The g 20 structure governance mandate and perspectives

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 2008 Washington,

Peter Wahl

World Economy,

Ecology &

Development Association

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

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 2008

Washington, London, Pittsburgh, Toronto

Seoul, France, Mexico

WEED - PeWaReaction to the crisis 2008

Member states

US Canada

France Germany Italy UK Japan

Russia

Australia

Brazil Mexico Argentina

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The G-20 is not inclusive

It aggravates the marginalisation of the UN

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Dekompressor „“

benötigt.

„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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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.“

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

opacitycomplexity

• indirect regulation

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IOSC

Committee

The big problem behind

„The crisis is global

But the instruments to solve it are national.“

Joseph Stiglitz

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Dekompressor „“

benötigt.

Increasing gap between the transnationalisation of

markets, in particular finanial markets and

the capability of national states to regulate them

Disembedding of Global Players from

Regulatory control of the national state

The world of national staates The post-national world of globalisation

Emergence of a new, transnational

space beyond national states and

intergovernmental relations

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„We have lost control.

B Bernanke

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

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 -

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

Profits in finance higher than in real economy Structural underinvestment in real economyy

Privatisation, pressure on social systems

Negative effect on employment

R E D I S T I B U T I O n

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.

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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• 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.“

The Seoul agenda for financial reform

(„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

What can the G-20 achieve?

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!

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Civil society and G-20

• Civil society in rsp Countries should take G-20 on the ir

Thank you very much

for your attention

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