Is the G7 hearing the Global South? | Counting the Cost

[music] >> Hello, I'm Tom McRae. This is Counting the Cost [music] on Al Jazeera, your look at the world of business and economics.

Stepping up efforts to address global debt burdens, G7 leaders [music] aim to ease the strain on developing countries, but they stop short of tackling [music] the fallout from the Iran conflict. Are global South concerns being heard? If not, what's the alternative? From the rise of BRICS [music] to the growing clout of middle powers, can blocks outside the Group of Seven provide a counterbalance? And who gets to shape [music] the rules of the global economy?

For half a century, a handful of wealthy Western democracies wrote the rules of the global economy. But the world order is becoming crowded. The Group of Seven nations, or G7, remains one of the world's most influential clubs. Yet a challenger has emerged. BRICS has expanded and says it wants a bigger voice for the global South. The block speaks for nearly half the world's population and a growing share of global output, energy, and raw materials. In the space between the two, a third force is gathering pace, the so-called middle powers, nations too big to ignore and many of them unwilling to pick a side.

At this year's summit, G7 leaders pledged support for developing countries, including efforts to address mounting debt burdens. But is that enough? Fintan Monaghan reports. >> The G7 has wrapped up its summit in France. Its members include some of the world's most advanced economies, accounting for 44% of the world's GDP. But critics point to another number they represent, 9% the G7's share of the world's population. While members say they work to tackle global problems, many in the developing world have long accused them of only looking out for their own interests. >> We urge G7 countries to abide by the principles of the market economy and international trade rules. Stop using the rules of little cliques to disrupt the international economic and trade order and work together to uphold the stable development of the world economy. >>

When the G7 first gathered in the 1970s, it represented the biggest economies outside the communist block. But today, many of the world's most significant players, including China, India, and Russia, are outside the group. The emergence of other powers has led to alternatives to the G7. The G20 was an expansion to the core seven, bringing other major economies to the table. This larger group helped coordinate the global response to major financial crises in 1999 and 2008. But its shortcomings were revealed during the COVID-19 pandemic. Despite a push for a unified strategy, members ended up doing things their own way.

While the G20 is an expansion of the G7, BRICS is positioning itself as more of a counter balance. In its early days, it brought together major emerging economies from each continent, Brazil, Russia, India, China, and South Africa. Since then, it's expanded to include several other countries, including the UAE, Indonesia, and Iran. >> From a vertical hierarchical model which served the interests of a very small group of countries, the world is transitioning to a more comprehensive multipolar system. The structure of growth is shifting in favor of new centers of development and the countries of the global south. >>

BRICS boasts successes such as setting up its own development bank and promoting alternative global currencies to the US dollar. But, while the G7 are all democracies with advanced economies, BRICS members have far less in common. China is growing rapidly, while South Africa's economy is struggling. India works closely with the United States, while China is a US rival. Beyond BRICS and the G20, a host of other forums for international cooperation have emerged. That includes APEC and the Shanghai Cooperation Organization, along with regional groups like ASEAN and Mercosur. The G7's internal divisions and the rise of other centers of global economic power have created space for alternatives. But, the real test of all these groupings will be their ability to build consensus and translate aspirational words into concrete action. Vince Monahan, Al Jazeera, for Counting the Cost. >>

While G7 leaders pledged to boost efforts for debt support to poorer nations, they acknowledge that public resources alone are insufficient to meet global development needs. In a joint statement, they said, "We will enhance efforts to address escalating global debt vulnerabilities that threaten economic stability and constrain fiscal space for essential public service interventions." They added, "While traditional development policies have achieved important results, they have at times had limited impact in reducing financial dependency on external assistance, strengthening country ownership, and creating pro-growth incentives."

Well, for more on all of this, we're going to bring in our guests. Now, from London is Creon Butler. He is the director of the Global Economy and Finance Program at Chatham House and served as the UK's G7 and G20 representative. In Pretoria is Gustavo D. Carvalho. He is the head of the African Governance and Diplomacy Program at the South African Institute of International Affairs. And in Goa, in India, is Shanti D'Souza. She is the founder and president of the Montreux Institute for Strategic Studies and an international relations specialist. Thank you so much for being here with us on Counting the Cost today. We really do appreciate your time and insight. Creon, if I can begin with you first. You've been inside these rooms at the at the G7. When when leaders say they will enhance efforts on debt, what does that actually mean in the real world? >>

Well, I think um in relation to to third-world debt, it actually means working through bigger groups, particularly the G20, where most of the the action on this takes place. And that's partly because a lot of uh debt to developing countries is from China, which is not a member of the G7, but also from the private sector. And so you actually have to address these these questions in that broader grouping. Uh but I you know, I think this is one of the areas within the G7 where is there is a fair degree of consensus on on the approach to be taken. They also do have considerable uh influence in relation to the multilateral development banks and the IMF, uh which is another key component in addressing this problem. So uh so I think in this case it means using that influence in that in that broader group uh to to develop a um an approach to debt which gives countries the opportunity opportunity to grow over time. >> Hm.

