Boutros-Ghali: IMF reform flagging

Youssef Boutros-Ghali, chair of the IMF’s policy steering committee has spoken out against what he sees as the failure of G20 members to act on their commitments earlier this month to reform of the Fund.

Around the time of the London Summit, both the Financial Times and the Economist spoke out against reforming international financial institutions. They argued that the first concern should be dealing with the financial crisis, not dealing with ‘peripheral’ issues. As Boutros-Ghali puts it, ‘in a crisis, you want to put out the fire and not bother with plans to redecorate the living room.’ Nonetheless, he added that ‘reform needs to be done in a time of crisis’. This is the position I myself have taken.

A recent CEPR report is also far from sanguine:

the proposed quadrupling of IMF resources will have implications for many years to come, even after the world economy recovers. Although the new resources are unlikely to reverse the trend of governments avoiding, whenever possible, the Fund’s lending and influence, they will help to re-establish an unreformed IMF as a major power in economic and decision-making in low-and-middle income countries, with little or no voice for these countries in the IMF’s decisions. This could have long-term implications for growth, development, and social indicators in many countries.

The will to reform the Fund’s wildly disproportionate voting rights seems to be flagging already. This is both concerning and, if we’re honest, unsurprising. Those countries that gain from the status quo have little incentive to push for change. It is easier and more beneficial to sideline these issues of global governance while they focus solidly on domestic economic recovery. This is the kind of short-sighted attitude that has become par-for-the-course when it comes to global governance. Domestic politicians have no need to look beyond the next election and will therefore never side with long-term gain over short-term pain. The same phenomenon can  be seen in climate change negotiations or social security reform at the domestic level.

Aside from a benign world dictatorship, or politicians showing genuine leadership, both of which I think we can dismiss, perhaps it is necessary to use a system whereby unpopular or disadvantageous reforms are agreed, locked in and then ‘grandfathered’ into practice some time later, thus—to a degree—reducing the immediate disincentive for politicians to make hard decisions. Politicians do not need to worry so much about upsetting their constituents if the changes they agree are scheduled to come into force some years later. This is by no means a perfect plan – it is slow and open to abuse. But it might be one of the only ways to get around the short-termism of the politics of global governance.

On a more postivie note, Boutros-Ghali also said that:

In future, [the IMF] should vary its policy recipes… “I want an institution that is more involved not only as a global policeman but as a global witchdoctor.”

This is an encouraging confirmation of the Fund’s increasing tendency towards more heterodox economic thinking, though I’m in two minds about whether a ‘witchdoctor’ is quite what we’re looking for.

One more G20 postscript: the death of Ian Tomlinson

Essential viewing: a video hosted by The Guardian, showing the police assault of Ian Tomlinson shortly before he died.

The footage can be viewed here.

The G20 at the close of play

First, here’s the final communiqué and here’s the BBC’s Q&A on what’s been agreed. Their ‘at a glance’ summary is here.

Aside from the recovery measures—the quality of which I do not intend to speculate upon—the success of the summit shows that a larger grouping such as the G20 can be effective. Hopefully this should encourage further substantive reform of the IFIs and a greater momentum towards a more truly equitable form of global governance. There will be a review of the IMF’s voting structure in 2011 and DSK stated yesterday that ‘he believed that the G20 was shaping up as the board of governors for the world economy, and said he favoured an even bigger grouping to give more representation to poor countries.’ This may turn out to be one of the more lasting and significant legacies of the London Summit.

If you want a laugh, check out the BBC’s vox populi on the summit. Oh, and it’s always nice to see Berlusconi getting told off, too.

Photo by Downing Street, via Flickr (Creative Commons, Crown copyright).

P.S. According to Kabir Chibber:

The G20 summit could go down as the turning point when the distinction between the developing and developed world, already blurry, ends for good.

Many of the developing nations – China, Brazil, India among them – came to the summit in London with a list of demands to make a more multilateral world.

Unlike the past, this time they actually got most of them.

This prompted Brazilian President Luiz Inacio Lula da Silva, whom US President Barack Obama called the world’s most popular politician, to say that the richer nations had finally negotiated with emerging countries on “equal terms”.

A G20 roundup

The London Summit

Alex Evans at Global Dashboard is reporting on the current state of negotiations at the summit and all-round good egg Adam Groves interviews Mr Billy Bragg in the City of London. While just about every respectable politician in the world is sounding off about the importance of avoiding protectionism (with their fingers crossed), a contrarian Noreena Hertz in The Times calls for protectionism. Though, on that note, prospects for Doha are predictably bleak.

