Bloomberg: The G-7 just now isn’t what it used to be

First row, from left: Italian Prime Minister Aldo Moro, UK Prime Minister Harold Wilson, US President Gerald Ford, French President Valery Giscard d’Estaing, German Chancellor Helmut Schmidt, and Japanese Prime Minister Takeo Miki at the first “Summit of the Six” in November 1975.
Photo: AFP

Fifty years after the first gathering of leading industrial nations, the Group of Seven is seeing its political and economic ambitions languish, Bloomberg writes.

…Back in 1974, Giscard d’Estaing and US President Gerald Ford met on the Caribbean island of Martinique for a de facto G-2, chatting poolside about the need for better economic cooperation between industrial democracies. It was there that Giscard d’Estaing proposed the informal gathering that would take shape the following year.

When leaders of G-7 countries gather in the forests of the Canadian Rockies next week, it will have been less than a month since Donald Trump confirmed his attendance. That the US president plans to show up at all is noteworthy — as recently as May 27, Trump said Canada should be the 51st state. But it’s also notable that the so-called leader of the free world waited until the 11th hour to RSVP: The G-7 ticket just isn’t what it used to be.

A half century after the crème de la crème of the world’s economies first gathered in a 14th century chateau to forge a collective response to an oil crisis, the Group of Seven is on borrowed time. The share of the world it represents is declining — now accounting for less than 30% of GDP and 10% of the population — and so too is its influence against Vladimir Putin and Trump. The former’s rejection of the chummy club of insiders arguably put an end to the G-7’s political aspirations; the latter’s America First mindset is now undermining its economic ones.

It was back in the late autumn of 1975 — nestled in a forest where the last king of France liked to hunt — that France, West Germany, Italy, Japan, the UK and the US enjoyed their first informal gathering. The summit’s creator and host, French President Valery Giscard d’Estaing, wanted frank conversation over the finest Bordeaux wines about the leading industrial nations’ shared economic woes, a collection of anxieties he referred to as “the crisis of capitalism.”

That was no understatement. The Bretton Woods system had collapsed and stagflation was rampant among the industrialized economies. The world was reeling from the shock of OPEC’s oil embargo, the US was running a massive trade deficit, and the UK was a year from asking for a humiliating IMF bailout. In Italy, then-Prime Minister Aldo Moro would go on to be kidnapped and assassinated in a decade-long wave of political violence.

The outcome of that first summit was succinct: a 15-point communique vowing “closer international cooperation and constructive dialogue” in “a world of growing interdependence.” But the gathering was deemed a triumph, and they agreed to do it again. Canada joined in 1976, officially making it the Group of Seven, a crew then representing 70% of global GDP. Every year, their gatherings got progressively grander.

Even as their challenges grew in complexity and magnitude, there were instances when the G-7 countries rose to the occasion. Such was the case in the Reaganite mid-80s, when in New York’s Plaza Hotel they agreed to intervene in foreign exchange markets to stem an overly strong dollar that was strangling the rest of the world and leading to double-digit inflation in the US.

There was always an understanding that some leaders at the G-7 table were more equal than others. Canada’s inclusion was allowed over France’s objections. Italy struggled to keep up economically, and was gleeful for a brief moment in 1987 known as “Il Sorpasso” when it overtook the UK in nominal GDP. Italy also went down in the G-7 history books for a 2001 summit in Genoa, where a policeman killed an anti-globalization protester. After that, the locations became more remote, the access harder and the image more impenetrable.

The implicit power of G-7 countries — and their collective ability to move markets — was tested in the wake of the Cold War. But the group’s waning relevance was accelerated by three blows to the political establishment: Putin, Brexit and Trump.

Russia joined the G-7 in 1997, making it the G-8, and in 2001 George W. Bush famously said he had looked into Putin’s eyes, seen a soul and trusted him. In 2006, Putin hosted the summit for the first and only time, in St. Petersburg — a city designed three centuries earlier to be Russia’s window into Europe.

Vladimir Putin with the US President Barack Obama at the G-7 summit in St. Petersburg.
Photo: Reuters

Ahead of the G-20 in Brisbane in 2014, Australia’s then prime minister, Tony Abbott, threatened to physically assault Putin; the Russian president simply left early. And unlike NATO, which has a charter, the G-7’s lack of legal structure makes its decisions unenforceable.

In 2014 after Crimea case Russia expelled from the G-8.

By 2016, the G-7 was facing the dual prospects of Brexit — its communique called the possibility a “serious risk to growth” — and Trump. When the freshly inaugurated US president made his G-7 debut in Taormina, Italy, the following year, he got a cool reception. At one point, TV cameras lingered on Emmanuel Macron and Justin Trudeau strolling together while Trump waited for a golf cart. But Trump got vengeance in 2018, ripping up the G-7 communique as soon as he left Quebec and calling Trudeau “weak.”

This is the summit that produced the iconic photo of leaders leaning over to seemingly chide an unchastened Trump.

Merkel deliberates with Trump on the sidelines of the G-7 summit in Charlevoix, Canada, in 2018.
Photo: Getty Images Europe

The G-7 and its multilateral ilk can shift global momentum. In 2009, the G-20 gathered in London for a “save the world summit” in the midst of the financial crisis. In 2015, G-7 leaders committed for the first time to phasing out fossil fuels by 2100, paving the way for the Paris Agreement. Even when its full potential wasn’t realized, the G-7 was seen as a place for consensus-building, for world leaders to essentially speed date.

Today, both of those functions appear increasingly moot. Not only is a communique no longer guaranteed — last November’s G-20 failed to produce even a family photo — but in the Trump era, business is conducted elsewhere. World leaders stand a better chance of courting the US president at Mar-a-Lago or on the golf course, and should avoid mentioning “a world of growing interdependence.”

This year’s discussion expected to touch on many crises of capitalism, from trade to artificial intelligence. But, perhaps, what the forum really needs is a new Henry Kissinger…

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