The do-nothing summit

November 18, 2008

Nicole Colson reports on the emergency meeting of the heads of the world's 20 leading economies.

WORLD LEADERS emerged from the Group of 20 economic summit patting themselves on the back--or in the case of French President Nicolas Sarkozy and George W. Bush, giving each other a celebratory "fist bump"--for coming together to discuss the global economic crisis.

Not that they came up with any real solutions, of course.

Speaking after the meeting, Bush called the agreement negotiated among political leaders from the world's largest economies "an important first step." But a closer look at the proposals in question shows that they amount to "too little, too late."

The general principles included in the G20 declaration include vague calls for strengthening transparency and accountability in financial systems; enhancing sound regulation; promoting "integrity" in financial markets; increasing international cooperation between the countries' financial regulators; and reforming international financial institutions to include emerging economies.

As National Public Radio's David Kestenbaum commented:

Group of 20 leaders gathered for an official dinner at the White House during an economic summit
Group of 20 leaders gathered for an official dinner at the White House during an economic summit (Three Trees Images)

A lot of the details are "to-be-figured-out-later."...Oh, the leaders said they thought economic stimulus (building new roads, mailing out checks, that sort of thing) were a good idea. But José Manuel Barroso, president of the European Commission, said each country would have to decide what was right.

In other words, although the G20 summit was portrayed as a coming together of world leaders to take coordinated action to bolster the world economy, the reality is that each country will do what it's already been doing--use the power of its own state to boost its national corporations and financial systems, at the expense of other countries, particularly poor and developing ones.

That fact was underscored by the announcement that the group isn't scheduled to meet again until April 30, 2009--more than 100 days after Barack Obama is sworn into office.

"Though the countries' stimulus packages were cast as ambitious steps, they mainly reflected measures that the countries were already undertaking to respond to the crisis," the New York Times reported.

"What remains to be seen is whether, working with a new White House, the leaders will cast aside their political and economic differences to embrace more radical changes, including far-reaching but fiercely debated proposals to overhaul regulation."

BEHIND THE scenes, even coming up with an agreement on these relatively toothless "principles" was nearly impossible, according to reports. Unsurprisingly, the U.S. seems to have dug in its heels the most at every suggestion of greater oversight and regulation.

Even mainstream economists rejected the idea that the summit achieved anything substantial. "This is plain-vanilla stuff they could have agreed on without holding a meeting," Simon Johnson, an economist at the Massachusetts Institute of Technology and a former chief economist of the International Monetary Fund, told the New York Times.

As the Times noted, "despite broad support for economic stimulus, the leaders were not able to agree on a coordinated global effort. The Bush administration, which does not favor a further stimulus, resisted that idea. And the proposal for colleges of supervisors fell short of an international regulatory agency favored by the French. The Bush administration opposes any regulatory agency with cross-border authority."

The U.S. also made sure that the G20 declaration is explicit in being committed to free-market orthodoxy.

"We recognize that these reforms will only be successful if grounded in a commitment to free-market principles, including the rule of law, respect for private property, open trade and investment, competitive markets, and efficient, effectively regulated financial systems," the declaration proclaims. "These principles are essential to economic growth and prosperity and have lifted millions out of poverty, and have significantly raised the global standard of living."

But it is "free-market principles"--specifically wholesale deregulation--that caused the crisis in the first place.

And as global justice campaigners Damien Millet and Eric Toussaint noted following the summit, under the framework of the G20 agreement, the world's poorest will be the ones who suffer--particularly if discredited institutions like the International Monetary Fund (IMF) and World Bank (WB) gain a new lease on life.

Millet and Toussaint called the summit:

a dismal failure...a sorry show, a script that lacks any credibility, but few spectators seem to care. In detective films, it is seldom the case that the keys to the Court of Justice be given to arch-criminals. Yet this is what the G20 summit is planning to do...This G20 summit shows that lessons have not been learned. The old demons of the past are still with us.

The IMF and the WB, though further delegitimized by the failure of the measures they have enforced for 25 years and by the governance crisis they have experienced over the last years...are still at the heart of the proposed solutions. [World Trade Organization] negotiations aiming at even more economic deregulation, while we have just witnessed the utter failure of this policy, are again on the agenda.

While IMF loans could no longer find clients, Hungary, Ukraine and Pakistan have volunteered. Contrary to denials by concerned institutions, the same intolerable conditionalities are still the order of the day: as counterpart for the latest loan, Hungary had to decide, among other things, to suppress civil servants' 13th month bonus and freeze their salaries. Japan even proposed to supply the IMF with $100 billion so that it could increase its loans and carry on its fateful activities.

Moreover, the meeting that was intended to find a global solution to the current crisis was not held in the context of the United Nations but in the limited context of the G20. So the very promoters of an unfair and unsustainable model are asked to rescue this model.

The only solutions that were put forward protect the interests of major creditors. Populations and poor countries as usual were not consulted.

When faced with such an inconsistent and ill-conceived script, one cannot but hope for a final twist that would introduce a measure of justice and ethics into all this. This final twist can only be found in social struggles all over the world to bring about a radical change in economic choices.

And if the film should end as dismally as it started, there is a strong chance that the audience will be highly dissatisfied and make it known to the 20 directors in the most vehement manner.

EVEN NEOLIBERAL writer Thomas Friedman had to admit in his New York Times column that the financial crisis is far from over:

Governments are having a problem arresting this deflationary downward spiral--maybe because this financial crisis combines four chemicals we have never seen combined to this degree before, and we don't fully grasp how damaging their interactions have been, and may still be," he wrote.

Those chemicals are: 1) massive leverage--by everyone from consumers who bought houses for nothing down to hedge funds that were betting $30 for every $1 they had in cash; 2) a world economy that is so much more intertwined than people realized, which is exemplified by British police departments that are financially strapped today because they put their savings in online Icelandic banks--to get a little better yield--that have gone bust; 3) globally intertwined financial instruments that are so complex that most of the CEOs dealing with them did not and do not understand how they work--especially on the downside; 4) a financial crisis that started in America with our toxic mortgages.

When a crisis starts in Mexico or Thailand, we can protect ourselves; when it starts in America, no one can. You put this much leverage together with this much global integration with this much complexity and start the crisis in America and you have a very explosive situation.

"If you want to know where we are right now," Friedman concluded, "rent the movie Jaws. We're at that moment when Roy Scheider first sets eyes on the Great White Shark and comes back and says to the skipper, with eyes wide with fear: 'You're gonna need a bigger boat.'"

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