The St Petersburg paradox, Mark II

Ian Beales

The last time Vladimir Putin hosted a summit in St Petersburg, it was to support efforts to save the tiger from extinction. At the upcoming G20 summit, he will be herding cats of another kind, but the differences don’t end there. First, the G20 is not yet officially an endangered species. Second, the tiger is actually worth saving.

The same can hardly be said for the G20, whose record as the world’s steering group on delivering international financial stability is poor. It has missed many of its targets since taking over the role from the group’s finance ministers in 2008. G20 is too big, unwieldy, impersonal – and its subject matter often too wonkish – to engross heads of government habitually distracted by domestic and other troubles.

On-going eurozone meltdown, economic slowdown in China and India, a bold but unproven fiscal initiative in Japan, civil unrest in Brazil and Turkey, constitutional crises in Argentina and Italy, political uncertainty in Australia – plus civil war in Syria – don’t improve the odds of success at the Constantine Palace in September.

Unless, perhaps, you take into account the St Petersburg Paradox. The host city gave its name to this arcane mathematical conundrum at a science convention in 1738. Essentially, it is based on a game of probability and risk assessment in which players bet on how often a coin would have to be tossed before it came down as heads, with the initial stake doubling in value each time that it doesn’t. In theory, it offers the chance of infi nite rewards. But in practice punters will never bet enough to win them, hence the paradox. It sounds like a simple triumph of rational expectation over improbable hope, but it has absorbed scholars for centuries.

It would not take an expert in probability theory to divine that the G20 summit currently generates little hope, let alone expectation. So, if there is one person who could do with a modern St Petersburg Paradox – an inverted, Mark II version, where upbeat hope triumphs over grim probability – it is President Putin. His isolation over Syria at the G8 summit in June seriously dented his image as a world leader. Success in St Petersburg would restore it. But how can it be done?

One way would be for the G20 to re-invent itself. It desperately needs a new direction: fresh ideas, clear vision and greater drive to increase its relevance. Such radical transformation won’t come instantly. But Mr Putin could use his presidency to plot the new course. He could take a reforming lead by urging expansion of the G20 role beyond its current horizons of protecting international financial stability. Many of these functions could be better handled – as before 2008 – by the G20 finance ministers working with a beefed-up Financial Stability Board.

This would free the Heads of Government summit to develop into a substantive world steering group over a wide range of key policy areas. It would also need to be more inclusive in embracing the concerns of non-G20 nations, to help mobilise the potential of emerging countries in Africa and Asia, with no voice in St Petersburg, but a lot to lose and much to offer.

At its heart, G20’s task should be to identify urgent social need and to co-ordinate and support radical solutions. The remit could be broad – from protecting the planet from poor environmental practice, like that threatening wildlife in the Himalayas, or destroying farmland in Africa – to eradicating bad industrial practice, such as that which left 1,127 workers dead in a collapsed factory in Dhaka.

The biggest single expansion of mobile banking, for example, was made possible not by G20 edicts, or even by some cyber-lab in the US or Europe. It was a revolution home-grown in Kenya – driven by social need, circumstance and indigenous inventive genius. G20’s new role should include enabling and encouraging such technological leaps, which can transform the lives of millions.

Such sweeping reform would not be without risk – not least if the G20 broadened its scope, without raising its game. But it is a risk worth taking. Surprisingly, for a man who once closed down most of Russia’s casinos, President Putin has a gambler’s instincts. In that, he is truly the St Petersburg paradox embodied. He should seize the moment.

About the author:

Ian Beales is the Editor of Global: the international briefing


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