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The G-20 Structure, Governance, Mandate and Perspectives. Seoul 7./8. July 2010. Peter Wahl World Economy, Ecology & Development Association Berlin. WEED PeWa. Content. Hiistory, structure, governance of the G-20 The G-20 and global governance 3 . The G-20 and the financial crisis

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WEED PeWa

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  1. The G-20Structure, Governance, Mandate and Perspectives Seoul 7./8. July 2010 Peter Wahl World Economy, Ecology & Development Association Berlin WEED PeWa

  2. Content Hiistory, structure, governance of the G-20 The G-20 and global governance 3 . The G-20 and the financial crisis 4. Perspectives WEED - PeWa

  3. Chapter 1 Hiistory, structure, governance of the G-20

  4. History Finance ministers and central bankers Reaction to the Asian crisis 1997/98 Initially established 1999 by G7 Dialogue on global key economic issues Heads of states since 2008 Washington, London, Pittsburgh, TorontoSeoul, France, Mexico Reaction to the crisis 2008 WEED - PeWa

  5. Member states USCanada FranceGermanyItalyUK Japan China India South Korea Brazil Mexico Argentina Indonesia Saudi Arabia Turkey Russia South Africa Australia IMF/World Bank Permanent guest: Spain EU/ECB Special guests WEED - PeWa

  6. Some indicators 65,5% of global population 88% of global GDP 80% of world trade WEED - PeWa

  7. Nevertheless The G-20 is not inclusive It aggravates the marginalisation of the UN WEED - PeWa

  8. In terms of theory of democracy the G-20 is a Club „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.“ Advertisement at the Internet WEED - PeWa

  9. Internal Structures The G-20 = informal institution • No statutes • No binding decisions („peer review“) • No headquarters • No own administration and staff • Rotating presidency • Implementationtrough national states or multilateral institutions WEED - PeWa

  10. Chapter 2 The G-20 in the system of global governance

  11. 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 Key words: 1. forum (lat.) = marketplace, open space in the centre of a city 2. economic cooperation G-20 = part of the global economic governance system WEED - PeWa

  12. Governance: Governance is not Government • mix of formal and informal procedures and agreements mix offormal and informal cooperation of different types of actors (governments, multilateral institutions, private sector, civil society) • indirect regulation opacity complexity WEED - PeWa

  13. Global Governance OECD IMF IOSCO BasleCommittee Worldbank WTO G-20 Summit FSB UN ParisClub BIS WEED PeWa

  14. The big problem behind „The crisis is global. But the instruments to solve it are national.“ Joseph Stiglitz Why? Increasing gap between the transnationalisation of markets, in particular finanial markets and the capability of national states to regulate them. Financial markets National state WEED PeWa

  15. Disembedding of Global Players from Regulatory control of the national state The post-national world of globalisation The world of national staates National State A National state A National state B National state C National state B National state C WEED - PeWa

  16. Emergence of a new, transnational space beyond national states andintergovernmental relations WEED - PeWa

  17. „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 called Sir, deliver me! Goethe, The sorcerer‘s apprentice WEED PeWa

  18. There is no international or global state to regulate markets Global Governance as a very imperfect substitute of international statehood WEED PeWa

  19. Chapter 3 The G-20 and the financial crisis

  20. The assessment of the G20 reform proposals depends on the analysis of the roots and the nature of the crisis

  21. Some current explanations Greed Easy money Subprime crisis Lack of supervision Reckless behaviour

  22. 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

  23. Essence of Sarkozy‘s analysis: Finance capitalism as a specific version of capitalism Dominance of finance over labour/real economy Speculation as dominant business model New type of capitalism Systemic crisis

  24. Traditional role of international financial markets • providing efficient services payment system for households and real economy • providing money for public and private investment - lending Real Economy Subordination Financial markets Service function of financial markets WEED PeWa

  25. A new system has emerged Financial markets Dominance Real Economy WEED PeWa

  26. Th e main characteristics of the new system Liberalization of financial markets Weak regulation and supervision (deregulation) Speculation as a central business model Excessive leverage Procyclical („herd“) behaviour Risky new instruments (CDS etc.) High risky institutional investors (Hedge funds etc.) Intransparency (shadow banking, off-balance sheet operations) Systemic instability WEED PeWa

  27. The neo-liberal financial architecture Ero s i o n o f d e m o c r a C y R E D I S T I B U T I O n Privatisation, pressure on social systems Negative effect on employment Structural underinvestment in real economyy Profits in finance higher than in real economy WEED PeWa

  28. General dimensions of the crisis Stability Distribution Democracy/Policy Space The G20 is focussing only on stability WEED PeWa

  29. 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. WEED PeWa

  30. 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 WEED PeWa

  31. 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.“ WEED PeWa

  32. „Four Pillars“ The Seoul agenda for financial reform Supervision Peer Review Addressing systemically relevant actors („too big to fail“) • Basle III • FASP & FSB • Including Hedge Funds etc. Regulatory Framework • OTC • Tax Havens • CRA‘s • Acctg. Standards FSB report FSB report WEED PeWa

  33. Chapter 4 Perspectives

  34. 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 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 WEED PeWa

  35. What can the G-20 achieve? 1. Dialogue, communication among leaders 2. Learning processes among leaders 3. Soft pressure 4. Early warning systems for emerging problems 5. At best, concerted action in case of consensus But limitations due to manyfold internal contradictions WEED PeWa

  36. 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

  37. 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 WEED PeWa

  38. Thank you very muchfor yourattention WEED PeWa

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