Thursday, November 20, 2008

All talk and no action at G20 meeting

As expected. The party's gotten bigger with no real solution.

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THE weekend meeting of the Group of 20 (G20) did not yield any dramatic announcements or proposals to overcome the financial crisis. The verdict on the outcome was mixed. The outgoing Bush administration saw progress, others said the leaders avoided the thornier issues, yet others opined that the G20 reshaped global politics, while the London- based Economist declared that it was "not a bad weekend's work". But if anyone expected the leaders to come out with concrete initiatives for a quick fix to the global economic woes, they would have been seriously disappointed.

The nations, accounting for 85 per cent of global economy, produced no real road map or major details on solving the meltdown.

The G20, however, laid the blame for the problems that started with the subprime mortgage crisis in the United States last August on "policy makers, regulators and supervisors in some advanced countries (who) did not adequately appreciate and address the risk building up in financial markets".

The contagion has spread. The US is in recession as is the euro zone. In Asia, Singapore and Japan are in recession, technical or otherwise.

Much of the wealth created over decades, including in developing countries, has been destroyed by the meltdown, while major institutions and household names have been brought to their knees.

To be sure, no one expected the lame-duck US President George W. Bush, who chaired the meeting, to produce a sliver bullet to solve the problems that are rapidly spreading around the world.

It would be asking too much of the G20 leaders to resolve the financial problems in one day. Undoubtedly, they came to the table with their own expectations.

In the end, they issued a bland statement.

Many of the measures they outlined are being worked on or have been implemented by individual countries to tackle the crisis at home. What is needed is a global, coordinated approach to solving the crisis.

The leaders promised a "broader policy response" and to strive for a deal on the stalled Doha Round of trade talks by the end of the year. They also pledged not to raise any barriers to trade and investment.

But this is nothing new. The previous pledges on the stalled Doha Development Round have not been fulfilled and with the current meltdown in the global economy, trade takes a back seat to rescuing companies, bailing out banks and ensuring that sovereign nations do not go under.

The markets, fund managers, analysts and indeed the poorest of the poor were hoping for an immediate and powerful signal that would throw some light on the way forward out of the dark tunnel. There were no new measures or regulatory breakthroughs. But what they got was a promise of more meetings.

The leaders set out a work schedule for their finance ministers: a review of global accounting standards, colleges of supervisors for major global banks, new standards for credit rating agencies and ways to limit bankers' pay by tying it to companies' risk profiles.

The ministers are to complete their job by the end of March for another meeting of the leaders in April.

By then, Barack Obama will be the president of the US and the Czech Republic will hold the rotating European Union presidency, taking over from Nicolas Sarkozy of France.

The difference of this meeting is that for the first time some emerging and developing economies as well as some oil producers got a seat at the table.

The rapidly-declining state of the US and European economies and victors of World War 2 find themselves in a weakened economic and financial position.

British Prime Minister Gordon Brown had lobbied Saudi Arabia and China to provide financial assistance to the Bretton Woods institutions.

The number of countries, including developed nations such as Iceland, going with bowl in hand to the multilateral institutions is putting greater pressure on the limited finances of the World Bank and the International Monetary Fund (IMF).

Indeed, the developed nations and their institutions are no longer the lenders of first and last resort.

They, in fact, are the borrowers and the lenders are the emerging economies and their sovereign wealth funds. There has been a clear shift away from dependence on Wall Street's financial supremacy and from the theories and remedies advocated by the World Bank and IMF.

The economic power has shifted from the Group of 7 (G7) most industrialised nations to a much larger and more diversified group of countries, including Asian nations.

According to Indian Finance Minister Palaniappan Chidambaram: "The G7 has recognised belatedly that they alone don't have the solutions to all the problems.

"The G20 has come to stay as the single most important forum to address the financial and economic issues of the world. The G20 is a much better forum than the G7."

He described the Washington summit as "a good beginning", adding: "The emerging economies are happy."

The shift in economic and financial power cannot be ignored as leaders seek solutions to the crisis and develop a new financial architecture.