Gustavo, Africa carries some of the heaviest debt loads in the world. Do these G7 pledges do they offer anything genuinely new for the continent? Is it going to make a a real difference in the real world there? >> Thank you. And and probably not. I I think to a large degree what we need to see in terms of what the G7 was able to do is to present a certain degree of consensus, but certainly not dealing with some of the more pending issues that we have seen over the last years and decades coming out of the the African continent, Whether it comes in terms of providing a language within the communication development finance, not really any new funding envelope that specifically deals with Africa. And even when we see some of the issues around critical minerals that have been presented and industrialization, it doesn't really talk specifically about how developing countries can actually create better structural economic spaces that can move beyond just exporting raw materials, importing the finished products, and to a large degree changing the economic landscape of African countries. To a large degree, I think Africa had a seat at the table through Ukraine, yeah, but it's not really particularly influential on the ways in which the decisions have been presented within the G20 and G7 declarations. >>

Shanti, this obviously all comes at a fascinating time for India. From from India's point of view, are global South concerns actually being heard by the G7, or are they simply being acknowledged and and then dismissed or forgotten about? >> Well, I I think it's true. I mean, this whole debate about India and its positioning as a major power of given that it's a middle power, but the fact that if you look at G7 itself, it's transitioning from an aid-giving agency to one which is relying on more mutually beneficial partnerships. And thereby, there is a kind of a consensus in the middle power constituency of having an alternative to what the global order looks like at this point of time. So, I think we need to understand takes a lot view of what G7 traditionally was in terms of the aid-giving capacity to now relying on more of the private capital. So, thereby, the positioning of India as a of an outreach partner for the G7 is important. >>

Keren, obviously the G7, the world has changed dramatically since it was first set up. The latest joint statement admits that some of the traditional development policies have have had in quotes limited impact. Is is the G7 actually finally admitting to saying that its own approach hasn't worked? >> I think there's probably a range of views between the different members. I mean, the key the key change at the start of 2025 was the US decision essentially to cut back very substantially on its overseas development assistance. I mean, other countries have also cut back. The UK, for example, has switched funding from ODA into um into defense spending, for example, but I don't think it's driven by the same uh the same sort of ideological view as was the case in the US. It's more out of regret than out of um of a a concerted approach. And I think there is a view among many G7 countries that although there is for a variety of reasons can be less public finance in the development space, it's still very important and it's still very important to deploy it in the best possible way. Uh and that includes in relation to to to leveraging in private finance. You you need elements of public finance in order to do that effectively. >>

Right. I want to highlight something that the Kenyan President William Ruto said. He told G7 leaders to support changes to the global financial system. He argued that Africa's main constraint was not a shortage of capital but ways to access that. >> We're going to reject any relationships that are based on extraction of our natural resources, energy resources, human capital. We are instead going to build relationships with partners who are interested in investments in our continent, not extraction. Africa is not a problem to be solved. It is actually a big part of the solution. I also made it absolutely clear that Africa is not a burden for anybody to carry. Africa instead is an opportunity that can be harnessed for global progress. >>

Chris, have I want to bring you in on this. Is Is that a sentiment that is shared right across Africa at this point? >> Yes, uh I I think so, and I think what we've seen in the in the last couple of years is very much a change of narrative around what African countries demand from the relationship with external partners. One of them, and despite seeing over the last couple of years the reduced in terms of development financing into the continent, a lot of the narratives that are coming from here is that we need partners that can support the access to capital, the idea that African countries uh tend to go into international markets and find their interest rates to be considerably higher than what they are able to do. It shows that imbalance around that. And particularly when it comes to changing the economic structure within the continent, we've seen over the years African countries looking to develop more complementary tools that increasing traffic trade and infrastructure inter connectivity within the continent, whether through the African Continental Free Trade Area, whether through the creation of payment systems that can utilize and settle the trade with local currencies. I think that is as much for African countries to look into what types of relationships they want, but also for Western countries, including those represented within the G7, to identify that there is new demands, new spaces, but also new players coming into two different environments offering more favorable conditions. And that I think is some of the challenges that G7 countries are yet to be able to deal with, to understand what is their role and what is their place and how to interact within these changing environments. >>

I want to discuss BRICS a little bit further in detail. It's one of the main alternatives to the G7 and claims to represent the voice of the developing world. Let's take a look at how those two groups actually match up in terms of nominal GDP. The G7 makes up 44% of the global economy while the 11 BRICS nations are around 28%, but there's more than one way to calculate GDP. Purchasing power parity or PPP takes into account differences in the cost of living from country to country. Now, on those terms, we get a very different picture. The G7 is now at 28% while BRICS overtakes it, clocking in at more than 40%.

