Giraffe in city street [News]Founded as the Group of Six in 1975, comprising of finance ministers and central bank governors of France, West Germany, Italy, Japan, the United Kingdom, and the United States; the G7 grew to become an influential actor in shaping global governance processes.  Canada was admitted to the group the following year, and Russia was coopted to the heads of government segment in 1998, but not allowed to participate in the finance ministers’ track. Russia would again be ejected from the group in 2014, in the wake of a fallout over Ukraine.

In the course of nearly four decades of the group’s existence, it has exerted enormous influence on the global economy. It has shaped ideas about global economic governance, and was a pacesetter on the performance of the global economy. That era was brought to a halt by the outbreak of the global financial crisis.

The financial crisis acted as a crucible that gave rise to the G20 Leaders Summit to overshadow the G7/8 as a premier mechanism for global economic governance. There are many who predicted that the G8 would simply disappear into oblivion. However, the group has continued to exist, more as a caucus mechanism to influence decision-making processes in multilateral processes including the G20.

In early June 2015, Germany played host to the G7. The declaration that emerged from the Schloss Elmau Summit was hefty and covered everything under the sun: a comprehensive undertaking to decarbonize the global economy by the end of the 21st Century; combatting tax evasion; tackling security challenges in Central Europe, the Middle East, and Africa; dealing with major health crises; and improving the plight of women. This is in addition to contending with deep structural challenges that plague many G7 economies.

What is becoming clear is that there is a false sense of power amongst the G7 that they still have capabilities and can call the shots on global affairs. In some respects they behave as if China’s rise is not a game changer, and that other rising powers such as India, Brazil, and Russia are irrelevant. It has not fully dawned upon the G7 countries that the gravity of power is shifting in fundamental ways, and global coordination require different ways of managing a global system that is undergoing a complex transition.

In many ways, in its conception of power the G7 suffers a phantom limb syndrome – a sensation that a limb that has long been amputated is still firmly attached to the body. Since the global financial crisis, it has become more glaring that the global system is no longer anchored on just one center of power. Rather, it is fragmented along multiple and competing groups that are all vying for significance.

In addition to the G7, these groups include the BRICS, and MIKTA, which is made up of Mexico, Indonesia, South Korea, Turkey and Australia. The BRICS hosted its 7th Summit in Ufa in July 2015, which Russia used as a platform to try and project its global relevance. Of concern for the stability of the global system is the tensions between countries that belong to these different groups.

The tensions between the US and Russia over Ukraine are not subsiding. The US and China have sharp differences over the East and South China Sea, with the US also accusing China of engaging in cyber-attacks. Japan and China collide intermittently over disputed Islands in the East China Sea. These tensions deepen mistrust amongst major economies that belong to important geopolitical groups. This bodes ill for managing interdependence, deepening cooperation and stabilising the global system. Already the World Economic Forum Global Risks 2015 has identified geopolitical risk as one of the top risks this year.

While it is apparent that the G7’s influence on global affairs is waning, and that BRICS countries are growing in influence, there is nothing that stops the two groups from collaborating. They could, for example, establish the basis for strategic dialogue on an equal footing to collaborate on a range of issues, including overcoming global security threats. They could also forge cooperation over areas in which there are significant grounds for agreement. Some of these areas include tackling climate change and energy challenges, enriching the post-2015 agenda for sustainable development, and managing the reform of global governance system.

A version of this article was published in the Business Day edition of 12 June 2015