LONDON: At the core of the G-20 Summit in London this week is an ideological battle about the future nature of capitalism. Never mind potential alternative systems of financial and economic management such as Islamic finance. If Saudi Arabia, Indonesia and Turkey, the three Muslim representatives at the summit, push this agenda, then it may merely get a mention more for cooperation than any adoption.
Yes, the official posturing of globe-trotting British Premier Gordon Brown talks about a $100 billion expansion of trade finance to reverse a slowdown in global trade; the completion of the Doha Trade Round; the reform of the global financial system through tighter regulation and early warning systems to pre-empt similar crisis in the future; and an assault on tax havens and banking secrecy.
There may be even more calls for fiscal and economic stimulus packages, although a clear rift is emerging in G-20 member countries such as the US and UK on the one hand and Germany and the EU on the other hand. In the UK, Brown seems to be at odds with his Chancellor Alistair Darling and his ‘independent’ monetary policy gatekeeper, Mervyn King, the governor of the Bank of England, both of whom have suggested that throwing more money at the problem is not a sustainable policy.
The single major difference between the London G-20 Summit and the one in Washington DC last November is a change of guard in the White House. The lame duck Bush administration was in its last days more interested in legacy salvation than solving the world’s financial problems, which were largely made in the USA. Not surprisingly, the discussion bordered on the plain vanilla stuff which could have been agreed on without holding a meeting.
The new US President Barack Obama has his work cut out. The hope he has inspired in millions of ordinary people around the world has raised massive expectations. To some extent his hands have been tied because he has been forced to continue a financial stimulus package initiated by his hapless predecessor.
The novelty of a dashing young non-white US president attending his first summit in Europe may distract a little from the real agenda of the summit, given the globalization these days of the cult of celebrity.
Obama’s response to the crisis has been ordinary thus far. His administration smacks more of a Clinton Mach-II than a genuine break from the past. As such, he may be riding the last few crests of his popularity wave, before the hopeful become transformed into the disillusioned.
The major problem of capitalism is that some of those who presided over its excesses and regulatory incompetence over the last three decades are now posturing as its saviors and gatekeepers. The incestuous relations between business and politics, especially in liberal democracies, which supposedly ought to know better because of checks and balances, is the main reason why the response to the financial crisis has been confused, haphazard, muted and bereft of ethics.
Take for instance speculation and short selling. After proscribing it for three months, both the US and the UK see the use of hedge funds as a crucial tool to revive the financial markets and the value of bank stocks. This moral ambivalence is the other core malaise of current capitalism.
As Brazilian President Luiz Inácio Lula da Silva stressed recently, “I am not worried about the name to be given to the economic and social order that will come after the crisis, so long as its central concern is with human beings.” To put it another way, the new financial order should reward production and not speculation. It should impact the real economy through stimulating productive activity. It should be rigorously rather than over regulated, both at a national and international level, through serious and representative organizations. This is also the ethos of the Islamic system of financial management.
While most of the world hankers are for a new global financial, economic and trade order, the die-hard capitalists are fighting back arguing that the G-20 Summit this week should restate the arguments for globalization and capitalism, to counter the anti-globalization demonstrators that follow the G-20 summiteers and who attack the control of world trade by the capitalist nations and finance by the banking majors.
The Times leader on Saturday could not have been more to the support of the capitalists: “To this attack, an unflinching response is required. Global free trade is not a tool of oppression. It is the route out of oppression. The rise of globalization - a word that the critics attempt to demonize - is one of the most helpful developments in the history of mankind.”