Our chart this week illustrates how in representing more than half of the world economy, decisions taken by the G7 can have a significant impact on the entire planet.
The G7 summit hasn’t formally started yet, but Group of Seven (G7) ministers and their guests have already started to meet ahead of the main event next month, albeit subject to quarantine restrictions.
The #icaewchartoftheweek illustrates how important this gathering is by highlighting how the seven major democratic nations and the European Union that together comprise the G7 represent more than half the global economy – and even more than that, once four invited guest nations are included.
Overall, the G7 economies are forecast by the IMF to generate £35.9tn of economic activity in 2021 at current prices, 54% of forecast global GDP of £66.8tn. This comprises the economies of seven individual member nations: the USA (£16.3tn), Japan (£3.8tn), Germany (£3.1tn), the UK (£2.2tn), France (£2.1tn), Italy (£1.5tn) and Canada (£1.3tn), together with the 24 other EU member states (£5.6tn).
The guests invited to the 47th G7 summit in Cornwall are expected to generate a further £4.9tn or 7% of global GDP in 2021, bringing the total economic activity represented at the summit to £40.8tn or 61% of the total. They are India (£2.2tn), South Korea (£1.3tn), Australia (£1.2tn) and South Africa (£0.2tn).
Not represented at the G7 are China (£12.2tn), Russia (£1.2tn) and Brazil (£1.1tn) and around 160 other nations across the globe (£11.5tn in total).
The G7 summit presents an opportunity for the 11 national leaders and 2 EU representatives involved to shape the direction for much of the world, with discussions expected to range from saving the planet through to transparency in financial and non-financial reporting.
19 March 2021: The UK’s Integrated Review is the inspiration for this week’s chart, illustrating the 20 countries around the world that spend the most on their militaries.
The UK Government launched its Integrated Review of Security, Defence, Development and Foreign Policy on 16 March 2021, setting out a vision for the UK’s place in the world following its departure from the European Union and in the context of increasing international tensions and emerging security threats.
At the core of the Integrated Review is security and defence, and ICAEW’s chart of the week illustrates one aspect of that by looking at military spending around the world.
The chart shows spending by the top 20 countries, which together comprise in the order of £1.2tn of estimated total military spending of around £1.4tn to £1.5tn globally in 2019 – an almost textbook example of the 80:20 rule in action.
More than a third of the total spend is incurred by just one country – the USA – which spent in the order of £526bn in 2019 converted at current exchange rates. The next biggest were China and India at £200bn and £50bn respectively, although differences in purchasing power mean that they can afford many more soldiers, sailors and aircrew for the same amount of money. This is followed by Saudi Arabia (£45bn), Russia (£41bn), France (£38bn), the UK (£38bn), Germany (£38bn), Japan (£34bn), South Korea (£33bn), Australia (£21bn), Italy (£20bn), Canada (£17bn), Israel (£16bn), Brazil (£14bn), Spain (£13bn), Turkey (£11bn), the Netherlands (£9bn), Iran (£9bn) and Poland (£9bn).
Exchange rates affect the relative orders of many countries in the list, for example between Russia, France, the UK and Germany which can move up or down according to movements in their currencies, while there are a number of caveats over the estimates used given the different structures of armed forces around the world and a lack of transparency in what is included or excluded in defence budgets in many cases.
In addition, the use of in-year military spending does not necessarily translate directly into military strength. Military capabilities built up over many years or in some cases (such as the UK) over many centuries need to be taken into account, as do differing levels of technological development and spending on intelligence services, counter-terrorism and other aspects of security. Despite these various caveats, estimated military spending still provides a useful proxy in understanding the global security landscape and in particular highlights the UK’s position as a major second-tier military power – in the top 10 countries around the world.
Global Britain in a Competitive Age: the Integrated Review of Security, Defence, Development and Foreign Policy sets out some ambitious objectives for security and defence, which it summarises as follows: “Our diplomatic service, armed forces and security and intelligence agencies will be the most innovative and effective for their size in the world, able to keep our citizens safe at home and support our allies and partners globally. They will be characterised by agility, speed of action and digital integration – with a greater emphasis on engaging, training and assisting others. We will remain a nuclear-armed power with global reach and integrated military capabilities across all five operational domains. We will have a dynamic space programme and will be one of the world’s leading democratic cyber powers. Our diplomacy will be underwritten by the credibility of our deterrent and our ability to project power.”
26 June 2020: The prime minister has announced a reduction in the number of government departments. How big is the cabinet compared to the rest of the world?
The news that the UK Government is reducing the number of government departments by one prompts the #icaewchartofthemonth to take a look at the size of government executives across the world.
As the chart highlights, with 26 members, the UK cabinet is one of the largest amongst major economies – comprising the prime minister Boris Johnson, 21 department ministers and four ‘ministers attending cabinet’. This does not include the Cabinet Secretary or other officials, meaning that cabinet meetings generally involve more than 30 people in total.
Compare that with the more compact 16-member German federal cabinet (Chancellor Angela Merkel and 15 departmental ministers) and the ten-member Chinese state council executive (comprising the premier Li Keqiang, five vice-premiers and four other senior departmental ministers).
It is certainly much larger than FTSE-100 company boards, where the average size is 11, and very few listed companies have more than 16 board members.
There is some debate around whether reducing the size of the UK cabinet would be more conducive to effective government. Some suggestions that the merger of the Department for International Development (DfID) with the Foreign & Commonwealth Office (FCO) to form the new Foreign, Commonwealth & Development Office (FCDO) in September is the first step on the way to that goal – with further mergers possible. However, although there will be one fewer departmental minister, there is a reasonable prospect of the minister responsible for development at the FCDO being invited to attend cabinet given its importance to the government’s global agenda.
Of course, merging departments is not the only way to achieve a slimmer cabinet – for example, the 31-member Russian cabinet (not shown in the chart) rarely meets as one body. Instead, there are regular meetings of the 10-strong prime ministerial group (the prime minister Mikhail Mishustin and nine deputy prime ministers) and occasional meetings of the 20-strong cabinet praesidium that includes the most senior ministers as well.
The UK Cabinet also works in this way to a certain extent, with critical decisions often being made in smaller groupings of senior ministers, such as the 9-member National Security Council, the 9-member Climate Change Committee or the 12-strong EU Exit Operations Committee for example. Canada, with its 37-member cabinet, also operates through a series of cabinet committees ranging from around 8 to 15 members. However, in both cases, the full cabinet still meets regularly and remains the formal executive body for authorising government actions.
With rumours of a cabinet reshuffle in the UK this autumn, it will be interesting to see whether moves to reduce the size of the cabinet will actually take place or whether we will see further development of cabinet committees as the places to be ‘in the room where it happens’.