1. WEED PeWa Peter Wahl World Economy, Ecology & Development Association Berlin Seoul 7./8. July 2010 The G-20 Structure, Governance, Mandate and Perspectives

2. 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

3. Chapter 1 Hiistory, structure, governance of the G-20

4. 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 2008 Washington, London, Pittsburgh, Toronto Seoul, France, Mexico WEED - PeWa Reaction to the crisis 2008

5. Member states US Canada France Germany Italy UK Japan 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 WEED - PeWa

6. Some indicators 65,5% of global population 88% of global GDP 80% of world trade WEED - PeWa

7. Nevertheless The G-20 is not inclusive It aggravates the marginalisation of the UN WEED - PeWa

8. „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 In terms of theory of democracy the G-20 is a Club WEED - PeWa

9. Internal Structures No statutes No binding decisions („peer review“) No headquarters No own administration and staff Rotating presidency Implementation trough national states or multilateral institutions The G-20 = informal institution WEED - PeWa

10. Chapter 2 The G-20 in the system of global governance

11. 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 1. forum (lat.) = marketplace, open space in the centre of a city Key words: 2. economic cooperation G-20 = part of the global economic governance system WEED - PeWa

12. Governance is not Government mix of formal and informal cooperation of different types of actors (governments, multilateral institutions, private sector, civil society) Governance: mix of formal and informal procedures and agreements opacity complexity indirect regulation WEED - PeWa

13. Global Governance G-20 Summit OECD FSB BIS UN IMF World bank Paris Club WTO WEED PeWa IOSC O Basle Committee

14. The big problem behind „The crisis is global. But the instruments to solve it are national.“ Joseph Stiglitz Increasing gap between the transnationalisation of markets, in particular finanial markets and the capability of national states to regulate them. Why? Financial markets National state WEED PeWa

15. Disembedding of Global Players from Regulatory control of the national state WEED - PeWa 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 BNational state C

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

17. „We have lost control. B. Bernanke WEED PeWa 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

18. There is no international or global state to regulate markets Global Governance as a very imperfect substitute of international statehood WEED PeWa

19. Chapter 3 The G-20 and the financial crisis

20. The assessment of the G20 reform proposals depends on the analysis of the roots and the nature of the crisis

21. Some current explanations Greed Easy money Lack of supervision Subprime crisis Reckless behaviour

22. 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

23. 1.Dominance of finance over labour/real economy 2.Speculation as dominant business model 3.New type of capitalism Essence of Sarkozy‘s analysis: Finance capitalism as a specific version of capitalism Systemic crisis

24. Traditional role of international financial markets providing efficient services payment system for households and real economy providing money for public and private investment - lending WEED PeWa Real Economy Service function of financial markets Financial markets Subordination

25. WEED PeWa Real Economy A new system has emerged Financial markets Dominance

26. 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) WEED PeWa Systemic instability

27. Profits in finance higher than in real economy Structural underinvestment in real economyy Privatisation, pressure on social systems Negative effect on employment REDISTIBUTIOn EroEro s sii o onn ooffdd e emm o o c crraaCCyyEroEro s sii o onn ooffdd e emm o o c crraaCCyy si on ofd em o craCy The neo-liberal financial architecture WEED PeWa

28. General dimensions of the crisis 1.Stability 2.Distribution 3.Democracy/Policy Space The G20 is focussing only on stability WEED PeWa

29. 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

30. 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

31. 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

32. The Seoul agenda for financial reform Regulatory Framework WEED PeWa „Four Pillars“ SupervisionPeer Review Basle III Including Hedge Funds etc. OTC CRA‘s Acctg. Standards FSB report Addressing systemically relevant actors („too big to fail“) FSB report Tax Havens FASP & FSB

33. Chapter 4 Perspectives

34. 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 WEED PeWa 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

35. What can the G-20 achieve? WEED PeWa 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 manyfold internal contradictions

36. 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

37. 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

38. Thank you very much for your attention WEED PeWa