotating chairmanship of the G20, the organization bringing together all the major economies of the world, but the U.S. is so far boycotting it. Last week it was Secretary of State Marco Rubio, who sat out the meeting of foreign ministers, and this week Treasury Secretary Scott Bessent joined him in saying he wouldn’t attend the gathering of finance ministers, claiming that he had more pressing business in Washington.
That pressing business may simply be the need to keep his thin-skinned boss happy, given President Donald Trump’s disdain for the South African government (which itself is probably influenced by Elon Musk’s evident distaste for his native land). But regardless, it leaves a big hole in the G20 since the U.S. usually plays a key role in leading summit discussions. Any hope that another major power would step in to fill the break was quickly deflated when the finance ministers of China and India, along with several other countries, added they’d also now skip the meeting, its point less obvious now that the Americans wouldn’t be there.
Although the G20 is merely a forum for discussion – a talk-shop, some might call it – the significance of the U.S. absence can’t be overstated. Summit attendees will often tell you that the real substance of international gatherings takes place not in the conference rooms, but in the cafeterias and impromptu gatherings at which senior officials from around the world build their informal networks. Those networks then allow for rapid and effective co-ordination when global events necessitate it.
This is what happened at the time of the 2008 financial crisis, when the G20 architecture was instrumental in assisting central banks and governments to co-ordinate their responses quickly. It’s widely believed this co-ordination was what prevented a global recession from turning into another Great Depression.
The first order of business for the G20 has therefore become to decide what, if any, role the organization will play if the U.S. boycott becomes permanent. It’s Washington’s turn to host the summit next year, and it’s now possible the White House could scrap the meeting altogether. Not only is Mr. Trump withdrawing his country into a more isolationist stance, but he prefers one-on-one meetings with foreign leaders to multilateral gatherings, where he undoubtedly feels everyone else gangs up on the U.S.
But the more pressing issue will be who will co-ordinate global responses to the next 2008-style crisis, if the U.S. steps back from the role of global hegemon it has played for nearly a century. Since the end of the Second World War, when the U.S. dollar emerged as the global reserve currency, the Federal Reserve has essentially functioned as the world’s lender of last resort.
Because the U.S. therefore has enjoyed what former French president Valery d’Estaing once called the “exorbitant privilege” of being able to run chronic trade deficits, covering the difference by issuing new money, its economy could equally function as the buyer of last resort. By ensuring a minimum level of demand in the world economy, the U.S. has acted as a backstop to any sudden weaknesses in corners of the global economy.
During the Latin American debt crisis of the 1980s, the Asian financial crisis of the 1990s and most vividly the 2008 global financial crisis, the U.S. played this role using various combinations of lending and co-ordinated fiscal and monetary stimulus. In each case its actions were decisive in stabilizing what threatened to become a chain reaction, one that could have plunged the world economy into catastrophe.
It’s no longer clear the U.S. is willing to continue playing this role.
The only other country that could come close to filling the gap left by the U.S. is China. It shows no appetite for doing so for the time being. Its relatively closed capital markets prevent the yuan from becoming a significant reserve currency and its export-oriented model currently stops it from assuming the U.S. role as the major demand sink in the event of a global recession. As a result, the world economy is vulnerable should the U.S. response to a global shock be to pull up the drawbridges. The danger then would be that, as every country looked after its own interests, we’d revert to the COVID lockdown playbook. And we saw how well that worked out for the economy.