How to make the G-8 'club' a little less cozy

The world's exclusive club of powerful industrial nations, called the Group of Eight, may soon become less snooty, more democratic, and more representative of the changing world.

The move, if it comes, underlines the growing clout of the developing world. But recognition won't come easily as the world's traditional - and mostly Western - powers cling to the levers of influence over the global economy and, at times, its politics.

The immediate question for the cozy club: Should it expand wholesale or step by step?

The question is sparked by the rise of China - still ranked as a poor, developing nation but coming on strong.

At last year's summit in Évian, France, French President Jacques Chirac invited China's president, Hu Jintao, as a guest. The Bush administration did not invite Mr. Hu to this year's G-8 summit, which winds up Thursday on Sea Island, a coastal resort off Georgia. But possibly as a first step toward full membership, the United States is considering asking China's finance minister and chief central banker to the fall session of the Group of Seven (G-7).

Admittedly, this alphanumeric soup can get confusing. The G8 summits involve the top leaders of the US, Japan, Britain, Germany, France, Italy, Canada, and Russia, whomeet once a year. The G-7 involves the finance officials of all those nations except Russia, and convenes twice a year. (The meetings also include the president of the European Central Bank.)

There is a growing sentiment among some intellectuals and in some capitals that the G-8 summits, which on occasion lead to significant decisions in regard to the world economy or the political scene, are not diverse enough. Except for Japanese Prime Minister Junichiro Koizumi, the summiteers at Sea Island are white and of European extraction.

Instead, critics charge, the wealthy economic powers need to involve poorer nations to deal with problems of growth, inflation, oil prices, currency prices, globalization, trade, and so on.

The pressures for change are building. A new study by two economists at Goldman Sachs International proposes that China be invited to join the G-7 meetings of finance ministers and central bankers.

At present, the G-7 countries account for 44 percent of world output and a mere 14 percent of world population - both shrinking percentages.

In contrast, the developing nations' share is growing. Today they account for 39 percent of global output and more than 80 percent of the world's population. (That output is measured in terms of purchasing power, rather than by foreign exchange rates.)

Admitting China would help ease the G-8's representation problem and there is precedent for this step-by-step approach. When President Ford convened a second summit in 1976, Canada was invited to join to balance the heavy weighting of European countries in the first summit. Russia was allowed to join in 1998. But China's accession alone doesn't solve the problem.

In the next 50 years, the world's population is projected to increase from 6.2 billion to 9 billion, with probably all the increase coming in the developing world while the number of people in rich countries remains at roughly 1 billion.

"The current [world] system is inadequate," says Colin Bradford Jr., a fellow at the Brookings Institution in Washington. "There is a big political need to enhance diversity and make the system much more democratic."

He and Johannes Linn, another Brookings scholar, propose replacing the G-7 and G-8 with the G-20. Added to the G-7 countries would be Russia (already in the G-8), Australia, and 10 emerging nations - Argentina, Brazil, China, India, Indonesia, South Korea, Mexico, Saudi Arabia, South Africa, and Turkey. They suspect that merely taking China into the club would delay going to a fairer and more balanced G-20 system.

The idea of giving the G-20 a bigger role in world governance has the support of Canadian Prime Minister Paul Martin. He raised the topic with Mr. Bush during a visit to Washington in April. Bush was "agreeable" if any G-20 sessions are kept informal, Mr. Bradford says.

Notwithstanding, there is much doubt that the G-20 will replace the G-8 or a G-9 anytime soon. The G-20 might be asked to tackle specific problems facing the world - water, farm subsidies, and so on - and meet every two years.

Mr. Martin's Liberal Party faces a national election June 28. Fate of the G-20 proposal may hinge on the party's victory.

The G-8 got its start in 1975, when the international economy, trade, finance, and commerce were dominated by the US, Japan, and a few European nations. Their leaders, note economists Robert Hormats and Jim O'Neill, "called the shots on trade negotiations, currency realignments, and most other international economic matters."

The leaders of what were then the six major powers got together to forge a strategy to overcome the recession caused by the Arab oil embargo after the 1973 Arab-Israeli war.

The problem of an outdated system of governance also afflicts the International Monetary Fund and its sister institution, the World Bank. At present at the IMF, Europe has at least nine executive directors and 73 percent of the vote, far more than the US. The remainder of the world has little clout. Belgium has a 52 percent greater vote than huge, populous Brazil.

Voting reform has been on the agenda for at least two years.

But it is a zero-sum game, says Ariel Buira, director of the G-24, a group of developing countries within these institutions. If the voting power were reshuffled to better reflect the real economic picture in the world, some nations would lose out - and they are resisting this loss of prestige and power.