Spotlight G20: Learning from Latin America

Fander Falconi, part of our 2011 Spotlight G20 Series

At the October meeting of G-20 finance ministers the only interesting item of note was a return to the discussion of a tax on international financial transactions, or “Tobin tax”. In 1971, the American economist and Nobel laureate  James Tobin, proposed this initiative to reduce speculative activity international. This initiative garnered international support, even by the organization Association for the Taxation of financial Transactions and Aid to Citizens (ATTAC), which has the backing of the European Union. The measure was not supported by the United States or China.

Everything else in that meeting was mutual recrimination about passivity in the face of a deepening economic crisis and the replay of an old script: neoliberal structural adjustment, reduced spending and public consumption. These policies have left a number of European countries, such as Greece, on the verge of bankruptcy.

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Spotlight G20: The Crisis in the Eurozone Conference

As the G20 is likely to focus primarily on the eurozone crisis at the Cannes Summit, we recommend checking out The Crisis in the Eurozone– a conference organized by James K. Galbraith taking place today and tomorrow at the University of Texas at Austin. The entire conference will be webcast live here and the program is available here. The event will focus on “A Modest Proposal for Overcoming the Euro Crisis” by Yanis Varoufakis and Stuart Holland, a plan which would combine the innovation of the Eurobond with a “New Deal” approach to European development.

Spotlight G20: The G20 and the New World Order

Sarah Anderson, guest blogger, part of our 2011 Spotlight G20 Series

Signs of a New World Order are everywhere here in the French Riviera, as the elite city of Cannes hosts the G20, the ultimate elite club. The local business rag, the Riviera Times, trumpets a recovery of the tourism business during the 2011 summer season – thanks to a 50 percent increase in visitors from China.

In my hotel lobby there are stacks of China Daily, but no such freebies from the newspapers of the Old World Order powers. Walking by the kiosks, though, I see European headlines rejoicing at the likelihood that China will aid in the Greek bailout. The head of the European Financial Stability Facility, the pot set up to rescue basket case countries, traveled to Beijing last week and rattled a tin cup for donations from China’s $3 trillion reserve fund. This comes amid news that Chinese investors have acquired distressed Swedish carmaker Saab. (They already own Volvo.)

How will China’s juggernaut status affect the G20’s agenda?  In both positive and negative ways, in my view. On the positive side, they could hold some of the other governments’ most extreme free market tendencies in check. Take, for example, some of the positions the Obama administration is pushing in bilateral and regional free trade agreements. In the recently signed treaties with Panama and Colombia, they pushed through new rules that ban the use of capital controls, despite the fact that many countries are using these policy tools to combat financial volatility and the International Monetary Fund is recommending them in certain circumstances. The Chinese government, a capital controls user, would never go along with it if the Obama administration tried to push such nonsense at the global level.

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Spotlight G20: Efforts on Food Price Volatility Hobbled: The G20 and the CFS

Jennifer Clapp, part of our 2011 Spotlight G20 Series

At the meetings of the UN Committee on World Food Security (CFS) in Rome two weeks ago, disappointment was in the air. Expectations that the body would be able to agree to anything near what is needed to effectively address food price volatility had been seriously deflated, especially among civil society groups that were participating. What was the source of the trouble for the CFS? In a nutshell, it was the G20.

Earlier this year when France took on the chair of G20 and President Sarkozy announced his intention to use the forum to address food price volatility, there was initial excitement. Sarkozy promised to rein in excessive speculation on commodity futures markets that was seen to be contributing to price volatility and resulting food insecurity in the world’s poorest countries. There was also hope that the G20 would do away with market-distorting biofuel policies that also have contributed the volatility in food prices. There was even hope that the G20 might support the idea of reserves to manage food stocks and smooth prices.

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Spotlight G20: Brazil in the G20 Meetings

Adhemar Mineiro, guest blogger, part of our 2011 Spotlight G20 Series

The meeting in the beginning of November will be somewhat of a new experience for Brazilian partners in the group. In all previous meetings Brazil was represented by President Lula da Silva and Foreign Minister Celso Amorim, who both had not only experience and inclination for the discussion of international issues, but also high profiles and proven leadership capacity in this kind of meeting. In the next meeting Brazil will be represented by President Dilma Rousseff and Foreign Minister Antonio Patriota, two newcomers with low profiles in general.

On other side, the international economic crisis remains the main problem on the agenda: the G20 as a group has a quite insurmountable problem. Besides its old problem of scarce or nonexistent legitimacy stemming from the idea that a small group of countries cannot represent the whole world, the G20 now faces a new issue. After its three year existence, and despite the use of available resources and political will, the group was unable to overcome the financial and economic crisis and find a new development path. In other words, it is not only the G20’s legitimacy that is now in question, but its ability as well.

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Spotlight G20: International monetary system reform: G20 chooses the wrong priorities

Aldo Caliari, guest blogger, part of our 2011 Spotlight G20 Series

When the first G20 Summit was launched in 2008 in order to provide an emergency response to the global financial crisis, the premise was that dramatic reforms were needed in a short period of time. Those reforms could never happen in the slow-moving machineries of the institutions with full representation of all countries, such as the UN, hence, the need for the G20.

Three years down the road, and based on the preliminary agreements that one can foresee happening in the coming Summit in Cannes, the G20 has negligible progress to show, calling such premises into question. The world veers dangerously close to a new global recession that, if it happens, will catch developing countries in a worse position than three years ago. The President of the World Bank informed last month that developing countries’ fiscal positions are, in the average, two percentage points of GDP down from where they were pre-crisis. In the face of what is arguably a more pressing emergency than three years ago, the Group cannot even agree to throw its full weight behind the coordinated stimulus measures of the kind and scale to which they’d previously agreed. The idea that grand agreements can be reached by the most powerful countries, if only small countries stop acting as spoilers or brakes in the multilateral machinery with their delaying tactics or parochial views, has evidently no merit to it.

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Spotlight G20: Why We Need a Financial Transaction Tax: A Proposal for the G20

Kavaljit Singh, guest blogger, part of our 2011 Spotlight G20 Series

At the forthcoming G20 Summit (Cannes, 3-4 November 2011), the summit leaders are expected to address several policy issues concerning world economy and financial markets, many of which remained unresolved since the Toronto Summit in June 2010. Against the backdrop of a weak global economy and the ongoing eurozone sovereign debt crisis, G20 leaders will have to take some hard decisions. Failure to do so would undermine the effectiveness and credibility of G20 as the “premium forum” for international economic cooperation.

One of the key policy issues to be tackled at the Cannes Summit is the introduction of a global financial transaction tax (FTT). The Interim Report of the G20 on Fair and Substantial Contribution by the Financial Sector (2010) had proposed a flat rate levy on all financial institutions and “financial activities tax” on profits and remuneration in order to pay for future financial clean-ups and reduce systemic risk. But the proposal got diluted at the G20 meeting held at Busan in June 2010, which called for implementation of the levy taking into account an individual country’s circumstances and options.

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