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WEED PeWa
Peter Wahl
World Economy, Ecology &
Development Association
Berlin
Seoul 7./8. July 2010Seoul 7./8. July 2010
The G-20The G-20Structure, Governance, Mandate Structure, Governance, Mandate
and Perspectivesand Perspectives
Content
1. Hiistory, structure, governance of the G-20
2. The G-20 and global governance
3 . The G-20 and the financial crisis
4. Perspectives
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Chapter 1
Hiistory, structure, governance of the G-20
History
Initially established 1999 by G7
Reaction to the Asian crisis 1997/98
Finance ministers and central bankers
Dialogue on global key economic issues
Heads of states since 2008Washington, London, Pittsburgh, Toronto
Seoul, France, Mexico
WEED - PeWaReaction to the crisis 2008
Member statesUS
Canada
FranceGermany
ItalyUK
Japan
Russia
Australia
Brazil
Mexico
Argentina
China
India
South Korea
Indonesia
Saudi Arabia
Turkey
South Africa
EU/ECB
IMF/World Bank
Permanent guest: Spain
Special guests
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Some indicators
65,5% of global population
88% of global GDP
80% of world tradeWEED - PeWa
Nevertheless
The G-20 is not inclusive
It aggravates the marginalisation of the UN
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„The East India Club, in the heart of London’s clubland, ....As a private club, only open to members and their guests, the club still provides a refuge and meeting place for busy young men and their more seasoned seniors.“
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In terms of theory of democracy the G-20 is a Club
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Internal Structures
• No statutes• No binding decisions („peer review“)• No headquarters• No own administration and staff• Rotating presidency• Implementation trough national states
or multilateral institutions
The G-20 = informal institution
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Chapter 2
The G-20 in the system of global governance
Is the G-20 a global economic government?
„We designated the G-20 to be the premier forum for our international economic cooperation.“
Pittsburgh Declaration
1. forum (lat.) = marketplace, open space in the centre of a city
Key words:
2. economic cooperation
G-20 = part of the global economic governance system
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Governance is not Government
• mix of formal and informal cooperation of different types of actors (governments, multilateral institutions, private sector, civil society)
Governance:
• mix of formal and informal procedures and agreements
opacity
complexity
• indirect regulation
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Global Governance
G-20 Summit
OECD
FSB
BIS
UN
IMF
Worldbank
ParisClub
WTO
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IOSCO Basle
Committee
The big problem behind
„The crisis is global. But the instruments to solve it are national.“
Joseph Stiglitz
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Increasing gap between the transnationalisation of markets, in particular finanial markets and
the capability of national states to regulate them.
Why?
Financial marketsNational state
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Disembedding of Global Players from Regulatory control of the national state
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The world of national staates The post-national world of globalisation
National state B
National State A
National state C
National state A
National state B National state C
Emergence of a new, transnational space beyond national states and
intergovernmental relations
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„We have lost control.B. Bernanke
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What a deluge! What a flood!Lord and master, hear my call!Ah, which disaster! Master! I have need of Thee!from the spirits that I calledSir, deliver me!Goethe, The sorcerer‘s apprentice
There is no international or global state to regulate markets
Global Governance as a very imperfect substitute of international statehood
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Chapter 3
The G-20 and the financial crisis
The assessment of the G20
reform proposals depends on the
analysis of the roots and the
nature of the crisis
Some current explanations
Greed
Easy money
Lack of supervision
Subprime crisisReckless behaviour
UNCTAD: „Nothing short of closing down the big casino will provide a lasting solution.“
„The globalisation of savings has created a world in which everything was given to financial capital and nothing to labour,
where the entrepreneur was secondary to the speculator, where the capital owner was privileged above the employees, where the leverage has assumed irrational dimensions. All this
created a capitalism, in which it was normal to gamble with money, preferably other peoples money, to obtain money
easily and extremely fast, without any effort and often without creating wealth or generating employment with these huge
amounts of money.“
Sarkozy in Davos 2010
1. Dominance of finance over labour/real economy
2. Speculation as dominant business model
3. New type of capitalism
Essence of Sarkozy‘s analysis:
Finance capitalism as a specific version of capitalism
Systemic crisis
Traditional role of international financial markets
• providing efficient services payment system for households and real economy
• providing money for public and private investment - lending
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Real Economy
Service function of financial markets
Financial markets
Subordination
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Real Economy
A new system has emerged
Financial markets
Dominance
Th e main characteristics of the new system 1. Liberalization of financial markets
