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WEED PeWa
Peter Wahl
World Economy,Ecology &
DevelopmentAssociation
Berlin
Seoul 7./8. July 2010
The G-20Structure,
Governance, Mandate
and Perspectives
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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
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Chapter 1
Hiistory, structure, governance of the G-20
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History
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 2008Washington, London, Pittsburgh, Toronto
Seoul, France, Mexico
WEED - PeWaReaction to the crisis 2008
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Member states
US
CanadaFrance
GermanyItaly
UKJapan
Russia
Australia
Brazil
Mexico
Argentina
China
India
South Korea
Indonesia
Saudi Arabia
Turkey
South Africa
EU/ECB
IMF/World Bank
Permanent guest: Spain
Special guests
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Some indicators
65,5% of global population
88% of global GDP
80% of world tradeWEED - PeWa
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Nevertheless
The G-20 is not inclusive
It aggravates themarginalisation of the UN
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The East India Club, in the heart of Londons clubland, ....
As a private club, only open to members and their guests, the club stillprovides a refuge and meeting place for busy young men and their moreseasoned seniors.
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In terms of theory of democracy the G-20 is a Club
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Internal Structures
No statutes
No binding decisions (peer review)
No headquarters
No own administration and staff
Rotating presidency Implementationtrough national states
or multilateral institutions
The G-20 = informal institution
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Chapter 2
The G-20 in the system of globalgovernance
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Is the G-20a global economic government?
We designated the G-20 to be the premier forum for our
international economic cooperation.Pittsburgh Declaration
1. forum (lat.) = marketplace, open space in the centre of a city
Key words:
2. economic cooperation
G-20 = part of the global economicgovernance system
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Governance is not Government
mix offormal and informal cooperation ofdifferent types of actors (governments, multilateralinstitutions, private sector, civil society)
Governance:
mix of formal and informalprocedures and agreements
opacity
complexity
indirect regulation
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Global Governance
G-20 Summit
OECD
FSB
BIS
UN
IMF
Worldbank
Paris
Club
WTO
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IOSCO Basle
Committee
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The big problem behind
The crisis is global.
But the instruments to solve it are national.
Joseph Stiglitz
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Increasing gap between the transnationalisation ofmarkets, in particular finanial markets and
the capability of national states to regulate them.
Why?
Financial markets National state
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Disembedding of Global Players fromRegulatory control of the national state
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The world of national staates The post-national world of globalisation
National state B
National State A
National state C
National state A
National state B National state C
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Emergence of a new, transnationalspace beyond national states and
intergovernmental relations
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We have lost control.B. Bernanke
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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 sorcerers apprentice
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There is no international or globalstate to regulate markets
Global Governance as a very imperfectsubstitute of international statehood
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Chapter 3
The G-20 and thefinancial crisis
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The assessment of the G20
reform proposals depends on the
analysis of the roots and the
nature of the crisis
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Some current explanations
Reckless behaviour
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UNCTAD:Nothing short of closing down the bigcasino 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 thiscreated a capitalism, in which it was normal to gamble withmoney, preferably other peoples money, to obtain money
easily and extremely fast, without any effort and often withoutcreating wealth or generating employment with these huge
amounts of money.
Sarkozy in Davos 2010
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1. Dominance of finance over labour/real economy2. Speculation as dominant business model
3. New type of capitalism
Essence of Sarkozys analysis:
Finance capitalism as a specificversion of capitalism
Systemic crisis
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Traditional role of international financial markets
providing efficient services payment system for
households and real economy
providing money for public and private investment -lending
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Real Economy
Service function of financial markets
Financial markets
Subordination
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Real Economy
A new system has emerged
Financial markets
Dominance
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Th e main characteristics of the new system1. Liberalization of financial markets
2. Weak regulation and supervision (deregulation)
3. Speculation as a central business model
4. Excessive leverage
5. Procyclical (herd) behaviour6. Risky new instruments (CDS etc.)
7. High risky institutional investors (Hedge fundsetc.)
8. Intransparency (shadow banking, off-balancesheet operations)
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Systemic instability
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Profits in finance higher than in real economy
Structural underinvestment in real economyy
Privatisation, pressure on social systems
Negative effect on employment
REDI
STIB
UTIOn
Erosion
of
de
mocraCy
The neo-liberal financial architecture
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General dimensions of the crisis
1. Stability
2. Distribution3. Democracy/Policy Space
The G20 is
focussing only on stability WEED PeWa
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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 familiesthe world over can find decent jobs.
We want growth without cycles of boom and bust and markets that foster responsibility notrecklessness
we will not allow a return to banking as usual.
strict and precise timetables.
move toward greener, more sustainable growth.
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Pittsburgh areas of financial reform
Raising capital standards capital requirements for risky products and off-ballancesheet 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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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
S
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The Seoul agenda for financial reform
RegulatoryFramework
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Four Pillars
Supervision Peer Review
Basle III
IncludingHedge Funds
etc.
OTC
CRAs
Acctg.
Standards
FSB report
Addressingsystemically
relevantactors
(too big to fail)
FSB report
TaxHavens
FASP &FSB
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Chapter 4
Perspectives
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Results by now
1. Change in rhetorics of summit discourses, in particularPittsburgh 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 managementexit strategy
5. No consensus on reform of financial system
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6. Modest financial reforms either at national level or in institutionswhich would have done something withoutthe G-20 Basle Committee on Banking Regulation
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What can the G-20 achieve?
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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 manyfoldinternal contradictions
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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 reconfigurationof the hierarchy in the international system
Competition/conflict US - China
Geo-political competition between countries
Emerging market emerging self-confidenceovershooting of national pride.
Dont expect too much!
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Civil society and G-20
Civil society in rsp. Countries should take G-20 on the iragenda
Organise parallel activities to create a counterbalance in
public opinion
Pressure for integration into UN-System and & representationof poor countries
Challenging the G-20 with own alternatives
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Thank you very much
for your
attention
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