G7 performance on macroeconomic policy

There are key measures the G7 can take to reverse the long-term decline in macroeconomic policy deliberation and decision-making

Macroeconomic policy has been a key subject for the G7 since its first summit in 1975. However, there has been a gradual decline in the G7’s deliberation and decision-making on it. At Hiroshima, G7 leaders must reinvigorate their efforts to make politically binding decisions on macroeconomic policy and continue ensuring a high level of members’ compliance with them.

Conclusions

Since 1975, G7 leaders have devoted 28,041 words to macroeconomic policy in their summit communiqués. However, this deliberation has generally declined over time. In 1975 they devoted 52% of their communiqué to the issue – the all-time peak. There was a gradual decline to 1981, a spike to 48% in 1982, a decline in 1983 and 1984, a spike to 33% in 1985, then a long decline until 1992. New spikes came with 21% in 1993 and 18% in 1998. After a long decline to 2019, deliberation spiked to 30% in 2020, then dropped to 6% in 2021 and 2022. 

There were thus four phases. First, from 1975 to 1982, G7 leaders gave an average of 32% of their communiqués to macroeconomics. Second, from 1983 to 1993, this dropped to 15%. Third, from 1994 to 2019, it plunged to only 5%. Fourth, since 2020, it increased to 14%.

Commitments

Between 1975 and 2022, G7 leaders made 316 public, collective, precise, future-oriented, politically binding commitments on macroeconomic policy, as identified by the G7 Research Group. They accounted for 5% of the 6,626 commitments made on all subjects. Macroeconomic policy ranked tenth, after development, health, environment, gender, climate change, energy, trade, terrorism and regional security. It ranked higher than the other 24 subjects G7 leaders made commitments on.

G7 decision-making on macroeconomic policy saw a dramatic decrease over time. Macroeconomics accounted for 20% of the total commitments at the first summit in 1975 and remained high until 1987, with the exception of two dips in performance in 1979 and 1984. However, starting in 1988, the percentage of macroeconomics commitments dropped significantly, first to 4% at the 1988 summit, and then to zero at the 1990 summit. Decision-making remained low, except for the 1993 Tokyo Summit at 17% and the 2020 US virtual summit at 32%. Subsequently, decision-making again plunged to 4% in 2021 and 3% in 2022.

Compliance

According to G7 Research Group assessments, G7 members have complied with the 23 priority macroeconomic policy commitments at a high level of 83%. This is substantially higher than the G7’s all-time average of 76% across all subjects.

Macroeconomic policy compliance has been relatively stable at this high level. The first three assessed commitments, from 1996 to 1999, had compliance of 100%. There were subsequently only three dips – to 63% in 2003 and 61% in 2004, and 63% in 2016. This increased to 82% in 2017 and 100% in 2018. Compliance with the 2020 summit averaged 75%. It increased to 88% in 2021. By January 2022, compliance on macroeconomic policy from the Elmau Summit was already 100%.

By member, the highest compliance comes from the United States, Canada and France, each with 87%. During the G8 years from 1998 to 2013, Russia led with 95%.

Causes and corrections

To improve compliance on their macroeconomic policy commitments, G7 leaders can use two low-cost accountability measures that have historically coincided with higher compliance.

First, a reference to the private sector coincides with higher compliance. The two assessed commitments with such references averaged 97% compliance; those without averaged only 81%.

Second, a higher number of companion commitments on the same subject at a summit coincides with higher compliance on each assessed commitment from that summit. For summits with more than 10 commitments on macroeconomics, compliance averaged 87%, and those with fewer than 10 averaged only 75%.

A third possible cause and correction is holding more G7 finance ministerial meetings. While there is no strong correlation between the number of finance ministerial meetings each year and compliance with macroeconomic policy commitments, the top-performing summits had at least three pre-summit meetings of finance ministers.

More generally, G7 leaders at the Hiroshima Summit should reverse the long-term decline in macroeconomic policy deliberation and decision-making, as they did in 2020, and craft their commitments to help ensure the complete compliance that their 2022 Elmau Summit has already achieved.