This is nothing new. The trouble with the G7 is that when it has achieved concrete results, these have more often than not backfired. This has eroded the willingness of the nations present to swallow their differences in joint initiatives. On top of that, the G7 has only really worked when the US has been willing to put its back into it, something that it is less and less prepared to do.
The G7 took shape in the Seventies to create an informal forum for the management of the world economy after the collapse of the Bretton Woods system of fixed exchange rates. Perhaps its most concrete achievement was the 1978 Bonn summit, when a reluctant German government acceded to American pressure to act as a "locomotive" to a flagging global economy. However, that stimulus was subsequently blamed for triggering the renewed upsurge in world inflation and the second rise in oil prices.
The G7 fell into abeyance in the early Eighties, partly as a result of the ill-feeling engendered by the fall-out from the Bonn summit together with the go-it-alone spirit of the first Reagan administration. But in the mid Eighties it revived with a vengeance in concerted efforts to manage exchange rates.
The key to this new lease of life for the G7 lay with the Americans, who decided they wanted to pull the dollar down from the crazy heights it had scaled in the early Eighties. The result was the Plaza Agreement of September 1985, under which central banks intervened with heavy sales of dollars in the foreign exchange markets. The plan appeared to work too well for its own good as the greenback then went into freefall. By early 1987, the finance ministers were at it again, this time seeking to stabilise the dollar with the Louvre Accord.
Once again, however, the concerted effort was subsequently judged as counter-productive. The Louvre Accord was seen as paving the way for the bubble economy of the Eighties, from which Japan is still recovering. It was also blamed for the stock market crash of 1987.
Since then, the G7 has adopted a lower profile in international economic management. This year, for example, there has been no attempt to redress the exchange-rate fluctuations of the past few months that have forced the yen up by 15 per cent since January. Instead the G7 has limited itself to bromides against budget deficits: the key to resolving international imbalances is now held to lie in the correct domestic policies rather than through co-ordinated international action.
The loss in effectiveness owes much to the atrophying of US leadership - both the capacity and willingness to offer it and the readiness to accept it. As the world's biggest debtor nation, the US is no longer in a position to call the shots to creditor countries. Even if it wanted to, an inward looking, protectionist mood shackles the Administration from taking anything other than the unilateralist posture manifest in its declaration of trade war against Japan.
The central problem with the G7 system is that only the US was able to make it work - and the US no longer can or so desires. The reduction in G7 influence thus mirrors the declining role of the US as an international leader. The US is big enough to rock the boat, as in the trade dispute with Japan. But it can no longer take the role it played for most of the post-war period.
If international leadership is necessary for the health of the world economy, as the eminent economic historian Charles Kindleberger maintains, then that is a cause for great concern. The trouble is there is no obvious way in which economic leadership can be restored to a multipolar world. Into the vacuum flood the all- pervasive financial markets - for better, for worse.