2. Weak regulation and supervision (deregulation)
3. Speculation as a central business model
4. Excessive leverage
5. Procyclical („herd“) behaviour
6. Risky new instruments (CDS etc.)
7. High risky institutional investors (Hedge funds etc.)
8. Intransparency (shadow banking, off-balance sheet operations)
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Systemic instability
Profits in finance higher than in real economyProfits in finance higher than in real economy
Structural underinvestment in real economyyStructural underinvestment in real economyy
Privatisation, pressure on social systems Privatisation, pressure on social systems
Negative effect on employmentNegative effect on employment
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The neo-liberal financial architectureThe neo-liberal financial architecture
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General dimensions of the crisis
1. Stability
2. Distribution
3. Democracy/Policy Space
The G20 is focussing only on stability
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Pittsburgh: interesting promises• we confronted the greatest challenge to the world economy in our generation.
• We cannot rest until the global economy is restored to full health, and hard-working families the world over can find decent jobs.
• We want growth without cycles of boom and bust and markets that foster responsibility not recklessness
• we will not allow a return to banking as usual.
• strict and precise timetables.
• move toward greener, more sustainable growth.
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Pittsburgh areas of financial reform
• Raising capital standards• capital requirements for risky products and off-ballance sheet activities• reduce leverage• strong international compensation standards• regulate OTC derivatives• standards against moral hazard („too big to fail“)• quota reform in the IMF and World Bank• strenghtening regulation, supervision, transparency• measures against tax havens and money laundering• contribution of finance industry to costs of crisis
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Toronto
• No progress in reform
• Disagreement over exit strategies
• Diplomatic formulars
„We recognize that these measures will need to be implemented at the national level and will need to be tailored to individual country circumstances.“
„Working Group on Development ... to elaborate a development agenda and multi-year action plans to be adopted at the Seoul Summit.“
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The Seoul agenda for financial reform
Regulatory Framework
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„Four Pillars“
Supervision Peer Review
• Basle III
• Including Hedge Funds
etc.
• OTC
• CRA‘s
• Acctg. Standards
FSB report
Addressing systemically
relevant actors
(„too big to fail“)
FSB report
• Tax Havens
• FASP & FSB
Chapter 4
Perspectives
Results by now
1. Change in rhetorics of summit discourses, in particular Pittsburgh declaration erosion of neoliberal talk
2. Consensus to act countercyclically stimulus packages
3. Strengthening of the IMF and the FSB
4. No consensus on further crisis management „exit strategy“
5. No consensus on reform of financial system
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6. Modest financial reforms either at national level or in institutions which would have done something without the G-20 Basle Committee on Banking Regulation
What can the G-20 achieve?
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1. Dialogue, communication among leaders
4. Early warning systems for emerging problems
3. Soft pressure
5. At best, concerted action in case of consensus
2. Learning processes among leaders
But limitations due to manyfold internal contradictions
Contradictions & Heterogenity
• National perspectives and interests are dominant• Behind the scenery of cooperation geo-politic power
politics, rivalry and the fight for hegemony continue• Emergence of regional powers and reconfiguration
of the hierarchy in the international system • Competition/conflict US - China• Geo-political competition between countries• Emerging market emerging self-confidence
overshooting of national pride.
Don‘t expect too much!WEED PeWa
Civil society and G-20
• Civil society in rsp. Countries should take G-20 on the ir agenda
• Organise parallel activities to create a counterbalance in public opinion
• Pressure for integration into UN-System and & representation of poor countries
• Challenging the G-20 with own alternatives
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Thank you very much
for your
attention
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