We live in an age of unparalleled inter-dependence. The global financial crisis demonstrated emphatically that all economies — developed, developing and emerging — are massively interconnected. A failure anywhere in the system will have consequences for us all.
I saw this graphically on the faces of the leaders at the London G20 summit of April 2009. Twenty or so of us sat together at a single dinner table in Downing Street.
Successive speakers reinforced the fear in each of us. That the crisis we faced was grave. And that we were all in it together. It was clear that, interdependent as we were, the only way out of the crisis would also be together.
The London summit saw concerted action by G20 leaders. The stimulus measures we adopted together were instrumental in averting a catastrophe. As the International Monetary Fund has acknowledged, that summit "broke the fall" of the global economy.
A further step in the recognition of our shared interests came at the Pittsburgh summit of September 2009. There, leaders resolved that the G20 would be the world's premier economic governing institution; no longer a cosy club of the world's rich but a modern institution reflecting the interdependence of all economies.
More recently, the G20 has begun to map out an agenda for action on economic development for poorer countries. In recognition of the interconnection of the world's rich and poor countries, the G20 is beginning to focus on the global development agenda. By harnessing the strengths of the G20 alliance, we can ensure that the sources of global growth are increasingly diverse and that resilience to shocks is broadly based. The global economy is only as strong as its weakest link.
G20 countries have a deep responsibility to help poor countries, and in particular the world's least developed countries, in times of need. But G20 countries also have a direct economic interest in doing so. Building resilience in the developing world is good for us all because global economic growth will depend more and more on emerging economies.
Recognising that developed and developing countries are connected as never before, last week in Washington saw the first meeting of G20 finance and development ministers. Treasurer Wayne Swan and I participated for Australia.
A specific problem addressed by the meeting was the global challenge of food security. The crisis in Somalia, where 12 million people face starvation, has grabbed the headlines. But behind the headlines there lies a more enduring reality.
By 2050 the planet will have a population of more than 9 billion. An estimated 70 per cent increase in global food production will be needed just to feed our growing population.
What, then, can the G20 do about global food insecurity?
First, it has resolved to work for more open international food markets. Second, to increase agricultural productivity through research and innovation. Third, greater public and private investment in agriculture. And, last, better risk management measures.
For example, the G20 is examining the potential of a system of targeted regional emergency food reserves. These would, without distorting food markets, give countries access to essential commodities when global sources of
supply dry up. This would avoid the problem which occurred in 2008 when food prices soared and supplies dwindled to the point that even those with the funds to buy struggled to source supplies.
The G20 is also considering how to increase the take-up of innovative risk management mechanisms at the community level, such as crop insurance schemes, and is exploring ways of turbo-charging agricultural research and innovation. This could involve providing incentives for the private sector to find solutions to food production, storage and distribution problems.
Addressing the infrastructure deficit in the developing world is also crucial to allow farmers physical access to markets. Again, innovation is needed to bring together private and public capital. There is about $120 billion of aid which flows a year, but more than $100 trillion of financial assets around the world.
Crises forge new alliances and the G20 is a good example. It has shown its effectiveness in dealing with a global economic crisis once and might be required to do so again.
In its new development agenda, the G20 is demonstrating its continuing relevance. Just as at that dining table in Downing Street we recognised our global economic futures were intertwined, so we now appreciate that the challenges of development and the global economy are very much linked.
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