People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 40

October 04, 2009

G 20 Summit: More Continuity than Change

THE recently concluded G 20 summit at Pittsburgh (September 24-25), the third since the outbreak of the global financial and economic crisis, has institutionalised the grouping of 19 countries (plus the European Union) as the new manager of the global economy. The G 8 has become incapable of running the show with the economies of China, India, Brazil, Mexico, Argentina, South Korea, Turkey, Indonesia, Saudi Arabia, South Africa etc. accounting for increasing shares of world output and trade. Increased integration through trade has made developing countries more dependent on export markets in the developed countries, especially the US. Moreover, the status of the dollar as the world�s reserve currency has meant that much of the world�s financial wealth is accumulated in dollar denominated assets. It is therefore in the interest of elites and governments across the world to cooperate with the US in preserving the confidence in the dollar.

The transition from G8 to G 20 as the manager of global capitalism, however, has not signified any basic shift in the global order. Neither does the G 20 represent, contrary to the claims being made, the interests of the developing countries across the world. The absence of major economies like Iran, Venezuela and countries from the Africam continent (only South Africa is included) robs the new grouping of a truly representative character.

While the G 20 summit agreed that it is as yet too early to roll back the fiscal stimulus in the backdrop of a tentative economic recovery, it was decided to �prepare�exit strategies and, when the time is right, withdraw�extraordinary policy support in a cooperative and coordinated way, maintaining our commitment to fiscal responsibility.� The G 20 also resolved to �fight protectionism� and bring the WTO Doha Round to a successful conclusion in 2010. It is clear that the overall economic framework underlying globalisation will continue to remain the same. The global imbalance characterised by the US running huge trade deficits by borrowing large sums of money from the rest of the world, remains unaddressed.

As far as restructuring the global financial architecture is concerned, other than the oft-repeated verbal commitment to institute limited banking reform to avoid excessive risk taking in the form of improved capital adequacy standards, regulation of derivatives trading and curbing bonuses of bank managers, there was nothing substantial. Actual financial reform was focused on themes like Basel II standards, crackdown on tax havens and reducing bank leverage, which predates the crisis and where consensus continues to be elusive. In terms of global economic supervision, the summit has promised to transfer at least 5 per cent of the shares in the IMF and at least 3 per cent of the vote share in the World Bank from over-represented developed nations to emerging economies. The US would, of course, retain enough shares to exercise a veto in the IMF. As for the global poor, an already existing World Bank-led programme to promote food security in the world�s poorest countries was endorsed to signal a concern for those excluded from the G 20 club. But a reference to an initiative on phasing out fossil fuel subsidies was also made.

The G 20 summit represents more continuity with the economic order underlying globalisation than any substantive change. In fact the way US president Obama used the occasion to step up rhetoric against Iran�s civilian nuclear programme, along with the heads of state of Britain and France, shows how little things have changed as far as US� hegemonic ways are concerned.