Globalise Not!

All talk and no action at G20 meeting

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


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?"

Labels: Emerging Economies, G20, G7, IMF, World Bank

posted by they lied @ 8:13 PM Comments: 0