Spotlight G-20: It’s Time for the G-20 to Support the Use of Capital Controls

Bhumika Muchhala, Guest Blogger
Part of a Triple Crisis series leading up to the Nov. 11-12 G-20 meetings.

Ahead of the Group of 20 (G-20) industrial and developing nations summit meeting in Seoul this week, a plethora of dysfunctions and imbalances in the world economy are revealing themselves in a showdown between surplus and deficit countries.  Reaching beyond the power-play ensuing on the G-20 stage, specific fault lines come to light, such as the growth strategies pursued by emerging economies across Asia, which have come to depend excessively on international capital flows and exports to advanced economies (AEs).

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Spotlight G-20: An Exit from Debt Crises: The Need for Fair and Transparent Arbitration

Melinda St. Louis, Guest Blogger
Part of a Triple Crisis series leading up to the Nov. 11-12 G-20 meetings.

South Korea’s painful experience of the Asian financial crisis has led the current G-20 chair to ensure discussing ways to strengthen the “global financial safety net” is high on the meeting agenda. The IMF has already made steps in this direction by creating its pre-qualified Flexible and Precautionary Credit Lines.

A global financial safety net that allows countries to ramp up borrowing in a crisis may well be needed.   But as lending increases, the G-20 must also work toward creating a fair and transparent sovereign debt workout mechanism.  A neutral insolvency procedure for governments – along the lines of national bankruptcy courts for individuals or corporations – is needed to ensure an orderly and equitable distribution of responsibility for unsustainable sovereign debt burdens.

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Spotlight G-20: The Missing Dimensions for the G-20 in Seoul: Hamlet Without the Prince of Growth

Stephany Griffith-Jones
Part of a Triple Crisis series leading up to the Nov. 11-12 G-20 meetings.

Triple Crisis is pleased to welcome Professor Stephany Griffith-Jones, Director of the Financial Markets Program at the Initiative for Policy Dialogue at Columbia University, as a regular contributor.

It seems that currency issues will dominate discussions in the G-20 meetings in Seoul. This is an important subject, but one that is being tackled incorrectly, as Jane D’Arista so clearly sets out in her blog.

The issues of imbalances and exchange rates relate mainly to the pattern of global growth, clearly a significant theme. But far more important in the short term, especially for poorer people both in developed and in developing countries, is to have MORE growth than current policies in developed countries will assure.

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Spotlight G-20: Causes and Consequences of the Currency War between US and China

C.P. Chandrasekhar
Part of a Triple Crisis series leading up to the Nov. 11-12 G-20 meetings.

Triple Crisis blogger C.P. Chandrasekhar was interviewed by Newsclick on the ongoing “currency wars” between the US, China, and other developing countries. This contentious issue will be a priority for many leaders attending this week’s G-20 meetings in Seoul.

Spotlight G-20: Franco-German Axis Can Help Set Up a Fair Debt Work-out Procedure

Nuria Molina, Guest Blogger
Part of a Triple Crisis series leading up to the Nov. 11-12 G-20 meetings.

For better or worse, the Franco-German axis has always been the driver of European integration. Now the unholy alliance could go one step further, this time for the better, and push for a debt work-out procedure to ensure a fair and orderly resolution of sovereign debt crises.

The ways in which debt crises have been dealt with in developing countries in the past, and nowadays in Europe, are having devastating impacts on vulnerable sectors of society. When debt crises come hand in hand with financial crises ordinary people always pay twice: first, taxpayers’ money is used to bail out financial institutions; and secondly, citizens are deprived of essential services as the state implements harsh austerity measures to win back the confidence of markets.

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Spotlight G-20: The G-20, Global Recovery, and Global Economic Rebalancing: Rhetoric and Reality

Nancy Alexander, Guest Blogger
Part of a Triple Crisis series leading up to the Nov. 11-12 G-20 meetings.

The G-20 aims to accelerate the global recovery through a global economic rebalancing process which, among other things, requires consumers in advanced deficit countries, such as the U.S., to cut spending and consumers in emerging surplus countries, such as China, to expand spending.