The crisis and the developing world

Jeremy Seabrook thinks Gandhi had the right idea (he really didn’t).The FT has a nice supplement on the the financial crisis in Africa and the UK is boosting foreign aid (a bit).

Global governance

There’s some big academic thinking from Saskia Sassen at oD about a world economy powered by finance. Stiglitz et al. at the UN are arguing for the G20 to be replaced by a Global Economic Council, while the Sec-Gen is afraid of total meltdown. On the subject of disaster, we should apparently be expecting a ‘”perfect storm” of food energy and water shortages’ sometime before 2030. More broadly, Timothy Garton Ash highlights the G2 (US and China) in the light of the EU’s failure to work cohesively. The New Statesman, on similar lines, believes that ‘no-one rules the world’ and CEPR welcomes us to a truly multi-polar state of affairs.

What the world needs from the London Summit

I have an op-ed at the International Affairs Forum entitled ‘What the world needs from the London Summit: moving beyond half-measures’.

The International Affairs Forum is run by the Center for International Relations, a nonprofit, tax exempt (501(c)3) organization based in the Washington, D.C. area unaffiliated with any group or ideology. It is devoted to the independent exchange of international affairs, intelligence and economics views and information.

The G20, Gordon Brown and time management

According to The Times’ Red Box blog, the Prime Minister will have a total of 4 hours and 35 minutes (aside from all the mealtimes) to spend on rectifying the global financial crisis and reforming the world’s economic architecture when the G20 summit takes place a week today. Gulp. It sort of reminds me of that line about doing six impossible things before breakfast…

Of course, much has been decided already, but if that’s the case, you’ve got to wonder whether a publicity stunt is worth all the cost, especially as policing alone is expected to cost £7.2 million.

Speaking of the British government and cost, I feel compelled to share this, from The Spectator:

To comprehend the scale of the sickening task awaiting George Osborne if he becomes chancellor, consider the following. If he were to raise VAT to 25 per cent, double corporation tax, close the Foreign Office, cancel all international aid, disband the army and the police, release all prisoners, close every school and abolish unemployment benefit he would still be unable to close the gulf between what the UK government spends and what it raises in taxes.

Double gulp.

Potential G20 solutions

Spotted on The Guardian’s comment pages:

Well, quite.

G20 ‘wishlist’ toy

For those of us following the lead-up to the G20 summit on 2 April (sadly, my workload means I probably won’t be going to any of the peripheral events after all), the FT has a rather exciting ‘interactive’ gadget which outlines the interests and conflicting preferences among the Group’s members that will largely determine the outcome of the summit. Incidentally, discussing the meeting with colleagues today, I was interested to note that—like me—everyone was profoundly agnostic as to whether the summit will result in anything very substantive, or any radical change. That’s not to say we’re doubting it, but rather that we really have no idea at all…

Development aid in a global crisis

The British Government has predicted that what is now being called the ‘Great Recession’  will leave 90 million more people in poverty. It is also being assumed that the financial crisis will set back progress towards the MDGs by at least three years. Indeed, Ashley Seager writes that:

The Global Monitoring Report from Unesco estimates the 390 million poorest Africans will see their income drop by around 20% – far more than in the developed world.

The global financial crisis has seen a fall in commodity prices as well as a drop in investment flows to poorer countries. The report’s authors – Kevin Watkins and Patrick Montjourides – estimate this will cost sub-Saharan Africa’s poorest people $18bn (£12.8bn), or $46 per person

[...]

The report says aid budgets in rich nations are being squeezed because they are expressed as a share of GDP, which is contracting. It estimates the EU’s commitment to provide 0.56% of GDP in aid by 2010 will actually mean a drop of $4.6bn.

Yet at the same time, the prime minister yesterday reaffirmed Britain’s commitment to the target that 0.7% of GNI be earmarked for development aid, which was agreed to at Gleneagles in 2005. The Secretary of State for International Development said that ‘we must continue our unwavering support for the MDGs. This must be the focus of the G20 summit’. On that, we may be forgiven some cynicism. Meanwhile, Global Dashboard provocatively questions the 0.7% shibboleth.

P.S. Further to my post linking to the ‘why aid is to blame’ interview with Dambisa Moyo, Humphrey Mulemba is articulating the counterargument.

Bloggers at the G20 London Summit

The people at the Global Call to Action Against Poverty are ‘inviting 50 influential and knowledgeable bloggers from around the world to join us at the London ExCel centre with the G20 leaders and the world’s press.’ More details here.

So if there are any fans of this blog out there, I would humbly say that I’d appreciate any nominations. You can nominate From Davos to Seattle to attend the London Summit by clicking here – just fill out the short form. Thanks.

