{"id":9252,"date":"2013-08-08T12:25:44","date_gmt":"2013-08-08T12:25:44","guid":{"rendered":"http:\/\/www.global-briefing.org\/?p=9252"},"modified":"2013-08-16T08:47:32","modified_gmt":"2013-08-16T08:47:32","slug":"a-summit-past-its-peak","status":"publish","type":"post","link":"https:\/\/www.global-briefing.org\/2013\/08\/a-summit-past-its-peak\/","title":{"rendered":"A summit past its peak?"},"content":{"rendered":"

G20, having missed its key targets on financial reform, can only succeed by transforming itself<\/strong><\/span><\/p>\n

The G20 was convened to address the challenges of global financial instability, but is now clutching at straws.<\/span> <\/span><\/p>\n

In a mark of its confusion and lack of direction, it has asked a sociobiologist, Rebecca D. Costa, to be the opening speaker for its upcoming conclave. The only thing good about the choice is that Costa is a woman. Her book, The Watchman’s Rattle: Thinking Our Way Out Of Extinction<\/em>, expounds a dodgy but currently fashionable theory – complexity – which offers very little that is new. Complexity theory has been around since the 1950s, and has been applied to financial markets since 1995. Costa hasn’t produced anything startlingly original, but has written something that has merely become popular. The G20’s chasing of such a chimera leaves the impression that it has no idea of what really needs to be done to address its actual tasks.<\/span> <\/span><\/p>\n

The original task for which it was convened – at the suggestion of Paul Martin, then the Canadian Prime Minister – was consultation and co-operation on matters pertaining to the international financial system, whose wrinkles were already becoming fault lines by the late 1990s. Formally inaugurated only in 1999, meetings of G20 Finance Ministers and Central Bank Governors were low-profile. Its studies, reviews and discussions of policy issues pertaining to the promotion of international financial stability were so ineffective that they neither prevented – nor even foresaw – the Great Recession (GR), which began in 2007-08.<\/span> <\/span><\/p>\n

This incompetence was ignored in the wake of the financial crisis as global hopes for mitigating the recession shifted from the Finance Minsters to a meeting of G20 Heads of State. This propelled the G20 summit to its current prominence. That meeting, in November 2008, was euphoric because it produced agreement regarding some means of addressing one key issue behind the Great Recession – reform of the financial sector.<\/span> <\/span><\/p>\n

These proposed reforms, however weak, were at least to be pursued according to a timetable monitored by the new Financial Stability Board (FSB), set up to monitor – and suggest improvements to – the international financial system. But it has not happened. Naturally, the FSB’s reports put the best face it can on the <\/span>‘progress’ made since 2008. Yet, in reality, even the weak reforms envisaged by that summit have not been completed nearly five years later. Some progress has been made on creating frameworks and structures, but the most major issues – such as bringing the shadow financial system to heel – remain, at best, a dream.<\/span> <\/span><\/p>\n

Indeed, the FSB meeting on 24 June acknowledged that “parts of the system remain in a state of incomplete repair” and that “volatility in interest rates, asset prices and capital flows has increased”. It therefore asked market participants and supervisory authorities to “incorporate, in their stress tests, scenarios that involve considerably elevated interest rate risk, widening credit spreads, falls in asset prices and material volatility in foreign exchange markets and capital flows.”<\/span> <\/span><\/p>\n

The spectre of competitive currency devaluations has also dogged the global economy since 2007. The latest instance is Japan’s Abenomics. However, it is extremely unlikely that anyone at the St Petersburg summit will want to take Japanese Premier Shinzo Abe to task, as every other major country – including America and China – has been playing this game for several decades. Moreover, Abe has made it clear that if Japan is attacked for its policies, it will return the favour by turning the spotlight on China’s record.<\/span> <\/span><\/p>\n

The whole milieu for the forthcoming summit is also complicated by confusion and unrest in Brazil, Turkey and the Middle East. No one wants to rock the boat too much, lest we move from currency wars to trade wars and – at worst – to actual wars.<\/span> <\/span><\/p>\n

As should be evident to everyone, nothing remotely like global stability has been achieved. In fact, we are in a worse situation in some ways. Though acute near-term risks have been resisted, credit is still not flowing, particularly to small and medium-sized companies. The corporate sector in most countries has been unable to reduce its debt, which poses a continuing threat to these economies, and to financial stability as a whole. Monetary easing, the principal remedy applied to the financial crisis so far, has encouraged exactly the excessive risk-taking, leverage and asset bubbles that created the conditions for the Great Recession in the first place.<\/span> <\/span><\/p>\n

