THE G20 OUGHT TO BE INCREASED TO 6 BILLION
COMMENTARY ARCHIVES, 8 Jul 2009
The G20 is important in the eyes of the world. Its pronouncements could decide whether you can get a job, refinance a mortgage, get a loan if you are a small company and, in the poorer parts of the world, even put your kids to bed with a full stomach.
Is the G20 really the right institution to address so many hopes and fears? From the standpoint of legitimacy, not at all. It has no employees, no headquarters and not even a statute. Indeed the international relations handbooks cannot tell us how to handle it, as it is situated half way between an international organization and the more formalized practices of traditional diplomatic channels.
In spite of the name, it does not even have 20 member states: it has only 19, boosted by the addition of a European Union representative. The member governments are by no means featherweights; as they themselves often remind us, they represent 85 per cent of world production, 80 per cent of world trade and two thirds of the world population.
However, these are merely quantitative values and have little to do with legitimacy. For Bangladesh it is not enough to have a population six times greater than that of Saudi Arabia to become part of the group. The only representative from the continent of Africa is South Africa. The G20 is lacking in logic also as far as income is concerned: Spain, Iran, Taiwan, the Netherlands and Poland have a gross domestic product exceeding that of Saudi Arabia, Argentina and South Africa but have not been invited. Also other countries of crucial importance for world financial architecture, such as Switzerland with its banking system and the Arab Emirates with its Sovereign Wealth Fund assets, are absent.
How does that one third of the world population whose state representatives have not even been invited to the Summit feel about it? A good 173 countries in the world have been left out and can only wait and see what is decided in London. We are talking about one third of the world population which has all the problems of the other two thirds and often many more, but in this case have no voice.
However, it is still better than the G8, it might be objected, which groups the governments of only 14 per cent of the world population, all of which located in the North of the world. It might be argued that to enlarge the meeting and turn it into a G192, a kind of UN General Assembly on a school outing, would make it more representative but also inconclusive as there would be no possibility of taking effective decisions. The crisis that has hit the financial markets calls for strong messages to be transmitted, which can only come from those governments that have enough resources to guarantee them. But the countries that have fat wallets do not seem to be interested in sending these messages, perhaps because they have not been given a mandate to act on behalf of all countries.
Initially dreamed up to act as a clearing house to the G8 by providing a platform also for the countries of the South, it has become entangled in inter-governmental logic and represents interests that are too divergent to allow a consensus to be reached.
In the preliminary document drafted by the host nation, the British government warns against protectionism and demands that the Doha Round be concluded as soon as possible, without however indicating what concessions the rich countries should grant to the poorer nations. It pleads for the reaffirmation of the objectives in terms of Official Development Aid without however indicating any ways or means. The only qualifying point, evidence that the arrival of Barack Obama at the White House has had some effect on the dry language of international summits, is the reference to a “low-carbon recovery”.
Although vague as far as the instruments are concerned, the G20 has radically overhauled its agenda with respect to previous years, as Will Hutton has noted. It calls for greater market regulation, whereas for years and years it debated on the trinity – liberalization – privatization – deregulation. It finally acknowledges that markets are fallible and that greater state intervention is needed. It calls for a reform of the International Monetary Fund and the World Bank, increasing the available resources and modifying the relative quotas. It claims that it is necessary to increase official development aid also as a demand support strategy.
There is nothing wrong with any of these ideas, although they are by no means original: indeed the anti-summiteers, the NGOs and independent observers have championed the same policies, and long before this. But instead of being debated by the heads of government and the economic ministers, all this wisdom has remained fixed to the banners carried in the demonstrations held under the windows of the summit venues. Had these ideas been given the required attention the present financial crisis might have been avoided or at least much reduced in intensity. The same proposals are summarized in the common document of the organizing organizations “Put People First:" Ensuring a response to the economic crisis that delivers democratic governance of the economy”.
It is to be hoped that the technocrats attending the summit have since become sufficiently humble at least to have read the document. But it is really a pity that none of the 35,000 protesters who rallied in London on March 28th will have the possibility to illustrate these proposals at the Summit.
The inability of the G20 to come up with solutions is largely dependent on its institutional nature. There is no proof that there is a trade-off between legitimacy and efficiency. In terms of efficiency, the key discussion will take place in the G2: on the one hand the United States with its debts, on the other hand China with its credits. But if something goes wrong in the dance between the two, all other dancers can be swept away.
In a world in which it is demanded world politics be increasingly held accountable it is inconceivable that everyman’s problems should be addressed in summits held outside the confines of democratic logic. Today some suggest not only that the Bretton Woods institutions should be radically overhauled but also that they should be placed under the scrutiny of a directly elected world parliament (see, for instance, the “Call for Global Democratic Oversight of International Financial and Economic Institutions” made by the Campaign for the Establishment of a United Nations Parliamentary Assembly).
When the world markets were still in a state of great euphoria, Frances Stewart and Sam Daws proposed setting up an Economic Security Council within the United Nations comparable for political authority to the Security Council. In such a body, seats would be elective and the member countries selected on the basis of their population, income and their capacity and willingness to contribute to financial stability.
The fundamental difference between this proposal and the current G20 is that each government would be empowered to act in the interest of all and not just in the interest of their own country. As with the Security Council, such a body would be based on a Charter, on transparent decision making, and would be able to rely on a permanent Secretariat. We have also learnt from history that inter-governmental organizations are more efficient when they are under the scrutiny of citizens and it would be important to give voice in such an institution also to non-state actors and elected representatives.
Now that the crisis has laid Wall Street and the City low, we can only hope that the London Summit will discover that the absence of democracy is a luxury we can no longer afford. And the best way to acknowledge it, would be to call for a genuine G6-billion Summit.
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