Russia and post-Olympic global governance

The world economy and Russia have undergone developments that have called into question both the role of the G8 and Russia's role within it.

The winter Olympic games in Sochi, Russia, look to have been a success, especially for Russian President Vladimir Putin. As successful politicians are wont to do, Putin clearly basked in the associated international visibility and national pride.

Unless Russia's invasion of Crimea causes a boycott, Putin will have another opportunity in Sochi to highlight Russia's and his own international role: the summit of government leaders from the Group of Eight (G8) industrial countries on June 4th and 5th this year. Other countries in that group include the other largest industrialized economies: the US, Canada, Japan and the four largest European economies, or the G7.

To some extent, this is fitting. The Russian Federation is the world's eighth largest economy, and after a painful experiment in radical market liberalization following the collapse of the Soviet Union in 1991, it has gradually been integrated into the global economic mainstream, notably by becoming a member of the World Trade Organization in 2012.

But the Russian economy remains structurally weak, still suffering from decades of massive Soviet investments in underproductive industrial capacity, and remains highly dependent on the outlook for energy resources. Russia's gross domestic product per capita is less than a third of that of other G8 countries, when measured in a common currency, although it has risen quickly since Putin's first presidency in 2000.

How did Russia manage to join a group of far more advanced economies? Partly to encourage market-friendly developments and, it was hoped, democracy in a nuclear power, the G7 first invited Russia to join them in an observer capacity and extended full membership in 1997.

However, since then, both the world economy and Russia have undergone developments that have called into question both the role of the G8 and of Russia within it.

Notably, the G8's role in the global economy has shrunk significantly. While once the G7 represented more than two-thirds of the world's GDP, today it accounts for less than half. Large and emerging economies — notably China, India and Brazil — are now occupying a much more important position within the global economy.

A new leaders' forum — the G20, comprised of the G8 leaders as well as those of key emerging and other economies — arose during the last global crisis, as a sort of "steering" group for addressing global macroeconomic coordination and financial stability issues, and other matters affecting the global economy.

Bereft of its former leading economic role, save for stabilizing interventions in currency markets where some of its members still play a central function, the G8 is increasingly a group of very well-off countries addressing a more focused set of problems that, thanks to their wealth and overwhelming military superiority, they are still able to address effectively. Thus, progressively, the G8's agenda has shifted to international security questions, human rights, debt relief and other development issues, global health and tax cooperation.

But the conditions for effective G8 action — like-mindedness among rich countries on sensitive political and economic development issues — raise rather starkly the question of whether Russia, already a legitimate member of the G20 by virtue of its sheer economic size, also belongs in the more select G8.

If the G8 meeting goes ahead, Putin will be presiding over a summit in Sochi at which many will see him as the odd man out, not to say an unhelpful player. The ability of Russia to concretely deliver on the motto of the summit, "Risk Management for Sustainable Growth in a Safe World," will be a test of whether it continues to belong to the G8. It is indeed a test of the very relevance of the G8.