Shanti, if I can bring you in here on all of this, how big an influence does India actually want to have in in going forward and and really pushing BRICS at this point in time? >> But, I think as you rightly pointed out in the discussion of my previous panelists, I think it's important to understand that G7 has not been really able to fulfill the gaps which have been existing in the global south. And BRICS is definitely an alternative platform in the sense of being the voice of the global south. So, having said that, there's this creation of the new development bank, but there are differences in the way in which the aid is given. For instance, it is more transactional and geopolitical in many sense. BRICS has also created a contingent reserve arrangement for countries in the in the developing world and the global south as a safety net to strengthen and you know shield the payments balance of payment prices which our members can face. But having said that BRICS cannot really traditionally replace what G7 had been doing and thereby there is a gap of how it's going to progress. I mean the President Lula has made this point and there are any efforts to replace that kind of an arrangement in terms of how you can replace a traditionally aid giving agency like the G7 with BRICS. But the geopolitical competition and the conflicting interests between member countries is going to play out in various ways that it will be more of loans rather than aid per se. >>

Okay Creana if I can bring you back in on this. We highlighted the purchasing power parity the PPP. BRICS now is outweigh the G7 as we mentioned. I mean what's one of the biggest structural weaknesses that's actually stopping BRICS from from becoming a genuine rival do you think? >> Well I think it's as you pointed out as you please pointed out at the start there is a great deal of diversity among the different members. There's a lot of things they don't necessarily agree on and indeed in the past one of the real strengths of the G7 has been its cohesiveness even though it's a much smaller part of the global economy than it was you know when it was first set up in the 70s. It still remain influential and indeed in the with the previous US administration was very influential partly because of that cohesion. That doesn't really exist anymore because President Trump doesn't share many of the the the broader principles of other members of the G7. So that has actually weakened the the G7's ability to propose solutions to problems to resolve internal differences and to if you like defend the interests of the G7. So I think I think you know in a way the difference between the BRICS and the G7 now is less than perhaps it was um a few years ago. Both of them suffer from from having these very diverse views. And I think what they have to both do is find perhaps a much more limited set of issues on which they do um you know, they do have a a common view. So, just one example that came out of the summit, I think all the G7 members were very concerned about the impact of new AI models on the financial system and the risk of to financial stability. So, that is one example, an important one that they can work on together. >>

Okay, Gustavo, South Africa's the only African member of BRICS. Do you think that it's actually amplifying the continent's voice or is it just focusing on itself at this point? >> I think two, and I think first of all, I think since 2024, uh there are three African members within BRICS, uh namely South Africa, Egypt, and Ethiopia. South Africa historically has been the sole African member for most of the duration of BRICS. I think for countries like South Africa, historically, what has been important to is utilize its own African identity as an important justification that provided its own credibility around that. But also the way that it has framed over the last 15 years, 16 years, how what priority South Africa brought to the table. I I think to a certain degree, what we see here is particularly with the expansion, there is the need of a stronger African identity within the group, and countries like Ethiopia, Egypt, and South Africa to to negotiate, to coordinate their own positions with one another, and to identify what are the areas in common that they have that they would like to bring to BRICS. But also understanding that the diversity and differences between members historically within BRICS has been seen perhaps more as an asset than than than a constraint. >> Right. Cuz fundamentally, what has happened is historically within BRICS, it is a process where the members spend more of their effort and political capital on the things that they can agree on and very easily understand that BRICS may not be the right platform to deal with every issue that are of national importance for individual members. >>

Okay, I will I want to highlight the rise of of middle powers. Now, the US and China are the world's leading economies, but where does else fit in with the current world order? At the World Economic Forum in Davos this year, Canadian PM Mark Carney spoke about middle powers. He urged them to band together in order to increase their bargaining strength against larger neighbors. As he put it, "If we're not at the table, we're on the menu." A middle power is generally a notch below the five nations that permanently sit on the UN Security Council, but they still have enough military or economic clout to have some influence over global Examples of this would be South Korea, Canada, and Australia in the global north, or Argentina, Brazil, and Indonesia in the global south. But it's not clear whether these nations have enough common interest to work together as a block.

