"History is being written in Cannes," trumpeted billboards around the Mediterranean resort city when world leaders met there last week. And it was, though not as the French might have hoped.
Nicolas Sarkozy had no lesser ambition when France assumed the presidency of the Group of 20 last year than to oversee a complete overhaul of the international monetary system. His ambitions were dashed by the European debt crisis and a failure by the advanced economies to provide solutions for a global economic crisis largely of their making.
In Cannes, for the first time in history, advanced economies sought help from fast-growing emerging economies, including India. By the end of the meeting one thing was clear: the domination of multilateral institutions by a handful of developed countries is no longer tenable in a world where economic growth is on the side of the political grouping BRICS (Brazil, Russia, India, China and South Africa).
Nearly every world leader who came to Cannes confronts serious domestic economic and political crises at home. Greek Prime Minister George A. Papandreou's was only the most urgent, threatening the integrity of the euro and the European Union. Italy's Silvio Berlusconi came a close second, agreeing to quarterly monitoring by the International Monetary Fund of Europe's second most-troubled economy. Presidents Barack Obama and Nicolas Sarkozy face tough elections next year as they grapple with high unemployment, lackluster growth and bloated deficits. In India, Manmohan Singh's government has been the target of massive protests over corruption, and must deal with the twin scourges of rising food prices and slowing economic growth.
Most leaders returned home with little to boast about. India, however, achieved two notable goals in Cannes. It lobbied hard for and signed, along with the other G-20 members, the Convention on Mutual Administrative Assistance in Tax Matters. The Convention allows for the sharing of information by governments of bank balances. With revelations by France to Minister of Finance Pranab Mukherjee during his visit to Paris in October of the existence of hundreds of bank accounts in Europe with high balances owned by Indian nationals, Manmohan Singh's government is under pressure to name names and to repatriate monies to India. The government is certainly hoping that signing the Convention at the G-20 will help placate critics who charge it is not doing enough to rein in the corruption that has flourished under its watch.
The Indian delegation also scored a significant win in the failure of the G-20 to adopt a tax on financial transactions. The Europeans had lobbied for the tax as a way to generate aid for developing countries, and billionaire philanthropist Bill Gates came to Cannes to stump for it. India argued that the tax would unfairly hamper its domestic banking system, and that it would make capital more costly at a time when India needs expanded credit for investment in infrastructure.
The global economy is hostage to the sovereign debt crisis still unfolding in Europe. The European Union, the largest global economy, may be too big to fail yet its crisis is far from resolved. India does not directly depend on the EU, but contagion from the crisis in the euro zone to India's two largest trading partners, the United States and China, is a serious concern. India's government has vowed to reduce inflation and boost economic growth in 2012. It will not be able to do so in a global environment of spiraling debt, austerity and protectionism.
Meanwhile, the G-20 meeting in Cannes has given India and the rest of the BRICS a strong platform to continue to pressure the institutions of world order still dominated by the developed economies – the United States retains veto power over the IMF and the combined voting rights of the BRICS is less than those of the U.S. alone – to allow them a greater role. At Cannes, one sensed that the real action, while the Europeans and the United States were focused on the euro zone crisis, was happening elsewhere. The BRICS group met separately and came up with two common positions: Europe had to take responsibility for its own mess, and that any help from developing countries would best come via the IMF.
The meeting in Cannes set the stage for what will likely become more apparent when the G-20 meets in Mexico next year: emerging economies, including India, are less and less inclined to play a subservient role in institutions of global governance, and will band together to ensure their interests are represented. From there to asserting a real leadership role in reformed institutions is still a considerable leap. Nor is there any assurance that the success of the Singh government in Cannes will save it from discontent at home if food prices continue to rise, growth slows, and graft is not meaningfully addressed. Be that as it may, under the relentless rain that fell on Cannes during the G-20 meeting, expectations that the developed countries will forever dominate multilateral institutions were considerably dampened.
Mira Kamdar is a Paris-based Senior Fellow at the World Policy Institute in New York and the author of Planet India: The Turbulent Rise of the Largest Democracy.