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 The G-20 and the financial crisis Perspectives WEED - PeWa Chapter 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 China India South Korea US Canada France Germany Italy UK Brazil Mexico Argentina Japan Indonesia Russia South Africa Australia IMF/World Bank Saudi Arabia Turkey Permanent guest: Spain EU/ECB Special guests WEED - PeWa Some indicators Zur Anzeige wird der QuickTime™ Dekompressor „“ benötigt 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 WEED - PeWa Zur Anzeige wird der QuickTime™ Dekompressor „“ benötigt 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 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 The G-20 in the system of global governance A new system has emerged Financial markets Dominance Real Economy WEED PeWa 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 The neo-liberal financial architecture E r o s i o n o f d e m o c r a C y Privatisation, pressure on social systems Negative effect on employment Structural underinvestment in real economyy Profits in finance higher than in real economy R E D I S T I B U T I O n WEED PeWa General dimensions of the crisis Stability Distribution 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 offballance 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 Framework Supervision • Basle III Addressing systemically relevant actors („too big to fail“) • Including Hedge Funds etc • OTC • FASP & FSB • Tax Havens • CRA‘s • Acctg Standards Peer Review FSB report FSB report WEED PeWa Chapter Perspectives Results by now Change in rhetorics of summit discourses, in particular Pittsburgh declaration  erosion of neoliberal talk Consensus to act countercyclically  stimulus packages Strengthening of the IMF and the FSB No consensus on further crisis management  „exit strategy“ No consensus on reform of financial system 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? Dialogue, communication among leaders Learning processes among leaders Soft pressure Early warning systems for emerging problems 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 ... Hiistory, structure, governance of the G- 20 The G- 20 and global governance The G- 20 and the financial crisis Perspectives WEED - PeWa Chapter Hiistory, structure, governance of the G- 20 History... Nevertheless The G- 20 is not inclusive It aggravates the marginalisation of the UN WEED - PeWa Zur Anzeige wird der QuickTime™ Dekompressor „“ benötigt In terms of theory of democracy the G- 20. .. Chapter The G- 20 and the financial crisis The assessment of the G2 0 reform proposals depends on the analysis of the roots and the nature of the crisis Some current explanations sy Ea G d e e