To accomplish this, the G-20 countries committed themselves to certain policies and asked the IMF to track their implementation through a “Mutual Assessment Process” (MAP).  However, the MAP may take countries to a dead end for several reasons.

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Spotlight G-20: India, US Should Beware the BIT

Kevin P. Gallagher and Jayati Ghosh
Part of a Triple Crisis series leading up to the Nov. 11-12 G-20 meetings.

With US President Barack Obama in India on his way to next week’s G-20 meeting in South Korea, Triple Crisis Blog co-chairs Gallagher and Ghosh published the following opinion article in “Mint” (daily newspaper of the Wall Street Journal in India) on the dangers to both countries of leaders’ announced intentions to negotiate a bi-lateral investment treaty. Read more in the Triple Crisis series on the G-20 and on investment treaty reform.

Dangers of Unrestrained Commerce

The visit of US President Barack Obama to India this week is heightening expectations about a host of new bilateral initiatives, such as a Bilateral Investment Treaty (BIT) between India and the US. Even if it is not formally signed during this visit, negotiations for such a treaty are already on. But the benefits of such a treaty are highly questionable and the dangers are many.

BITs are extensions of the attempt in the late 1990s by rich nations to impose a Multilateral Agreement on Investment (MAI) that would have significantly reduced regulation of the activities of multinational companies by governments in host countries. That effort failed, but the US and the European Union (EU) pushed to include it in trade talks at the World Trade Organization (WTO) forum in 2003. India played a key role in blocking that particular effort, along with other developing countries.

Read the full article at Live Mint.

Spotlight G-20: Who Pays the Bill for the Fed's QE2?

Kevin P. Gallagher
Part of a Triple Crisis series leading up to the Nov. 11-12 G-20 meetings.

Kevin P. Gallagher published the following opinion article on the US Federal Reserve’s approval November 3 of further “quantitative easing” to stimulate the US economy, which has implications for next week’s G-20 meeting of world leaders.

To no one’s surprise, the Federal Open Market Committee has sanctioned another round of quantitative easing – or “QE2”, as it is fashionably referred to. The Fed’s QE2 may not have the desired effect on the US economy, but will certainly accentuate currency tensions in the developing world. So, the US should not be surprised when its proposals to fix global finance are met with stiff resistance at the G20 meeting next week.

To its credit, the US Fed seems to be the sole believer (with any power) in the need for expansionary policies in the United States. The outcome of the US midterm elections has tied the hands of the government to engage in expansionary fiscal policy. The Fed alone has the power to act.

Read the full article at the Guardian.

Read more on Gallagher’s work on capital controls and foreign investment. And follow the debates over G-20 policies in our Spotlight G-20 series, with contributions by Ilene Grabel, Ha-Joon Chang, Jane D’Arista, Sarah Anderson and others.

Spotlight G-20: Who Pays the Bill for the Fed’s QE2?

Kevin P. Gallagher
Part of a Triple Crisis series leading up to the Nov. 11-12 G-20 meetings.

Kevin P. Gallagher published the following opinion article on the US Federal Reserve’s approval November 3 of further “quantitative easing” to stimulate the US economy, which has implications for next week’s G-20 meeting of world leaders.

To no one’s surprise, the Federal Open Market Committee has sanctioned another round of quantitative easing – or “QE2”, as it is fashionably referred to. The Fed’s QE2 may not have the desired effect on the US economy, but will certainly accentuate currency tensions in the developing world. So, the US should not be surprised when its proposals to fix global finance are met with stiff resistance at the G20 meeting next week.

To its credit, the US Fed seems to be the sole believer (with any power) in the need for expansionary policies in the United States. The outcome of the US midterm elections has tied the hands of the government to engage in expansionary fiscal policy. The Fed alone has the power to act.

Read the full article at the Guardian.

Read more on Gallagher’s work on capital controls and foreign investment. And follow the debates over G-20 policies in our Spotlight G-20 series, with contributions by Ilene Grabel, Ha-Joon Chang, Jane D’Arista, Sarah Anderson and others.