The developing countries may have been given a seat at the table but their long-term role in the global economy and in decision-making must be considered.

For a start, the G20 agreed to a seat for emerging market economies on the Financial Stability Forum, the group of financial regulators and central bankers charged with the technicalities of financial supervision, whose membership has been based on that of the G7.

In the medium term, developing countries will be offered more seats at the IMF and World Bank.

Even so, it must be remembered that talk of reforming the IMF has gone on for years without much headway being made. The devil is in the details.

In the end, many saw the meeting more of talk than action.

"This is plain-vanilla stuff they could have agreed on without holding a meeting," said Simon Johnson, an economist at the Massachusetts Institute of Technology and a former chief economist of the IMF. "What's new, except that this is the G20 instead of the G7?"

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Monday, November 10, 2008

G20: Global Summit to Reform IFIs

Source: Infoshop

Over the summer of 2008 pressure was already building in official circles for a new Bretton Woods-style international conference to restructure the international financial architecture. A Commonwealth summit in June produced a statement calling for such a conference. And the discussions on the draft document for the UN's Financing for Development conference in Doha (slated for December 20008) also have included language calling for such a conference. Finally in early October, the calls were made publicly by leaders of several big European countries, notably France. This may be the greatest chance since 1944 to influence the structure of international finance. This page is aimed at helping civil society coordinate a response to this potential conference. We will bring you analysis, links to documents and highlight selected events. If you want to contribute just write to info@brettonwoodsproject.org.

Intelligence and responses towards a so-called "Bretton Woods 2"

Over the summer of 2008 pressure was already building in official circles for a new Bretton Woods-style international conference to restructure the international financial architecture. A Commonwealth summit in June produced a statement calling for such a conference. And the discussions on the draft document for the UN's Financing for Development conference in Doha (slated for December 20008) also have included language calling for such a conference. Finally in early October, the calls were made publicly by leaders of several big European countries, notably France. This may be the greatest chance since 1944 to influence the structure of international finance. This page is aimed at helping civil society coordinate a response to this potential conference. We will bring you analysis, links to documents and highlight selected events. If you want to contribute just write to info@brettonwoodsproject.org.

Civil society moves

The IFI watching and debt activist communities and movements are working on a global sign-on letter to governments about the process for a new international financial architecture. Please check back here for more information on this effort shortly.

Several NGO networks and movements have produced statements on the financial crisis and their demands for a reformed international financial architecture. These statements generally focus on the financial sector and financial markets. But it is expected that more will be forthcoming. If you have a statement you want included in this list please let us know (info@brettonwoodsproject.org).


Latest intelligence

After the calls from three major European leaders (UK, France, and Germany) for a new international financial architecture, the G7 was pressured into acting. US president George Bush has agreed to host a summit in the US in the second week of November. The G8 statement calls for "key leaders" to be invited but makes it clear that it will not be a truly international summit. French president Nicholas Sarkozy was with George Bush in Washington for the announcement. Gordon Brown, UK prime minister, seems to have agreed as well on the timetable for a quick conference in November with only selected participation. If you have more intelligence you would like to share please do make it available. Bush has now set the date for the summit as 15 November, and plans to host it in Wahsington, spurning the offer from the UN general secretary to hold the conference at UN headquarters in New York. The plan is to invite the members of the G20 which means the G8 plus some emerging markets (like Brazil, India, China, Argentina, Turkey, South Africa, and Indonesia) and other rich OECD countries (like Australia and South Korea), as well as Saudi Arabia.

In contrast to the G8 moves, the president of the UN General Assembly announced he is setting up a high-level task force to review the global financial system, including major bodies such as the World Bank and the International Monetary Fund (IMF), in response to the current turmoil that is affecting all countries, large and small. Miguel D'Escoto has appointed Joseph Stiglitz to chair the panel, which will also suggest steps to be taken by UN members "to secure a more stable global economic order". The special commission is to hold its first meeting on 30 October.

