The much-anticipated G20 London Summit ended in an anti-climax. The measures announced appear to be more of the same old solutions the world has relied on so far to deal with financial problems. Have we arrived at the ‘beginning of the end’ of a promise of a new world order rather than at the ‘beginning of the beginning’ of a new world order? CIDSE’s main criticisms of the outcomes:
- The IMF with a slight face-lift will continue to regulate global finance. The IMF, bastion of industrialised country influence, will be given a 500 billion USD boost to continue to be the guardian of the global financial system, a role it has failed at so far. The G20 acknowledges the need to reform the mandates, scope and governance of these institutions by increasing the voice and representation of emerging and poor economies; ‘to take steps’ to make them more accountable and credible; and to appoint the heads and senior management on merit through open and transparent process. Will this make a difference to the numerous low income countries who are recognised to be the most adversely affected by the crisis? Highly unlikely.
- Tax havens will continue to flourish so long as they sign bilateral agreements that have proven not to be effective. The black-listing measures that the G20 announced will do little to return the millions of euros that have been illegally taken out of developing countries and deposited in secret European Bank Accounts. The OECD’s new black list will be reduced to no more than a diplomatic exercise. Countries like Liechtenstein, Monaco, Switzerland, Luxemburg, Belgium and Austria have found an easy way to stay off the list through bilateral tax agreements, while hardly changing their bank secrecy rules. Such bilateral agreements have delivered meagre results until today.
- The announced 50 billion USD for low income countries is little more than a repackaging of existing resources. With many countries in the EU set to default on their aid commitments, the Summit’s reaffirmation of donors’ commitment to achieve their respective Official Development Assistance pledges can only be believed if followed by concrete allocations to development budgets.
- A balanced and development-friendly system for international monetary stability remains elusive. The current monetary system disproportionately affects the currencies of non-reserve currency countries. The preliminary recommendation of the Expert (Stiglitz) Commission of the UN General Assembly President on reforms of the international monetary and financial system to adopt a new Global Reserve System, and the call by China to review the current monetary system based on a single reserve currency, is not reflected in the communiqué.
In conclusion, the G20 with its limited membership and interests is not the forum that can provide the global response to the financial crisis. Instead, the G20 should feed this outcome into the broader process to prepare the June UN Conference on the financial and economic crisis and its impact on development. Through such a dialogue, the G20 can ensure that its commitments and further policy orientations are informed by the needs and interests of this larger group of states that have as much if not a greater stake in ensuring that a new global order is carved out of the present crisis.
See CIDSE’s new policy paper, "From Collapse to Opportunity: Development Perspectives on the Global Financial Crisis" (April 2009), full G20 analysis and the Christian Aid response to the G20.
See also Euforic's newsfeed on the financial crisis