LONDON: “Money is for losers” said the graffiti daubed by an anti-capitalist protester on the wall of the Bank of England yesterday morning as leaders from the G-20 countries converged on London for their historic summit today.
Whether the protester intended the pun is a moot point, but it certainly would not have spared the blushes of “the Lady of Threadneedle Street”. Judging by the losers who presided over the near-collapse of a string of banking majors and the near-criminal reward for their failure in the form of bonuses and tax concessions, the protesters and millions of ordinary people around the globe believe they have a valid point.
Amid the demonstrations against casino capitalism and the war in Iraq and Afghanistan and for global measures to fight climate change, as well as talk of a rift between the UK-US alliance on the one hand and the German-French cordiale on the other, British Premier Gordon Brown and US President Barack Obama at their early morning meeting at No. 10 Downing Street were eager to play down any such differences and to tone down expectations of any immediate impact any of the G-20 decisions would have.
A cautious Brown reported to the world at the Downing Street press conference: “President Obama and I are agreed about the significance of this week’s G-20 meeting that the world is coming together to act in the face of unprecedented global financial times. We are within a few hours of agreeing a global plan for economic recovery and reform.”
The G-20 summit is politically crucial for Brown, whose reputation for economic competence has been battered by the financial crisis, and who faces voters in a general election next year. He has sought to lead the drive for a global approach to the crisis by stressing that the financial crisis is a global one that needs global solutions.
A relaxed President Obama spoke of a “sense of urgency” needed to confront the worst global economic crisis in over 70 years. “The United States,” he pledged, “is committed to working alongside the United Kingdom in doing whatever it takes to stimulate growth and demand and to ensure that a crisis like this never happens again.”
He said the G-20 had to reject protectionism and support emerging markets, and called for countries to work together. Perhaps most importantly, he emphasized that he is “absolutely confident that the United States as a peer of these other countries will help to lead us through these very difficult times.”
As usual at these events, the most crucial spadework is done behind the scenes at the private bilateral meetings between the leaders. The meeting between President Obama and Russian President Dmitry Medvedev already marks a new chapter in US-Russian relations. The two leaders have agreed to sign a new START (Non-Proliferation) Treaty before the end of 2009, when the old one expires.
The old treaty called for the strategic nuclear weapons stockpile of between 1,700 and 2,100 warheads, enough to destroy the world several times over. A new treaty, according to defense analysts, will seek to halve the current stockpile, which would make the threat of a nuclear war far less likely.
The US president has also accepted an invitation from the Russian leader to visit Moscow in July.
The meeting between President Obama and Chinese President Hu Jintao concentrated on different issues.
Obama similarly accepted an invitation from Hu to visit China later this year. China is the dark horse of the summit. It is effectively the underwriter of the massive US current account deficit.
China is also one of the most liquid countries in the world and as such is expected to play a major role in any reform of the international institutions such as the IMF and its Financial Stability Forum.
But in exchange for their money, the Chinese like the Indians want a seat at the top table and a greater say in the implementation of the new “plumbing of the global financial architecture.” This means increasing the contribution of China and India to the IMF but in return for greater voter rights. The IMF may be propped up with a further injection of over $250 billion in contributions.
As such, after this summit the global financial regulatory and architecture will probably change for ever hopefully for the better, because there will be no progress if the strong emerging economies do not get equal treatment at the international organizations.
The G-20 summit will probably also see the phasing out of the G-8 summit because there has been an irreversible shift in economic and financial power from the traditional capitalist states such as the US, Japan, Germany, the UK and EU to the rising stars from the East.
The key issues on the table are cross-border regulation of global financial institutions, which is much more difficult to achieve in reality; fiscal stimulus packages which are strongly supported by the US, UK, Brazil and India, albeit the latter two want these packages more to benefit ordinary people rather than banks and corporates per se; liberalized world trade through the completion of the Doha Round, which will remain elusive as long as the US and UK persist with protectionist tariffs for their wheat farmers or through the Common Agricultural Policy and developing countries have limited access to developed markets; the reform of the IMF which is long overdue especially its prescriptive imposition of monetarist policies such as structural adjustment programs at any cost; a clampdown on tax havens which the developed countries are particularly in favor of; and the environment agenda, especially measures to mitigate climate change, which was the Achilles heel of the Bush administration.
A message from one climate change protester called Kevin though was emphatic: “Carbon trading is not going to work. There will always be the danger that this market will collapse as spectacularly as the financial market has done.”
