The G-20
Structure, Governance, Mandate
and Perspectives
Seoul 7./8. July 2010
Peter Wahl
World Economy,
Ecology &
Development
Association
Berlin
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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
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
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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
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Some indicators
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65,5% of global population
88% of global GDP
80% of world trade
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Nevertheless
The G-20 is not inclusive
It aggravates the
marginalisation of the UN
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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.“
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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
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Chapter 2
The G-20 in the system of global
governance
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
Key words:
1. forum (lat.) = marketplace, open space in the centre of a city
2. economic cooperation
G-20 = part of the global economic
governance system
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Governance is not Government
Governance:
• mix of formal and informal cooperation of
different types of actors (governments, multilateral
institutions, private sector, civil society)
• mix of formal and informal
procedures and agreements
• indirect regulation
opacity
complexity
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Global Governance
IMF
OECD
IOSC
O
Basle
Committee
World
bank
WTO
FSB
G-20 Summit
UN
Paris
Club
BIS
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The big problem behind
„The crisis is global.
But the instruments to solve it are national.“
Why?
Joseph Stiglitz
Increasing gap between the transnationalisation of
markets, in particular finanial markets and
the capability of national states to regulate them.
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Financial markets
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National state
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Disembedding of Global Players from
Regulatory control of the national state
The world of national staates
National State A
National state B
National state C
The post-national world of globalisation
National state A
National state B
National state C
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Emergence of a new, transnational
space beyond national states and
intergovernmental relations
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„We have lost control.
B. Bernanke
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
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There is no international or global
state to regulate markets
Global Governance as a very imperfect
substitute of international statehood
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Chapter 3
The G-20 and the
financial crisis
The assessment of the G20
reform proposals depends on the
analysis of the roots and the
nature of the crisis
Some current explanations
Reckless behaviour
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
Essence of Sarkozy‘s analysis:
1.
2.
3.
Dominance of finance over labour/real economy
Speculation as dominant business model
New type of capitalism
Finance capitalism as a specific
version of capitalism
Systemic crisis
Traditional role of international financial markets
• providing efficient services payment system for
households and real economy
• providing money for public and private investment lending
Real Economy
Subordination
Financial markets
Service function of financial markets
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A new system has emerged
Financial markets
Dominance
Real Economy
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Th e main characteristics of the new system
1.
2.
3.
4.
5.
6.
7.
8.
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
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The neo-liberal financial architecture
E
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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
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T
I
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n
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General dimensions of the crisis
1. Stability
2. Distribution
3. Democracy/Policy Space
The G20 is
focussing only on stability
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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 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.
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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
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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.“
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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
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Chapter 4
Perspectives
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
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
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What can the G-20 achieve?
1. Dialogue, communication among leaders
2. Learning processes among leaders
3. Soft pressure
4. Early warning systems for emerging problems
5. At best, concerted action in case of consensus
But limitations due to manyfold
internal 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 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!
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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
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Thank you very much
for your
attention
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