Gordon Brown has pulled off an enormous feat – 12 years into government, he has been heralded in domestic and international media as the champion of a New World Order. But the high praise heaped on Brown needs to be tempered by a hard-headed look at whether the G20’s promises really contain sufficient vision to transform the global economy.  

For the task facing the world is not simply to provide sufficient sticking plasters to patch up a flawed economy, but to transform that economy to one which puts jobs, justice and climate at its core.

The trillion dollar package?  

Even looking at the symptoms, where the G20 appear to be travelling in the right direction, they are doing so at a snail’s pace. Of the much heralded $1.1 trillion ‘package’, still a fraction of Northern bank bail-outs, only a half is actually ‘in the bank’ and most of that had already been announced before the Summit, some of it diverted from existing aid funds[1]. Only $50 billion is likely to reach the world’s 49 poorest countries, and no time period is specified on when it will be spent.   

This money isn’t a coordinated stimulus. Most of it will take the form of loans and will be channelled through deeply compromised institutions that have been part and parcel of creating the crisis. The International Monetary Fund – which appeared on its last legs only 12 months ago – is the biggest winner gaining a $750 billion increase in the amount it can lend.   

The IMF has been at the centre of the Third World Debt Crisis, a previous economic crisis from which many countries are still reeling. Rather than cancelling these long-overdue and deeply unjust debts, the G20’s solution is more loans through the same institutions. Uruguayan writer Eduardo Galeano called the decision “a joke of black humour” over the weekend, saying it will “rub salt in the wound."

Recent loans given to governments from Pakistan to Latvia, El Salvador to Serbia have prescribed the same sorts of free market policies that turned a crash in South-East Asia in the late 1990s into an unprecedented crisis that saw 10 million people thrown out of work in Indonesia. Even the best bit of the IMF package – the issue of Special Drawing Rights (the IMF’s own ‘currency’) which come without conditions, will mostly benefit rich countries. 

A further ‘trade finance’ package of money will enrich export credit agencies – like the UK’s Export Credit Guarantee Department, a government agency which guarantees more risky UK exports overseas. In effect it acts as a subsidy, most especially to enormous arms and carbon-intensive industries, leaving a trail of defaulted debt to be picked up by the UK taxpayer and poor country governments.

Finally the ‘trillion dollar’ package makes only a vague aspiration about spending on the type of ‘Green New Deal’ in renewables which environmental groups have called for. 

Reforming the System

A clear call on the G20 was to clean up the financial system – to radically reform the current economy where finance is king. The G20 made a lot of noise about ending financial secrecy, particularly taking on tax havens, which are believed to rob developing countries of £250 billion a year (not to mention £100 billion from the UK).[2]

Agreement to date will fall far short of closing tax havens down, let alone properly regulating hedge funds and other ‘innovative’ financial funds – the communiqué speaks of an “appropriate degree of regulation and oversight” for “systematically important financial institutions, markets, and instruments”, surely posing more questions than it answers.

Of course, none of these changes would have even been hinted at a year ago. But the point is that they will do nothing to fundamentally change a system which is not simply an economic, but moral crisis. Massively growing inequality, the scourge of the global economy, has changed the nature of the society we live in, turning life into a Monopoly game which the vast majority of the world can never win.  

Indeed in some ways, the G20 moves us clearly in the wrong direction. The G20 continues to believe that free trade – the liberalisation of markets and capital – are the solution. In fact, this is the very reason that developing countries have become so dependent since the late 1970s. A recent report by ActionAid clearly shows how those countries that have become most dependent on capital inflows to their economy are most vulnerable to the financial crisis[3].

International institutions have spent decades forcing developing countries to open their markets, destroying the livelihoods of small and subsistence producers, and leading dozens of countries who used to be net exporters of basic agricultural products to become net importers. Today, tens of millions of people are dependent on over-consumption by the West, while starvation and hunger rises and falls with the commodity markets.

Who are the G20 anyway?  

As the IMF has been empowered by the G20, the United Nations has been consigned to its time-honoured role of clearing up the mess, only being asked to ‘monitor the impact of the crisis on the poorest and most vulnerable.’ This is extraordinary given that a UN summit will take place on the financial crisis in early June – something which the G77 group of Southern countries had to fight tooth and nail for at another UN Summit in December.

In the run-up to the G20, Nobel laureate Joseph Stiglitz produced a report which had been commissioned by the President of the UN General Assembly. Its findings go well beyond the G20’s ‘vision’, calling for an international debt work-out process which would allow for far greater and fairer debt cancellation, an end to forced conditionality, a global Economic Council and a new reserve currency to replace the dollar. The last proposal was echoed by the Governor of China’s central bank Zhou Xiaochuan, calling also for an International Clearing Union – an idea dreamt up by economist John Maynard Keynes in the 1940s – to help ensure that enormous the trade deficits and surpluses do not build up. 

Stiglitz’s commission has gone out of its way to engage civil society organisations unlike the G20 which even refused entry to well-known organisations like WDM and War on Want.   

Stiglitz makes another thing clear – there are no shortage of coherent solutions to the global crisis. The issue is one of political will. Thirty years of economic fundamentalism has not simply created an economic crisis, but a profound sense of disempowerment on the part of Southern countries and ordinary activists. Now is the time – the first in a generation – to reclaim that political space.

During the G20 summit demonstrations took place across the world. If we are to ensure that we take this historic opportunity to make 2009 a year of global change, then the voices of ordinary people need to be heard whenever world leaders meet – building, educating and mobilising a movement is the only way to build a genuinely democratic, just and sustainable global economy. 

[1] Bretton Woods Project, ‘G20 ‘trillion’ dollar magic trick’, 3 April 2009

[2] War on Want, ‘G20 slammed for ‘shortsighted’ deal’, 2 April 2009

[3] ActionAid, ‘Where Does it Hurt? The impact of the financial crisis on developing countries’, March 2009

- Nick Dearden is director of the Jubilee Debt Campaign, London.
www.jubileedebtcampaign.org.uk

Jubilee Debt Campaign is part of the Put People First platform www.putpeoplefirst.org.uk