Sunday, March 22, 2009

My critique of the agenda for the London G20 meeting (God help us)

Concerning my previous post, a reader has asked me why I was laying out my own vision for the G20 meeting ("based on your 'year of blogging the financial crisis'") when the actual agenda is available at the G20 website.

Indeed, my reader articulates what we have come to expect of the mainstream media journalist. But that's not the way I think a blogger should approach a G20 summit. I don't believe that global citizens should first turn to political leaders -- and the echo chamber that is the mainstream media -- to define what ought to be the global agenda. Blindly accepting our leaders' agendas, not asking ourselves what really ought to be on the global agenda, is what got us all into this pickle. The news media model is as defunct as any mortgage derivative; it is but another "impaired asset."

Rather, I think the first step -- for the citizen journalist -- is to get a grip of one's own understanding of the situation. That's what the last post was about. If bloggers are to play a constructive role at the G20, staking out a critical space for ourselves is crucial. For myself, the previous post was an important step in that process. Of course, another step is assimilating input from readers and the people we talk to on the street.

Which brings me to observe that the reader made a good point: it is important to examine any proposed agenda.

What exactly is the planned agenda for the G20?

In preparation for the 2 April meeting, on 14 March the finance ministers of the G20 nations met in West Sussex and issued a joint communique. Finance ministers representing Russia, Spain, and Thailand were apparently so displeased with the joint communique that they issued their own separate proposals for the meeting. (I plan to critique these in another post).

To summarize the one page joint communique, the ministers have agreed that something must be done about the crisis, and (whatever that may be) they have agreed to do it. Not only will they do it, but they will do it "head on," providing "vital support" for creating growth and jobs. Nothing concrete about any new financial industry regulations, just an acknowledgment of the need for "appropriate regulations." The ministers agree to "recapitalize" banks and "deal with" impaired assets, but they do not commit to doing this in such a way as to ensure shareholders and reckless executives are not rewarded. (The ministers make no commitment to adapt the time-tested Swedish recovery model of temporary nationalization of defunct financial institutions). As for specifics, the ministers essentially rehash a list of previously hashed-out talking points tangential to solving the actual crisis at hand: these include registering hedge fund managers, ensuring some future IMF president is hired on the basis of "merit," better regulating the (now useless) rating agencies. The ministers also congratulate themselves on their past accomplishments (having lowered interest rates to the point where rates can no longer be lowered any further, etc.), and the ministers have agreed not to stop printing money ("continued liquidity support").

A few positives: the ministers acknowledge the need help developing countries "cope with the reversal in international capital flows" (see this Jotman post), and shore up the IMF funds "very substantially." Intriguing is a proposal to develop a new "high-access, quick-disbursing precautionary facility" for distributing economic relief. Nevertheless, this aspect of the current crisis (the flight of money out of the developing world and into safe-haven US treasuries) -- though deserving of the most urgent attention -- is a symptom. Addressing this problem alone would be insufficient.

In terms of tackling the underlying problem, the most disturbing thing about the communique is the two words it omits. Nowhere in the statement is there any recognition of the need tino pursue the one thing most economists say is likely to turn the recession around: significant "stimulus spending" by the key developed countries (US, Japan, UK, France, Germany).

On the whole, if that was the best agenda world leaders could come up with in preparation for such a critical meeting at a time like this then all I can say is God help us.


  1. Thank you very much for your two comprehensive articles on G-20 Summit. I think in the communique G20 Finance Ministers did imply the stimulus spending by using "whatever action is necessary" in their first para under "Restoring Global Growth". By not putting it clearly, it might be because of some of the members' differences over the notion of stimulus spending, notably France and Germany. In any case, I do hope that this upcoming London Summit 2009 will bring about tangible outcomes on key issues such as a real restraint on imposing protectionist measures, true action and commitment on reform in key international financial institution (esp.greater voice and representation for developing countries in the IMF), concrete plans on how to promote sustainable economic development, as well as a clear plan on how to prevent future crisis particularly how to ensure greater monitoring and transparency of financial activity.

  2. Anonymous wrote:

    By not putting it clearly, it might be because of some of the members' differences over the notion of stimulus spending, notably France and Germany.

    Yes, I think you have probably identified the explanation. It looks as if France and Germany aren't willing to invest in the recovery of Europe as a whole.

  3. Your comments on the G-20 Summit were more useful and concrete than most of the communiques from official sources. However, we should remember that the source of our economic crisis was a "collapse in confidence" in the economic system. The leaders at the G-20 Summit must put aside national and regional rivalries and show that they can work together to address problems. Only then can some amount of "confidence " be restored - confidence in leaders, governments and the economy. The concept of the "economy" is a man-made construct, therefore man should be able to rebuild it. Let us hope the London Summit is the first of many positive steps in this direction.


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