Shanti, if I can bring you in on here. What do you make of of of the term middle powers? Do you think it has a place in in the world going forward? >> Well, I think we are seeing a kind of churn in the present geopolitical order. There's a lot of instability. There is a lot of reordering and restructuring which is going on. And as you mentioned, there are two major economies at the moment that is US and China. But beyond that, the middle powers are gaining ground in that space and in that uncertainty provided by the present geopolitical order. India definitely stands to gain from this position. So does countries where the Prime Minister of Canada has really explicitly talked about middle powers and their countries in Europe, Germany, France, Australia. There are other countries in South America as well. So, I think there is a space which is provided in terms of looking at a restructured geopolitical and global order where the middle powers are emerging as important poles. And each of these poles will have a huge strength in terms of just not their populace, but also the economies. And that itself will kind of lead to a restructured world order we're talking about. So, when you look at the groupings and you look at what's happening in terms of the BRICS or you're talking about the G7 and the G20 and ASEAN and all of that, I think the middle powers are gaining more prominence in this kind of regional groupings and thereby the relevance of G7 can be questioned at particular point of time given that fact that they've cut substantially on the aid and are not making those pledges visible to people on the ground, particularly in the global south. >>

Okay, Creal, I want to get your thoughts on what Mark Carney said. If we're not at the table, we're on the menu. Some people have said that that is hyperbolic, but but is there really economic will among those middle powers to to try and come together and form maybe a block of its own? >> Yes, I mean, I think the the key differences between, if you like, the US and and China, I have to say, who, for example, in their approach to world trade, I mean, the US has uh increased tariffs from, you know, a very low level to by about seven times when when President Trump came in. And China, over a long period of time, has not played by the same rules on trade as as most other countries in terms of how it uses subsidies and public procurement and so on. So, the big difference, if you like, is between those two economies, the really big ones, and if you like, the rest of the world, which I think still does want to have a rules-based approach to trade. And indeed, that's evidenced by the fact that more than 70% of world trade still takes place on WTO terms. So, I think there is the basis for, if you like, a a group uh of countries, I mean, the middle powers, but others, smaller ones as well, who want to stand up for that uh rules-based approach, not just in trade, but in all the other issues that face the global economy. So, you know, net-zero transition, monetary and financial stability, and so on. And for me, at least, that's what I would prioritize if I was among that group of countries. >>

Okay, Gus, uh middle powers across the global south, you've got Brazil, Indonesia, Argentina to to name just a few. Do they share enough in common, do you think, uh to form a block of their own? >> I think to a certain degree, what what we see for most members of groups like BRICS, it is a grouping of middle powers looking to increasing their voice within global economic governance. And I think to to what we need to identify here is to what degree groups like BRICS, groups like G20, and the G7 can be paralyzed by some of the geopolitical disputes. To what degree we have commonalities between middle powers within the global south and global powers within the global north. And I think that historically, that term has been utilized to present countries like Australia or Canada that were very much order-conforming, that were very much countries that were supportive of the beneficial gains that they had in terms of the old based order. And to what degree the demands that we have from the global south, that the idea here is not just being out of the menu or being part of the table, but it's to what degree we were able to sit at the table to decide what is on the menu or not, to avoid being on the menu, but particularly to be influential to make the changes and turn of directions that countries want to do. And I don't think that is necessarily across global south countries only, but also what are the points of commonality that we find globally outside of the big superpowers being the United States and China. >>

Shanti, this is quite a broad question, but what is the single most important change developing countries actually need from the international system right now? >> Well, I think they need more of equity and justice. For instance, if you look at the good leverage G7 has in terms of the voting rights or in terms of the power potential or even the fact that currency itself the dollars play such an important role. So, I think there has to be a reallocation of the voting shares to match the contemporary reality African continent is one great example of having more than 1 billion people. So, we need to look at more of multilateral development banks and mechanisms to address the realities of the developing world. And BRICS and all of these organizations do not really represent the needs of the people on the ground. It's more more of a geopolitical setup a competition between countries playing out in different ways that they can't even move away from the dollar and have their own bilateral trading agreements based on currencies. I think that would be one indicator a shift of the trust between these countries. So, the developing countries definitely need more in terms of assistance. The fact that the ODA has been cut by more than 44 billion dollars and it has hit maximum the most vulnerable section of the developing world. That is agriculture, health care, education, climate issues. And thereby I think the developing countries through G20 and other such forums will be looking for space. And obviously this gives the middle parts an opportunity to lead on this direction for the developing world. >>

Unfortunately, we will have to leave it there. We've run out of time, but thank you so Creon Butler, director of the global economy and finance program at Chatham House. Gustavo de Carvalho, head of the African governance and diplomacy program at the South African Institute of International Affairs. And Shanti D'Souza, founder and president of the Mantraya Institute for Strategic Studies. Thanks so much for joining us here on Counting the Cost. Great discussion. And that is it for [music] our show. You can get in touch with us on X at Tom McGrath _NZ. Do use the hashtag #AJCTC when you do. Or you can drop us an email. [music] countingthecost@aljazeera.net is our address. But there's more for you online at aljazeera.com/ctc. [music] That will take you straight to our page which has individual reports, links, and entire episodes for you to catch up on. Well, that [music] is it for this edition of Counting the Cost. I'm Tom McGrath. From the whole team here, >> [music] >> thanks for joining us. The news on Al Jazeera is coming up next.