As we come to the end of the first decade of the 21st century, I shall, in the course of the next few columns reflect on the international economic situation, in the circumstances of two of its most pressing and intractable problems (crises). The first of these is the now three-year-old global economic crisis, which has failed to show meaningful signs of a sustained recovery, any time soon. By all accounts, it would be fair to characterize this crisis as the worst economic recession, financial crisis, and credit squeeze the world has experienced since the Great Depression of the 1930s. The second of the intractable problems is equally urgent, and has grave long-term implications for the very survival of human activity on Planet Earth. That problem is environmental, and is uniquely characterized by the threats of global warming and climate change.
As testimony to the profundity of these two problems, there have been five G20 summits on the global economic crisis (beginning in November 2008). Over the past year, there have been two summits on climate change and global warming (the Copenhagen Summit of December 2009, and the recent Cancun Summit, November-December, 2010).
Before I address these two matters, which will form the main topic for consideration for the rest of the year (decade), I shall first indicate, as promised last week, a few cultural factors, which compound the vulnerabilities of Guyana and the wider Caricom’s financial regulatory and oversight structures examined in recent columns.
Cultural impediments
There are at least five cultural considerations, which should be taken into account in order to complete the assessment of vulnerabilities in the financial, regulatory and oversight infrastructure of the region’s economies. The first of these is that in several economies, “crime, theft, public and private corruption and inefficiency, along with their accompanying violence” loom large among the most problematic factors for doing business. Thus the World Economic Forum’s Global Competitiveness Report in its recent survey of businesses, found that in Guyana, “crime and theft” plus “corruption” accounted for just over one-fifth of the businesses surveyed ranking of the most problematic factors facing them.
A second cultural factor compounding financial vulnerabilities is the deeply embedded practice of “secrecy, non-disclosure and opaqueness,” as portrayed in both private and public actions in the area of business. More often than not, the presumption held by enterprises, is that the public does not have a right to know.
This cultural consideration is closely linked to a third, which is the continued proliferation of “relatively unorganized and minimally regulated financial businesses,” which are very important to the daily lives of the broad mass of the region’s population; these are the money-lenders, pawnbrokers, and ‘box-hands’ or ‘sous-sous,’ widely dispersed across the region.
Survey data also show a fourth cultural factor at work: as a rule, “financial management and accounting practices are very weak.” Thus, it has been frequently found that lax supervision of credit is responsible for both substantial business losses and the prevalence of corrupt practices. Often also, this weak supervisory financial management has been accompanied with weak balance sheets, poor audits, and the untimely public dissemination of legally required financial records. This harms other financial bodies whose effective functioning depend on the timely release of financial data, for example, stock exchanges.
Finally, to these should be added the damaging impact of “the political environment and its accepted practices.” While the effect of this varies across the region, there are situations like Guyana’s where 1) existing private sector organisations appear to be intimidated by the political administration and/or timidly allow themselves to be manipulated into serving the political ends of the administration in office; 2) public sector enterprises are treated as ‘untouchable,’ in that criticisms of these are received as criticisms of the government. In Guyana we have a wide range of such institutions, ranging from large productive enterprises (GuySuCo − sugar) or (GPL − power) to untouchable and opaque financial bodies like the Privatisation Unit and NICIL.
Clearly there are other features of the region’s financial culture at work, which readers need to be aware of that compound the vulnerabilities of its financial regulatory and oversight infrastructure. However, enough has been disclosed here to make readers aware that assessments of these vulnerabilities would remain incomplete, if such considerations are not taken into account.
I shall now return to the main topic to be engaged in my columns for this and the next few weeks.
The G20
As regards the G20 summits mentioned above, it was in November 2008 that the then US President Bush took the unprecedented step to push for a G20 leader-summit in Washington, DC, USA, with the publicly stated aim of making this body the lead international forum for dealing with the global economic crisis which had erupted earlier in the year. Since then there have been four other leader-level summits: London (April 2009); Pittsburg, USA (November 2009); Toronto, Canada (June 2010); and most recently Seoul, South Korea (November 2010). However, prior to November 2008 the G20 was primarily a negotiating body for the finance ministers and central bank governors of the world’s biggest economies. Indeed, it was the G8 group of rich countries, which had up till then traditionally provided the so-called ‘global coordination’ of economic policies.
Finally, as a matter of practical detail, the G20 includes the G8 countries, the European Union and large emerging economies (Brazil, China, India, Indonesia, Mexico, Saudi-Arabia, South Africa, Argentina, South Korea, Turkey and Australia). Spain has observer status. Other countries were also invited by the Chair to the Seoul Summit, November 2010 (Malawi, Chair of the African Union, Ethiopia, Chair of NEPAP, Singapore, Chair of the Global Governance Group, and Vietnam, Chair of ASEAN).
Next week I shall start the appraisal of how the G20 has fared so far in resolving the global economic crisis.
