Emaciated or not, the G7 summit has assumed one heavy burden this year, a commitment to reform the international public sector: the UN; the Bretton Woods institutions (the IMF and World Bank); and the new World Trade Organisation (the successor of Gatt). The question has become compelling since these institutions originated half a century ago, in the aftermath of war, in reaction to the Great Depression and in an intellectual climate that vested much faith in public institutions, national and global.
The current mood is quite different. When such solid bastions of national public service and enterprise as the British Treasury, Deutsche Telecom, Air France and the US Federal Housing Department are being prepared for the auctioneer's hammer or the management consultant's knife, international civil servants are not going to be spared from rationalisation and "downsizing".
The international economic institutions are especially vulnerable to critical review, since the market-led global economic integration of the last few decades has, in key respects, marginalised them. Global integration has occurred through national deregulation - mainly of capital markets, partly of trade. Foreign exchange markets, for example, are effectively self-regulating. With a daily turnover of a trillion dollars, more than the total official reserves of all governments, there is no longer any serious pretence, least of all by the IMF whose responsibility this once was, that exchange rates can be "managed" (short of complete monetary union). This is largely true also of the market in internationally traded securities, which grew in little over a decade to $20 trillion at the end of the late 1980s and has since multiplied many times through derivatives. These markets operate and expand without any supranational supervision.
The other dynamic elements in the international economic system have also been market driven, a product of liberalisation policies, mainly in G7 countries that owe little to global institutions; for example, the rapid growth of direct foreign investment flows - which multiplied by 400 per cent over six years during the 1980s and is now growing strongly again. And while the formal process of multinational trade negotiations can be credited with some of the trade expansion which has taken place, the most rapid growth of world trade has occurred in services - such as telecommunications and banking - without the help of a multilateral agreement. Furthermore, global standards are being created - for accounting; telecommunications interconnection, and quality control - on a largely voluntary, improvised, informal basis by the market players themselves.
The international public sector has been left with a diminished role and status. The IMF may seem overpowering to the small, mainly African and former Communist countries, for whom it has become a lender of last resort, but it is a shrunken shadow of the institution conceived by Keynes and his contemporaries. Its currency, the SDR, accounts for a tiny part of international liquidity. No industrial country of any importance has been subject to its policy conditions since Britain in the 1970s. Responsibility for systemic financial stability has been shifted elsewhere: to ad hoc committees of central bank officials meeting in Basel. The World Bank, despite its prestige, has also been marginalised. It is struggling to maintain its share of the shrinking pot of foreign aid, now down to 0.3 per cent of rich countries' GNP. Other UN agencies never had much of an economic role and are fighting to avoid outright closure.
Worse, the international institutions find they have few friends in the G7 countries. Free-market fundamentalists see no need for them. The left, and the environmental movement, has demonised them for some real, mostly imagined, sins against the world's poor and the planet. National politicians and officials, especially in the US, are jealous of their resources and their perks. The idealism and political energy that was once channelled into global multilateralism are now diverted into building regional institutions in Europe, North Africa, Latin America and the Asia Pacific. The global institutions have no popular constituency.
As a consequence of this experience there will be a strong argument at the Halifax Summit to the effect that, since market-led globalisation is working, why fix it? Why try to reinvent or re-engineer public sector institutions when a largely privatised world economy seems to work well enough?
This response would suit the current mood of budgetary cheeseparing. It would also satisfy the preference for low key, intergovernmental, informal fora - like the G7 itself - rather than powerful, supranational institutions. It is also potentially a recipe for disaster.
A world of highly integrated markets supported only by weak rules and institutions is a precarious one. It could crack.
There are signs of this happening even within the G7. One line of weakness is trade policy, as the new, unproven, World Trade Organisation seeks to establish a stronger sense of international legality in the face of a direct challenge from the United States (which is endeavouring to force open the Japanese market unilaterally). Whatever the particular rights and wrongs in the Japan-US dispute, a fundamental issue of principle has arisen: unless the world's most powerful country can be made to conform to the rules of a multilateral institution, the way would be open to a fragmentation of the world economy into bilateral and regional arrangements. This is an issue that the G7 cannot duck.
Another threat is created by the hazardous transition to open market economies being made by large numbers of developing and former Communist countries. The Mexican crisis was a reminder of the vulnerability of these countries to shocks. It also revealed the lack of preparedness of the international institutions to mobilise large sums in emergency lending to help to keep the reform process on track. The G7 has a choice: to support a bigger IMF and World Bank (which in practice also means more aid and debt relief); or to run the risk that many reforms will simply fail. Neither is palatable.
Beyond these immediate concerns, there is a bigger question of how to create strong rules and institutions for a highly integrated world economy. The G7, with its restricted membership and limited ambition, is not the right institution to oversee the international system; but it could perform a useful service by breathing new life into the existing global institutions.