In ‘Global Governance after the Financial Crisis: A New Multilateralism or the Last Gasp of the Great Powers?’ in this journal, Ngaire Woods discusses what appeared in the wake of the global financial crisis to be a renewed birth of multilateralism in the governance of global economic issues, and concludes that it was only the last gasp of the G7 whose influence may have become diluted somewhat but paradoxically preserved by the G20.

Woods’ exclusive focus is on the International Monetary Fund (IMF), though the word IMF is conspicuously missing from the title of the article. Perhaps she is using the IMF as a case study – an exemplification of what multilateralism represents. Her comprehensive but succinct review of the recent reforms of the IMF is timely and useful. Her conclusion that the recent reforms are not sufficient to win back the confidence of major emerging market economies is difficult to disagree with. Equally reasonable is her assessment that, as long as the IMF remains less than fully representative, it will continue to have only a limited role to play in the global economy, alongside national and regional strategies. Her analysis of three contrary forces at work that are constraining the IMF to stay as it is – borrower dependence, financial independence and lender dependence – is insightful (though only academic).

Multilateralism can mean different things to different people. In the specific context of the article, Woods seems to equate multilateralism sometimes with an independent IMF but on other occasions with a more representative IMF. They may or may not be the same thing, depending on how one defines multilateralism. The IMF remains a machinery of global cooperation, regardless of whether it is independent or more representative. But representativeness is another difficult concept to define.

Any multilateral mechanism must possess some elements of representativeness (to claim legitimacy) and exclusivity (to ensure effectiveness). It would be unreasonable to expect unilateral decisions by one major country to command the willing compliance of all the others. At the same time it would be impractical to engage every country in every decision, especially when the occasion calls for quick action; it is simply not possible for all countries to be making all decisions together all the time. The practical issue is how to strike the right balance between the conflicting requirements of legitimacy and effectiveness. Different issues probably call for different combinations of the two elements.

The emergence of various alphanumeric groups (such as the G7 and the G20) in global economic governance is an outcome of the shortfall of supranational organizations (such as the IMF) in effectiveness. Although supranational organizations enjoy representativeness and hence legitimacy, they are limited in their ability to make decisions quickly (or make any decision at all) given the size and diversity of membership. Although limited in representativeness and legitimacy, on the other hand, smaller intergovernmental groups can act more quickly under certain conditions. Usually included in these conditions is that (1) membership is sufficiently small and (2) membership is relatively homogeneous, in terms of level of economic development and philosophy.

Something of a market mechanism appears to be in operation. A combination of representativeness and exclusivity that gives slightly more weight to non-G7 countries emerged in the aftermath of the global financial crisis because the G7 had lost effectiveness under the circumstances (and it did not have legitimacy in the first place). The additional factor favoring a larger group of countries at the time was the broad consensus that had already existed on what needed to be done, given the unprecedented magnitude of the problem the global economy faced. This does not mean that the G7 has totally lost its relevance for all global issues.

Likewise, the G20 cannot be the most appropriate forum for all issues. As a weakness, it does not meet either of the criteria for effectiveness – it is too large and not sufficiently homogeneous. A group of 19 sovereign countries (plus the EU) is too large to be effective or efficient as a mechanism of decision making; a body that simultaneously includes the United States on the one hand and China or India on the other is too diversified to be responsive and flexible on divisive issues. Once the global financial crisis becomes a thing of the past, the sense of cohesion that initially appeared to exist will be lost. It is possible that important decisions will be made in a smaller grouping of countries – perhaps different groups will emerge for different sets of issues according to the working of the market mechanism. In fact, this is exactly what happened in L’Aquila, Italy in July 2009. Following the G8 Summit, two separate groups of countries were invited to join in the discussion of two separate sets of issues.

Do we need a representative but largely ineffective IMF or a less representative but more effective IMF? Both are different forms of multilateralism. Multilateralism is also at the mercy of those who allow it to exist. Woods’ version of multilateralism – where a large number of countries overcome differences of view to make collective decisions in a cooperative fashion and entrust an independent agency to execute their collective will – is not likely to come to pass in the near future.