Background

For more background on the calls for the new conference the best paper is the briefing produced by our colleagues in Canada at the Halifax Initiative. Their issue brief, Rethinking the international financial system and its architecture: Calls for a "Bretton Woods II" walks people through the calls that have been made up until mid October 2008. As of now the following people/forums have announced support for such an initiative.

  • Selected Commonwealth heads of state in the Marlborough House statement
  • Nicholas Sarkozy, president of France
  • Gordon Brown, UK prime minister
  • Angela Merkel, German chancellor
  • Commonwealth finance ministers in their October 8 statement
  • Ban Ki-Moon, Secretary General of the United Nations
  • Supachai Panitchpakdi, UNCTAD Secretary-General
  • UN Financing for Development (draft outcome document)

Additionally some governments and statements have expressed interest in something less comprehensive than a full international conference involving all countries and external stakeholders. For example:

  • The G8 statement of October 15 calls for a meeting of "key leaders"
  • Pascal Lamy, director-general of the WTO "welcome[d] the construction of what some are calling a new Bretton Woods consensus" according to Livemint/WSJ

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The issues facing Obama

HopeBama. Can he save America with plans on Energy, Education, Health care, Guantánamo Bay, Security and citizenship, Tax breaks, old and new, Iraq, Iran, Nafta?

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Energy

"I will invest $15 billion a year in renewable sources of energy to create five million new energy jobs over the next decade."

Oct. 31, Des Moines, Iowa

On energy and climate change, Barack Obama's focus has shifted over the course of the year as the economy has weakened.

An earlier proposal put an economy-wide cap on greenhouse gases, requiring industry and utilities to buy credits from the government to emit carbon dioxide. The plan would have produced hundreds of billions of dollars in government revenue and drive up the cost of energy for everyone.

Obama is now emphasizing a program to spend $150 billion over 10 years to develop renewable sources of energy, like wind, solar and biofuels, and to encourage energy conservation in homes, offices and public buildings. He would also provide substantial financial help to the auto industry to develop high-mileage and electric cars.

Education

"A truly historic commitment to education - a real commitment - will require new resources and new reforms."

May 28, Mapleton, Colorado

Obama's education plan outlined about $8 billion for recruiting, performance pay and other initiatives that represent his approach to updating the Bush education law known as No Child Left Behind. But his plan also offered grand proposals for every level of education, including a $4,000 tuition tax credit that would make college more affordable for millions of students and a $10 billion expansion of early childhood programs.

The challenge will be how to finance all those proposals when budgets are extremely tight, experts said.

Obama's $10 billion proposal to expand early childhood education would probably produce tremendous savings to the nation later, but experts said he would find it extremely challenging to finance under current financial conditions.

Health care

"If you don't have health insurance, you'll be able to get the same kind of health insurance that members of Congress get."

Oct. 31, Des Moines

Obama has said "every American has a right to affordable health care," but he has not said exactly how he would finance coverage for the 45 million people who are uninsured. The economic slump and the bailout for the financial industry may reduce the amounts available to cover the uninsured.

On his Web site, Obama says his health plan "will lower health care costs by $2,500 for a typical family by investing in health information technology, prevention and care coordination." Health policy experts endorse those goals but say they are unlikely to produce such large savings.

If Obama hopes to keep his promise, he will need to mobilize public support for specific legislative proposals. And he will need to co-opt or placate a swarm of lobbyists.

Guantánamo Bay

"We're going to lead by setting the highest of standards for civil liberties and civil rights and human rights."

Feb. 20, Dallas

As president, Obama could simply declare an end to practices that have been widely condemned as torture. He could revoke President George W. Bush's executive order, disclosed in 2007, that allowed the Central Intelligence Agency to use more severe interrogation techniques than allowed under the U.S. Army Field Manual.

To do so, however, he would have to overrule at least some intelligence professionals who have argued that they need to use more aggressive methods.

His pledge to close the prison at Guantánamo Bay, Cuba, would require finding a place to imprison dozens of detainees.