What has been the G20’s response? Instead of intensifying its work in order to achieve global financial stability, it has, astonishingly, chosen to reduce the frequency of its meetings from twice a year to just once a year. More staggeringly, the G20 has tried to distract attention from its failure to stabilise the global financial system by moving the goalposts to another task: the even thornier and more amorphous challenge of enabling growth and improving employment around the world.<\/span> <\/span><\/p>\n

Encouraging growth and job-creation are goals which may not be mutually compatible, unless the G20 is willing to look at fundamental reforms de-prioritising technology and putting the cash, instead, to social needs. The Gates Foundation gives US$1.5 billion each year. By contrast, the 2013 fiscal year budget just for military technology research in the US alone was $69.65 billion. President Obama’s fiscal year 2014 budget request for NASA is $17.7 billion for space research. Forrester Research forecasts that US global spending on IT in 2013 will be $2.06 trillion.<\/span> <\/span><\/p>\n

Further, if the G20 wishes to accomplish stability with growth, as well as with increasing employment, then reforms need to be introduced, not only in the financial sector, as discussed so far, but also in the much more difficult areas of reconstituting money and of re-orienting our entire economic system. Not only are there questions about the G20’s effectiveness and good sense, there are continuing concerns about its very legitimacy. It is a self-appointed body with unclear criteria about which countries to include or exclude at what times.<\/span> <\/span><\/p>\n

The G20’s membership does not reflect the 19 largest national economies of the world in any given year. Indeed, the organisation states that there are “no formal criteria for G20 membership\u2026 In view of the objectives of the G20, it was considered important that countries and regions of systemic significance for the international financial system be included. Aspects such as geographical balance and population representation also played a major part”.<\/span> <\/span><\/p>\n

The 19 member nations are indeed among the top 29 economies, as measured by GDP in nominal prices, and among the top 25 countries by purchasing power parity, in lists published by the IMF for 2013. However, in a club of the rich, exclusion of countries that should qualify because of being in the top 20 – such as Switzerland, Norway and Taiwan – not surprisingly, rankles them. Spain is a “special invitee”. Austria, Belgium, the Netherlands, Poland and Sweden are included only as part of the EU, and not independently, while other countries are represented twice – once as themselves, and once as part of the EU.<\/span> <\/span><\/p>\n

While the G20 believes that the group’s “economic weight and broad membership gives it a high degree of legitimacy and influence over the management of the global economy and financial system”, there have been several different proposals to put the membership on a rational, rather than political, basis. In the words of Jonas Gahr St\u00f8re, then Norway’s Foreign Minister, the G20 “may be more representative than the G7 or the G8, in which only the richest countries are represented, but it is still arbitrary”. Alternative proposals have been given short shrift.<\/span> <\/span><\/p>\n

Other issues affecting the G20’s legitimacy are that it lacks a formal charter, that its meetings are held behind closed doors and that it is usurping tasks that belong to the UN and other international organisations. No wonder St\u00f8re, called the creation of the G20 “one of the greatest setbacks [to rational global governance] since World War II”. The fact is that the G20 will have to be reformed if it is to be genuinely useful – for example by basing its membership on some defensible principle, by taking on some task which is not the province of another international organisation, by accomplishing one task before moving on to another and by holding its meetings in the open.<\/span> <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

G20, having missed its key targets on financial reform, can only succeed by transforming itself The G20 was convened to address the challenges of global financial instability, but is now clutching at straws. In a mark of its confusion and lack of direction, it has asked a sociobiologist, Rebecca D. Costa, to be the opening […]<\/p>\n","protected":false},"author":10673,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[155,160,35,9],"tags":[],"_links":{"self":[{"href":"https:\/\/www.global-briefing.org\/wp-json\/wp\/v2\/posts\/9252"}],"collection":[{"href":"https:\/\/www.global-briefing.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.global-briefing.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.global-briefing.org\/wp-json\/wp\/v2\/users\/10673"}],"replies":[{"embeddable":true,"href":"https:\/\/www.global-briefing.org\/wp-json\/wp\/v2\/comments?post=9252"}],"version-history":[{"count":3,"href":"https:\/\/www.global-briefing.org\/wp-json\/wp\/v2\/posts\/9252\/revisions"}],"predecessor-version":[{"id":9254,"href":"https:\/\/www.global-briefing.org\/wp-json\/wp\/v2\/posts\/9252\/revisions\/9254"}],"wp:attachment":[{"href":"https:\/\/www.global-briefing.org\/wp-json\/wp\/v2\/media?parent=9252"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.global-briefing.org\/wp-json\/wp\/v2\/categories?post=9252"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.global-briefing.org\/wp-json\/wp\/v2\/tags?post=9252"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}