The G-20

Structure, Governance, Mandate and Perspectives

PRESENTED BY SANDEEP KUMAR SINGH MBA SECTION B

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Content
1. 2. Hiistory, structure, governance of the G-20 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 Japan Indonesia Saudi Arabia Turkey Australia EU/ECB
IMF/World Bank Permanent guest: Spain

Brazil Mexico Argentina

Russia

South Africa

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 Londons 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

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

The post-national world of globalisation

National state A

National state B

National state C

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 sorcerers 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 Sarkozys 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 r 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 U T I O 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 Basle III

Supervision

Addressing systemically relevant actors

(too big to fail)

Peer Review

Including Hedge Funds etc.

OTC CRAs Acctg. Standards FSB report FSB report

FASP & FSB

Tax Havens

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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.

Dont 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

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