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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

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


                                                   WEED - PeWa
             Chapter 1


Hiistory, structure, governance of the G-20
                    History
    Initially established 1999 by G7

Finance ministers and central bankers

  Reaction to the Asian crisis 1997/98

Dialogue on global key economic issues

       Heads of states since 2008
         Washington, London, Pittsburgh, Toronto
                    Seoul, France, Mexico



      Reaction to the crisis 2008                  WEED - PeWa
               Member states
                    US
                  Canada
   China                              Brazil
                   France
    India         Germany           Mexico
South Korea         Italy         Argentina
                     UK
                   Japan

 Indonesia         Russia      South Africa
Saudi Arabia
                                   IMF/World Bank
  Turkey          Australia
                               Permanent guest: Spain


                  EU/ECB            Special guests
                                                        WEED - PeWa
              Some indicators



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65,5% of global population

88% of global GDP

80% of world trade
                                                 WEED - PeWa
    Nevertheless

The G-20 is not inclusive


   It aggravates the
marginalisation of the UN


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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.“
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       Internal Structures

The G-20 = informal institution

•   No statutes
•   No binding decisions („peer review“)
•   No headquarters
•   No own administration and staff
•   Rotating presidency
•   Implementation trough national states
    or multilateral institutions

                                            WEED - PeWa
         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.“
                                                           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
Governance is not Government
 Governance:
 • mix of formal and informal cooperation of
 different types of actors (governments, multilateral
 institutions, private sector, civil society)


 • mix of formal and informal
 procedures and agreements

 • indirect regulation

                                       opacity

                                      complexity
                                                        WEED - PeWa
           Global Governance

                         OECD
                 IMF


        IOSC
          O                       Basle
                                Committee



World
bank                                WTO




                G-20 Summit
          FSB                       UN

                Paris
                          BIS
                Club
                                            WEED PeWa
       The big problem behind
               „The crisis is global.
  But the instruments to solve it are national.“
                                           Why?            Joseph Stiglitz




Increasing gap between the transnationalisation of
    markets, in particular finanial markets and
 the capability of national states to regulate them.



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   Financial markets
                                                  National state                        WEED PeWa
          Disembedding of Global Players from
         Regulatory control of the national state

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


             National State A                                  National state A




                                                National state B            National state C
National state B           National state C




                                                                                           WEED - PeWa
Emergence of a new, transnational
space beyond national states and
  intergovernmental relations




                                    WEED - PeWa
„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
There is no international or global
    state to regulate markets




   Global Governance as a very imperfect
    substitute of international statehood



                                            WEED PeWa
 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




         Reckless behaviour
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
Essence of Sarkozy‘s analysis:

1.   Dominance of finance over labour/real economy
2.   Speculation as dominant business model
3.   New type of capitalism




                                  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 -
                           lending




                      Real Economy



                                       Subordination

                        Financial markets


    Service function of financial markets                   WEED PeWa
A new system has emerged



   Financial markets



                      Dominance



       Real Economy




                                  WEED PeWa
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
     etc.)
8.   Intransparency (shadow banking, off-balance
     sheet operations)

                             Systemic instability

                                                       WEED PeWa
    The neo-liberal financial architecture


E
r
o
s
i                                                       R
o                                                       E
n                                                       D
                                                        I
o
f                                                       S
                                                        T
d                                                       I
e        Privatisation, pressure on social systems
                                                        B
m
o             Negative effect on employment             U
c                                                       T
r                                                       I
a      Structural underinvestment in real economyy
                                                        O
C
y      Profits in finance higher than in real economy   n

                                                        WEED PeWa
General dimensions of the crisis


 1. Stability
 2. Distribution
 3. Democracy/Policy Space


         The G20 is
  focussing only on stability
                                   WEED PeWa
      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
  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
                           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
 The Seoul agenda for financial reform
                      „Four Pillars“



 Regulatory    Supervision        Addressing            Peer Review
 Framework                        systemically
                                    relevant
• Basle III                          actors
                                  („too big to fail“)    • FASP &
 • Including                                                FSB
Hedge Funds
     etc.

 • OTC
                                                           • Tax
                                                          Havens
 • CRA‘s

 • Acctg.                          FSB report
               FSB report
 Standards
                                                                WEED PeWa
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

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
 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
     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
               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
Thank you very much

      for your

     attention


                      WEED PeWa

				
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