The G20 Summit Falls Short

International labour leaders including CLC President Ken Georgetti met with the heads of the IMF and World Bank, President Lula of Brazil and several other G-20 leaders before the summit to speak to the major trade union statement which called for immediate, co-ordinated action to avert a global jobs crisis, and fundamental reform of the de-regulated global financial system which got us into this mess.


http://www.progressive-economics.ca/2008/11/13/economic-crisis-worlds-trade-unions-respond/

The most disappointing outcome of the summit is that governments failed to agree to a concrete plan of immediate action to stop the world economy from spiraling down into a global depression led by huge job losses and a collapse of house prices, household spending and business investment .

It is welcome that leaders, notably now including Prime Minister Harper, recognized that cuts to interest rates and bailing out the banks will not be enough, and that governments will have to invest directly in a significant and co-ordinated way to save jobs and turn the global economy around. However, no specific commitments were made which would have an immediate positive impact.

On a more positive note, the G 20 leaders turned down efforts by some, notably the outgoing Bush Administration and the Canadian government, to set aside the call for new international rules to regulate global finance, as advocated not just by the global labour movement but also some European and developing country leaders.

Working parties will be set up with important mandates to address a wide range of issues over the next four months, including the compensation of senior executives, regulation of highly risky and complex financial products such as credit default swaps, excessive leverage, the behaviour of credit rating agencies, the need to ensure that all governments regulate adequately, and the need to extend regulation to hedge funds and others prepared to take huge and potentially disastrous risks with other people’s money..

While most important financial issues which the global labour movement wanted to be addressed are at least now on the table for discussion by working groups, the main forums of discussion will be the Financial Stability Forum and the International Monetary Fund. Both of these institutions advocated very light regulation until very recently, and failed to anticipate, let alone prevent, the current financial crisis.

The G 20 leaders did call for reform of both the Financial Stability Forum  and the IMF to increase the role of large developing economies, but they provided no assurance of a reform process that would allow for input beyond the narrow world of central bankers and government finance officials.

G 20 leaders (other than Japan) also failed to come up with new resources to protect developing countries from a crisis which was not of their making.

3 comments

  • In order to compensate for the decreasing economic efficiency that is happening or about to happen. Governments must take a hard look at increasing economic efficiency.

    Reduce market barriers created by vertical market integration. Examples included separating wireless tower ownership from wireless service providers. Much like long distance carrier service was separated from local phone providers. This may provide as a benefit, cost effect path to ipv6. I will skip the details, but a migration to ipv6 will not only create economic stimulus, it is necessary.

    Increase land usage and resource efficiency. This can be obtained by increased redevelopment efficiency. Incredibly inefficient redevelopment in the US, has increased localized house devaluation. More efficient redevelopment will enable more cost effective transportation and housing. Increased efficiency here will lead to significant labour cost/efficiency improvements.

    Last point: War is not an economic stimulus. Reduced corruption, barriers to market entry and market place transparency are economic stimulus.

  • The trade union call for a “new green deal” – or something like that was great.

    The UN Secretary-General also urged G20 leaders to tackle climate change at the same time.

    Very good work on a green stimulus package for the US has been conducted by the Political Economy Research Institute – http://www.peri.umass.edu/

    Where is this agenda in Canada? There is a low-income efficiency program that the Conservatives cancelled that could create jobs throughout the country? If aid is going to be given to the auto sector is some of that going to be for trains and buses?

  • Thanks Andrew. It seems that the working groups represent a bit of progress on some financial products and behaviours, but this is most notably in the context of a 12-month restriction on any limits to trade in financial services. It’s like saying to the fox, ‘We’re going to trim your nails a bit, but are giving you free range in the hen house for the next 12 months. Here are the keys.’

    I’m going to re-read Ellen Gould’s excellent summary of WTO and GATS limits on financial services trade, linked below. It looks like the G20 members essentially did a trade-off (trimming of product trade for guaranteed expansion of services trade) which may reassure the financial services providers who want to infiltrate globally, with theoretically trimmed products, but the trade-off puts people and planet furhter under the finger of a sector hoping to profit from increased control of resources, infrastructure, and labour over the next 12 months. “In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports.” [from the N15 G20 declaration linked at http://www.whitehouse.gov/news/releases/2008/11/20081115-1.html pt.#13].

    Unfortunately there are a number of WTO-consistent measures which are already in place for financial services providers to stimulate export of themselves, and the 12-month restriction on new barriers to prevent their incursions gives the foxes effectively a year to run rampant.
    http://www.policyalternatives.ca/documents/National_Office_Pubs/2008/Financial_Instability_and_GATS.pdf

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