P.S. I’m currently working on an extended article on what the world needs from the G20 – I’ll link to it on the blog when it’s finished.

The summer of rage?

Apparently, a ’summer of rage’ is being predicted for the UK. Mass protests are expected. The combination of the G20 summit and the likelihood of more ‘wildcat’ industrial strikes, as well as general anger at the financial industry as a whole seems to be causing concern at the highest levels. According to The Guardian:

Britain’s most senior police officer with responsibility for public order raised the spectre of a return of the riots of the 1980s, with people who have lost their jobs, homes or savings becoming “footsoldiers” in a wave of potentially violent mass protests.

Apparently, ‘known activists’ are mobilising. Of course, it is well known that civil strife (as well as crime) is more common in summertime. That said, my gut instinct is that all this is being exaggerated a bit. Mark Easton’s talk of attempts to ‘destroy capitalism’ is overblown. Naturally, there will always be an active minority trying to do just that. It takes a lot to get the British to protest at all; only the Iraq War has seen real public mobilisation in recent years. I can see middle England letting off some steam about the economy, but calling for the end of capitalism itself? Things haven’t got so bad as to provoke the English to advocate revolution. Of course, if the summer should also see some allied political controversy emerge, that would be an explosive combination. It’s times like that can see governments fall. Either way, interesting times.

(Hat tip: my mother.) Photo by Roger Lancefield, via Flickr (Creative Commons).

P.S. The above notwithstanding, I’ve noticed that I’m also getting a few hits via searches for ‘economic collapse martial law’. A little disturbing…

EDIT: The Prospect blog is reporting on a Prospect/YouGov poll that suggests that ‘37 per cent… of people across Britain thinking unrest is certain or likely this year’.

Representation at the London Summit

Some of you will have read my previous post on One’s campaign to ensure African representation at the G20 meeting in April. Well, mission successful. In the end, Downing Street acted before the petition could be delivered, so it was converted into a thank you note! According to the One blog, ‘32,319 ONE members around the world, including 1,104 in the UK, signed that thank you message.’

The London Summit’s official website reports that invitations have been sent to ‘the Chair of The New Partnership for Africa’s Development (NEPAD), the Chair of the Association of South East Asian Nations (ASEAN) and the President of the EU Commission are also invited. The Chairman of the African Union Commission will also attend.’

There’s also an interesting interview on the site with Lord Malloch-Brown, Foreign Office Minister for Africa, Asia and the United Nations (a suspiciously large portfolio?). One thing that strikes me is how comfortable he seems with articulating the desires and interests of Africa. Speaking on behalf of an entire continent seems to come a little too easily to the minister.

China after the G7’s Rome meeting

Both the FT and IHT are carrying stories about how the Group of Seven has been acting in a more pacific fashion towards China over the weekend. According to the Financial Times:

Aides at the G7 finance ministers meeting in Rome said the US and the UK in particular pushed for the group to take a more conciliatory approach towards Beijing ahead of a broader G20 summit in London on April 2.

“The G7 has realised that China needs to be brought into the fold of the global financial system rather than be treated as a pariah just because of currency inflexibility,” UBS said in a note on Sunday on the meeting. “This is also a realisation that as the world’s largest foreign exchange reserve holder and the US’s largest creditor nation, China not only holds the purse strings but its continued growth is crucial to helping the world recover from the economic crisis.”

The London Summit is shaping up to be utterly fascinating, to say nothing of potentially of great historic significance. But in other G7 news, the Japanese seem to have been driven to drink. Figures.

Africa and the G20 summit

Ngaire Woods profiles what’s on Africa’s agenda for April’s meeting. The list is fairly modest and the matter of institutional reform is eminently reasonable. The worry is the funding:

To deliver on these, obviously the IMF and World Bank will need significant resources. Food security alone will require a step increase in donor support in the light of higher food prices ( World Bank paper detailing this). The IMF and World Bank should be measuring and informing the G20 of the scale of these new needs, and seeking adequate finance to meet them.

Obviously we’ll have to wait and see. But if there was some kind of priority considering being given to this, we might have heard something more about it. It just worries me that all that seems to be going on is a lot of talking about talking. Check out this press conference with the Foreign Secretary:

‘A seat at the table’

I’m plugging a One.org campaign again:

On April 2, leaders from 20 of the world’s largest economies, a group dubbed the G20, will gather in London to start reforming the global financial systems. A crucial first step for making sure those reforms help the world’s poorest is to give Africa a real seat at the table, by including, for example, a representative of the African Union (AU) and/or the Africa Development Bank.

Seems fair enough, doesn’t it? Sign the petition here.