At the conclusion of its recent summit in Pittsburgh the Group of Twenty Finance Ministers and Central Bank Governors (G-20) declared itself “the premier forum for our international economic cooperation.” Within a week, at semiannual meetings of the International Monetary Fund (IMF) and the World Bank in Istanbul, the Group of Seven (G-7) acknowledged the end of its two-decade role as the primary vehicle for discussion of the global economy.

The move has been hailed as “a symbolic act of inclusion of immense importance to international politics.” And it is a grand political gesture. But in the cold, hard world of economics, this expansion of the global economic decision-making table is simply recognition of a reality exposed by the recent crisis: emerging markets account for a significant and growing share of the world economy, have been critical players in efforts to engineer a rebound, and will soon be the engine of global growth.

Nineteen countries plus the European Union (EU) comprise the G-20; it accounts for 85 percent of global GDP, 80 percent of world trade (including trade within the EU) and two-thirds of the world population. That the G-20 would supplant the G-7 was inevitable: Emerging economies–notably China, Brazil and India—account for more than half of global GDP.

The decision gives China, Brazil and India more say in steering the global economy, a role long played by the US, Great Britain, France, Italy, Canada, Japan, Germany and, to an extent, Russia.

The transition to G-20 represents a major and necessary change (from a political perspective) in the global financial architecture, but this larger group is likely to coexist with the G-7. The G-20 is focused on financial stability and regulation and fiscal and monetary stimulus. The G-7 will continue to have a role in political security issues such as climate change, energy policy and nuclear non-proliferation.

Both groups have been good at establishing common frameworks for dealing with certain global issues but have largely failed when it comes to getting actual policies enacted by member countries.

Beginning in Washington, DC in November 2008, continuing in London in April 2009 and culminating in Pittsburgh, the G-20 became the main forum for debating the financial crisis. But like the G-7 before it, the G-20 will struggle for relevance because the major players will respond first to domestic political concerns and will always act in their own interest.

Although the Pittsburgh summit resulted in agreement on the broad outlines of a future regulatory structure, the overhaul of international standards of bank regulation remains subject to domestic political factors. Taken together the broad reforms agreed to by the G-20 would make risk-taking more expensive, thus limiting banks’ ability to pay exorbitant bonuses.

But the institutions on whom new burdens would operate apparently wield as much political influence as they did before Lehman Brothers collapsed. The financial sector has regrouped and is lobbying hard against “excessive” levels of regulation. And CEOs have warned that forcing banks to hold too much capital would impair lending and damage the economy.

Tensions over foreign exchange rates illustrate the difficulty the G-7 had in maintaining control over global policy. Persuading China to appreciate its tightly controlled renminbi is widely seen as crucial to correcting trade imbalances, but China isn’t a member of the G-7.

A critical test of the influence of the new members of the G-20 will be handling the unwinding of the imbalances that threatened the global economy. In Istanbul, one of China’s top central bankers reportedly assured European officials that China was doing its part to shift from export-led to domestic-driven growth. Such a shift would likely lead to the strengthening of the renminbi.

This is encouraging but unconfirmed. And China has proven itself obstinate when it comes to supporting multinational efforts with regard to key trading partners that run afoul of the international community, such as Iran, and it has continued to come up short of its own previous commitments when it comes time to contribute funds to the IMF.

The prevailing view among economists is that the imbalance must be addressed by an adjustment of the currencies; in other words, the renminbi needs to float against the US dollar.

The rising savings rate in the US will help, and Europe, primarily Germany, could invest more. But discussions within the G-20, and the IMF, which may soon become the working staff for the ascendant group, must move beyond the theoretical to the tangible.

Whether a delicate discussion of currency pegs is more likely to result in substantive change with 20 members as opposed to seven or eight is an open question. The math alone makes an agreement seem more remote. And recent comments by He Yafei, China’s vice foreign minister, suggest we may be living in a G-2 world.

He didn’t specifically mention the US dollar but said that given China’s major holdings of foreign currencies fluctuation was a concern in both the short and long term. He voiced support for a system of “mutual assessment” involving the IMF, and said he thought “assessments of the policies of major reserve currency-issuing counties will be included in this.”

When asked about any enforcement mechanism to settle potential currency disputes between the US and China, He noted the system of mutual assessment would be voluntary and legally nonbinding.

The transition to a G-20 as the primary forum for economic and financial debate symbolizes the rise of its most important new member, China. It’s a reminder of a hard reality, too: Although China won’t soon surpass the US, the distance between the two is shrinking.

In other words, the US share of global GDP is shrinking; this means less demand for dollars relative to other currencies.

The Federal Reserve and Congress are flooding world are flooding the world with dollars to try to stimulate the economy; too many dollars and too little demand equal a lower price. And to right the global trade imbalance, the US will eventually have to import less and the rest of the world will have to import more. If that’s the goal, a weaker dollar is going to look awfully convenient to policymakers.

The recent revolution in intergovernmental policymaking is only the latest evidence that the global economic order has changed. Istanbul, the junction of West and East, was a fitting locale for the denouement of a largely symbolic transition.

Asia is gaining in global importance while the US and Europe are receding, but efforts to coordinate solutions to the world’s economic problems will still be impaired because domestic concerns still prevail over the international interest.