Federal officials have drafted plans to move them to centers in the United States, but even supporters of that acknowledge the potential consequences, including the release of suspects for lack of evidence.

Security and citizenship

"We cannot deport 12 million people. Instead, we'll require them to pay a fine, learn English and go to the back of the line."

Sept. 10, Washington

As a senator, Obama supported comprehensive immigration overhaul, and in the campaign he pledged to enhance border security and provide a path to citizenship for millions of people in the country illegally. And while he said he favored a guest worker program, he also advocated tougher penalties for employing illegal immigrants.

But his proposals are very likely to encounter resistance from those who contend that they amount to amnesty - an argument that helped jettison a bill in Congress. And with the economy shedding jobs, opponents will also argue that immigrants are taking jobs from citizens. But experts say Obama will face pressure to act from the many Hispanic voters who supported his candidacy in part because of his stance on immigration.

Tax breaks, old and new

"As president, here's what I'll do: cut taxes for every working family making less than $200,000 a year."

- Oct. 29, paid television address

Obama pledged to extend the Bush tax cuts of 2001 and 2003 past 2010, when they would expire, for taxpayers making less than $250,000 a year. He would repeal the cuts for taxpayers making more than that, effective Jan. 1, 2010.

Obama considers the extension for those making under $250,000 a continuation of current policy, not a tax cut.

But he promises a new break for taxpayers making less than $200,000 - an annual tax credit of $500 a worker, or $1,000 a working couple. It would be a refundable credit, so those who do not earn enough to pay income taxes but do pay payroll taxes would also benefit.

Given the economic crisis and the Democratic gains in Congress, the odds are good that he will push the measures through.

Iraq

"Nobody's talking about bringing them home instantly, but one to two brigades a month. It'll take about 16 months to get our combat troops out."

May 16, Watertown, South Dakota

Obama has said repeatedly that he would set a 16-month timetable for troop withdrawal. Some military experts believe that could lead to a reversal of the gains from the increase in troops over the past 18 months, and they argue that the generals running the war should decide how many troops to pull out and when to do it.

Obama appears to have the Iraqi government on his side. Iraqi leaders say his timetable is closer to theirs, which they put at 2010. The Bush administration timetable, which has some wiggle room, was 2011.

But all of this supposes relative stability, even while troops are withdrawing. And questions also remain about the kind and level of force Obama would leave behind.

Iran

"I would be willing to lead tough and principled diplomacy with the appropriate Iranian leaders at a time and place of my choosing."

June 4, Washington

Obama raised expectations that he would meet with Iran's leaders. He said during the campaign that the notion of not talking to America's foes was "ridiculous." Since then, he has tempered his words somewhat, indicating that he would send envoys initially and would meet personally with Iran's leaders only if he thought he could advance the American agenda.

Obama also faces the issue of when to reach out. If he makes a move before June, when Iran's presidential election is scheduled, he risks giving President Mahmoud Ahmadinejad claim to a foreign policy victory, to the possible detriment of more moderate Iranian presidential aspirants. But if he waits too long, Iran could get closer to acquiring a nuclear weapon.

Nafta

"I think we should use the hammer of a potential opt-out as leverage to ensure that we actually get labor and environmental standards that are enforced."

Feb. 26, Democratic candidate debate

No legal hurdle would prevent Obama from pulling out of the North American Free Trade Agreement, a distinction from other trade deals. But trade experts say the political and economic costs of scuttling the deal would be enormous.

Even opening it up to renegotiate labor and environmental standards carries risks: Canada might seize the opportunity to renegotiate provisions on energy, while Mexico might push for access for its trucks in the United States.

Obama's union supporters have not put changing Nafta at the top of their agenda, focusing instead on issues like China's exchange rate. With little political upside and so much potential downside, this may be one issue Obama prefers not to touch.

