Tuesday, March 31, 2009

G20 - A Group too diverse to succeed?

Group of 20 too diverse to succeed

Wednesday, April 1, 2009
Special to The Japan Times

HONG KONG — Amid great fanfare, pestered by a rainbow alliance of protesters, and protected by almost blanket security costing $30 million for a mere seven hours of meetings and making London a virtual no-go area, the leaders of the Group of 20 (G20) countries meet this week, promising to restore hope and prosperity to a world battered and bruised by financial and economic crises.

Unfortunately, there are too many doctors already squabbling over the diagnosis and which medicines to take, vitamins or antibiotics, starvation or a rich diet, energy boosters or that new but expensive wonder drug that might have damaging side effects; moreover, the doctors are going to have to take some of their own medicine, and they don't like that at all.

There are many good reasons for the world's top economic powers to come together, not least because the global economy has fallen off the proverbial cliff edge. In October, Dominique Strauss-Kahn, the managing director of the International Monetary Fund (IMF), was more pessimistic than his own economists, but all scorned the idea that the world as a whole would fall into recession. Indeed, the economists expected positive growth of 3 percent, thanks to rapidly growing developing countries like China and India.

There has been a rude awakening. Robert Zoellick, president of the World Bank predicted, that global growth this year will be minus 2 percent, the first time since the end of World War II that there has been negative global growth.

The IMF is slightly less pessimistic, expecting only minus 0.5 percent. But there are plenty of ominously gloomy signs. World trade, the main engine of growth, has spluttered and fallen by 9 percent. Protectionism is growing from the United States and Russia, to China and India. The U.S., France, Germany and Japan are looking for ways to protect their carmakers.

Jobs are being lost in the thousands, adding up globally to tens of millions. The U.S. and China are being noticed most because of the large numbers involved, but every country is suffering except perhaps North Korea (the harder-hit victim of its own isolation). The idea that rapidly growing developing countries had their own momentum and would be immune to global trends has been found wanting: The poorest countries are faring relatively worst, with children being taken out of school to try to earn pennies for their families.

One problem for the summit is where to start. The extensive agenda includes too many key issues, including: How much extra stimulus governments should pump to revive their own and the global economy and get sustainable growth going again; what new rules and regulations should be put in place to stop future financial excesses and restore confidence; how to stimulate trade and prevent the resurgence of protectionism; what special measure should be taken to help the poorest countries; what new powers and funds should be given to the IMF and World Bank; what part the two should play in a reformed international financial system.

On its Web site, the G20 boasts that its members account for 85 percent of global output. In striving for inclusiveness it has become unwieldy. Ideas of giving emerging economic mega-powers China and India a greater voice have been lost in the profusion of voices at the top table, though critically Bangladesh, Pakistan and the oil-rich Gulf, apart from Saudi Arabia, are missing.

The G20 has become the G-22 with the unaccountable admission of the Netherlands and Spain. Places also have been found for the Czech Republic, as chair of the EU, plus the president of the EU commission — how the Europeans love double and triple dipping — the heads of the IMF and World Bank, the U.N. secretary general and chairs of the African Union, ASEAN and other regional bodies, making it a "G30something" circus of more than 1,000 summiteers.

Mutual bitching has already started. A small taste greeted British Prime Minister Gordon Brown last week in Brazil where he went trying to find common cause to set the world to rights. On the same platform as the British leader, President Luiz Ignacio Lula da Silva launched a stinging attack on the "white and blue-eyed" people "who appeared to be gods of wisdom" who started the crisis that has engulfed the world.

President Barack Obama is not blue-eyed, but there are plenty of leaders who are gunning for the U.S. and American-style capitalism. There is a great gulf between the U.S. and Europe, and the leaking in Der Spiegel of a draft final communique containing plans for a $2 trillion global spending boost has been seen as a German ploy to defeat such spending.

There is a real danger that infighting among the old G7 members preoccupied by domestic politics may prevent China, India or the emerging countries being heard. Canada has already said specifically that helping the world's poorest countries is "secondary" to the need to restore global growth.
Kevin Rafferty, editor in chief of PlainWords Media, was managing editor at the World Bank.
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