From G7 to G20
The shift in the authority for superintending the international economy from the G7 club of rich nations to the G20 grouping, which includes the emerging economies of China, India, Brazil and Russia, was initiated by United States President Bush in 2008 when both the US and the global economy were engulfed in an economic recession, financial crisis and credit crunch, such as the world had not witnessed, since the Great Depression of the 1930s. This unprecedented step was testimony to the gravity of the economic crisis, as seen from the perspectives of world leaders at the time.
Among poor countries there was great welcome for this shift. It was widely interpreted as a chance to introduce at the highest levels of global decision-making constant, rather than sporadic attention to developmental issues, such as the eradication of poverty and its associated deficits and disadvantages. Also it was seen as a means to introduce a sense of fairness, balance, and equity in international economic relations as well as the desire to bring to a swift end prevailing practices of exploitation of poor countries inherent to the working of global economy in all spheres (financial, trade, investment, the movement of productive factors and technology).
Leveraging for
their own benefit
To date, however, there has been great disappointment. The emerging economies, led by China, seem more bent on leveraging their new found institutional authority in the G20 in order to pursue their own national interests, rather than those of the larger humanity, which includes the vast majority of nations outside the G20. There is to date, damning evidence of the cooptation of the emerging economies to the neo-liberal and neo-colonial policies and practices that characterised the imperial behaviour of the G7 grouping of nations whose authority they were supposed to be replacing.
Of particular concern is that, the neo-liberal and neo-colonial practices being exhibited by the emerging economies, particularly China, seem to lack any pretence at sophistication. They are cruder, more vulgar and cynical than those of the historic plunderers that make up the G7.
The historic plunderers had learned over the ages that subtlety, finesse and deception in their exploitative dealings with poor countries, are essential to their continuation without outright rebellion.
Regrettably, China’s systematic global grab for poor countries resources has put it in the vanguard of 21st century neo-colonial resource exploiters. Its seeming disregard for human rights, environmental considerations, the rule of law, and corruption in the nations whose resources they are after is now legendary. Aid has been vulgarly tied to the support of Chinese interests, whether these are to be found in their dispute over Taiwan, or advancing the privileges for Chinese nationals in poor countries where they form a diaspora. China’s reputation for shady and poorly constructed and executed projects and the dumping of outdated technology and equipment to its aid recipients in poor countries has made several of these countries wary in their dealings with China.
IMF reform: To
whose benefit?
A couple of examples would serve to underscore the significance of these observations. One of these is that, for several decades now, the fundamental reform of the IMF, including reform of its governing structure, policies and procedures, has been high on the agenda of issues that poor countries have been calling for.
Prior to their new-found G20 role, countries like China, Brazil and India have led the poor countries’ agitation for these changes. Indeed, this matter has been, over the years, a regular subject of discussion in these columns.
Naturally, within the G20, the emerging economies were expected to take up this issue on behalf of the poor countries.
It was expected that the emerging economies would push, on behalf of poor countries, for a fundamental shift in the control of the IMF from the rich countries who finance it, to the poor ones who have to follow its policies slavishly.
The principle the poor countries have invoked in calling for IMF reform is the application of the United Nations General Assembly’s: ‘one nation one vote.’
However, what has eventuated so far between the IMF and the G20 is an extremely modest reform, which the emerging economies seem satisfied with.
That reform in effect has led to a six per cent reduction in the over-represented rich countries’ control of the IMF, to a six per cent improvement in the under-represented emerging economies. The result is that the ten largest countries in terms of voting rights in the IMF are US, Japan, BRIC (China, India, Brazil, Russia) France, Germany, Italy and Britain. Close observers of international affairs have recognised that this G20 agreement represents a concession which the G7 had long been willing to cede to the emerging economies, in order to reflect their new found global economic influence.
Another illustration is one which I have made before in earlier columns. Despite G20 promises to refrain from raising existing barriers to trade or introducing new barriers to trade and investment flows for three years in order to combat the economic crisis, export restrictions or other WTO-inconsistent measures have been introduced by almost all G20 countries. I have previously pointed out: “the emerging economies have introduced an alarming number of measures aimed at reducing/restricting/protecting their trade.” Indeed, the Monitoring Group looking at the G20’s trade and investment measures has gone on record about three dangers: 1) intensifying protectionist measures among the G20; 2) the steady accumulation in the G20 over time of measures that restrict or distort trade; and 3) the challenge of managing the trade and investment impact of restrictive measures in the G20 taken in response to the crisis.
In all three areas both the emerging economies and the rich advanced economies in the G20 share blame.
Next week I shall deal with potential areas of conflict as the emerging economies and the rich advanced economies jockey for advantage within the G20 and the wider global economy.