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G20: Global Summit to Reform IFIs

Source: Infoshop

Economy Crumbles

Over the summer of 2008 pressure was already building in official circles for a new Bretton Woods-style international conference to restructure the international financial architecture. A Commonwealth summit in June produced a statement calling for such a conference. And the discussions on the draft document for the UN's Financing for Development conference in Doha (slated for December 20008) also have included language calling for such a conference. Finally in early October, the calls were made publicly by leaders of several big European countries, notably France. This may be the greatest chance since 1944 to influence the structure of international finance. This page is aimed at helping civil society coordinate a response to this potential conference. We will bring you analysis, links to documents and highlight selected events. If you want to contribute just write to info@brettonwoodsproject.org.

Intelligence and responses towards a so-called "Bretton Woods 2"

Over the summer of 2008 pressure was already building in official circles for a new Bretton Woods-style international conference to restructure the international financial architecture. A Commonwealth summit in June produced a statement calling for such a conference. And the discussions on the draft document for the UN's Financing for Development conference in Doha (slated for December 20008) also have included language calling for such a conference. Finally in early October, the calls were made publicly by leaders of several big European countries, notably France. This may be the greatest chance since 1944 to influence the structure of international finance. This page is aimed at helping civil society coordinate a response to this potential conference. We will bring you analysis, links to documents and highlight selected events. If you want to contribute just write to info@brettonwoodsproject.org.

Civil society moves

The IFI watching and debt activist communities and movements are working on a global sign-on letter to governments about the process for a new international financial architecture. Please check back here for more information on this effort shortly.

Several NGO networks and movements have produced statements on the financial crisis and their demands for a reformed international financial architecture. These statements generally focus on the financial sector and financial markets. But it is expected that more will be forthcoming. If you have a statement you want included in this list please let us know (info@brettonwoodsproject.org).


Latest intelligence

After the calls from three major European leaders (UK, France, and Germany) for a new international financial architecture, the G7 was pressured into acting. US president George Bush has agreed to host a summit in the US in the second week of November. The G8 statement calls for "key leaders" to be invited but makes it clear that it will not be a truly international summit. French president Nicholas Sarkozy was with George Bush in Washington for the announcement. Gordon Brown, UK prime minister, seems to have agreed as well on the timetable for a quick conference in November with only selected participation. If you have more intelligence you would like to share please do make it available. Bush has now set the date for the summit as 15 November, and plans to host it in Wahsington, spurning the offer from the UN general secretary to hold the conference at UN headquarters in New York. The plan is to invite the members of the G20 which means the G8 plus some emerging markets (like Brazil, India, China, Argentina, Turkey, South Africa, and Indonesia) and other rich OECD countries (like Australia and South Korea), as well as Saudi Arabia.

In contrast to the G8 moves, the president of the UN General Assembly announced he is setting up a high-level task force to review the global financial system, including major bodies such as the World Bank and the International Monetary Fund (IMF), in response to the current turmoil that is affecting all countries, large and small. Miguel D'Escoto has appointed Joseph Stiglitz to chair the panel, which will also suggest steps to be taken by UN members "to secure a more stable global economic order". The special commission is to hold its first meeting on 30 October.

Background

For more background on the calls for the new conference the best paper is the briefing produced by our colleagues in Canada at the Halifax Initiative. Their issue brief, Rethinking the international financial system and its architecture: Calls for a "Bretton Woods II" walks people through the calls that have been made up until mid October 2008. As of now the following people/forums have announced support for such an initiative.

  • Selected Commonwealth heads of state in the Marlborough House statement
  • Nicholas Sarkozy, president of France
  • Gordon Brown, UK prime minister
  • Angela Merkel, German chancellor
  • Commonwealth finance ministers in their October 8 statement
  • Ban Ki-Moon, Secretary General of the United Nations
  • Supachai Panitchpakdi, UNCTAD Secretary-General
  • UN Financing for Development (draft outcome document)

Additionally some governments and statements have expressed interest in something less comprehensive than a full international conference involving all countries and external stakeholders. For example:

  • The G8 statement of October 15 calls for a meeting of "key leaders"
  • Pascal Lamy, director-general of the WTO "welcome[d] the construction of what some are calling a new Bretton Woods consensus" according to Livemint/WSJ

Labels: ,