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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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Zur Anzeige wird der QuickTimeDekompressor

bentigt.

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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bentigt.

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.

Advertisement at the Internet

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


bentigt.

Increasing gap between the transnationalisation ofmarkets, in particular finanial markets and

the capability of national states to regulate them.

Why?

Financial markets National state


bentigt.

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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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