The complexity of the international financial community was never more apparent during a global financial crisis. The international financial community is more vital to the functioning of the US economy than ever before. In light of that development how does the G8 affect international economic policy?
When the Group of Eight (G8) was originally formed in 1975, it was actually the Group of Six, including the United States, Great Britain, France, West Germany, Italy and Japan. At that time, these were the six largest economies in the world. Subsequent additions inlcuded Canada and, in 1997, Russia.
The original purpose for the summits held by the G7 and, later, the G8, was to discuss and coordinate macroeconomic policies. Until the last decade, it represented the greatest concentration of wealth, and the greatest economic power, in the world. With the rise of China, now the second largest economy in the world, and the development of the so-called BRICS -- Brazil, Russia, India, China, and South Africa -- the influence of the G8 (notice the inclusion of Russia in both categories) has diminished considerably. It is still influential, but its ability to dictate or influence international exchange and interest rates is no longer as formidable as it once was.
As globalization spread, and as the U.S. dollar declined against other currencies during the 2000s, more and more countries began to agitate for an alternative to U.S. global economic dominance. The 2008 banking crisis, which swept the industrialized world, hit China less severely, thereby buttressing its growing image as an alternative to the United States for global economic influence. The fact that China holds as much U.S. debt as it does has contributed to the development of that image.
The European Union, once a growing economic force to be reckoned with, has experienced very serious and wide-spread financial problems, with Greece and Spain requiring considerable assistance from other EU members, notably an increasingly disgruntled German population, in servicing their high levels of debt. The United States is experiencing severely-high levels of debt itself, thereby weakening its international standing and moral posture. Consequently, the G8 lacks the level of influence it did ten years ago. The concentration of wealth in the original G6 and G7 is still high relative to the rest of the world, and its ability to influence global economic conditions is still high, but that influence is diminishing every year. The BRICS represent a growing number of countries jealous of western economic domination, and actively seek alternative means of influencing regional economies.