By Jesse Griffiths, Guest Blogger
Jesse Griffiths is the director of Eurodad, European Network on Debt and Development.
The communiqué from this weekend’s G20 finance ministers’ meeting in Cairns tried to paper over increasingly evident cracks in the global economy, trumpeted an OECD initiative to reduce tax dodging which is not as good as it seems, continued to focus on privately funded infrastructure, and suggested G20 impotence in tackling big problems including too-big-to-fail banks and global governance reform.
The global economy: fragile and faltering
The G20 cannot hide the continued high levels of fragility, huge unemployment, and glaring inequality that continue to characterise the global economic situation. The finance ministers’ communiqué notes that, “the global economy still faces persistent weaknesses in demand, and supply side constraints hamper growth.” Recent reports that companies are buying their own stocks at record rates, helping stock market bubbles build rather than investing for future growth, is one reason the ministers “are mindful of the potential for a build-up of excessive risk in financial markets,” though they promise no new measures to tackle this.
Instead, their response has been to trumpet the promise they made in Sydney earlier in the year to “develop new measures that aim to lift our collective GDP by more than 2 per cent by 2018.” They get the seal of approval from the IMF and OECD’s “preliminary analysis, ” which, at three pages long, has so little detail it is impossible to assess its accuracy. Interestingly, according to the crystal ball gazing that inevitably characterises such attempts to assess global impacts of national policy changes, “product market reforms aimed at increasing productivity are the largest contributor to raising GDP,” which appears to largely mean changes in trade policies in emerging markets. The next biggest impact comes from public infrastructure investment commitments – highlighting the problems with the G20’s focus on private investments in infrastructure, discussed below.
Brief reference is made to the problem that dominated the G20 Finance Ministers’ meeting in February: developing countries’ concern about how the gradual ending of quantitative easing and possible future rises in interest rates in the developed world will affect capital inflows and outflows, which can create huge problems for them. The rich countries that dominate the G20 cannot offer more than the promise to be “mindful of the impacts on the global economy as [monetary] policy settings are recalibrated.”
Despite the fact that Argentina – currently fighting a rearguard action to prevent a US court ruling from undermining a decade of debt restructuring – has a seat on the G20, the issue of permanent mechanisms to deal with debt crises continues to be off the table. Instead it was picked up by the UN, which passed a resolution in September to negotiate a “multilateral legal framework for sovereign debt restructuring,” which could be a game changer for how sovereign debts are managed, offering the possibility of preventing and resolving debt crises: a consistent plague for many countries and a huge problem for the global economy.
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