Let Down by Politics

Two years ago, in the midst of the financial crisis, the then US President George W. Bush called a meeting of 20 leading nations to discuss action. It was seen as marking the start of a new era. French President Nicolas Sarkozy pronounced the dawn of “the planetary governance of the 21st century”. That seems to be long ago.


By the time the G20 met again in Seoul earlier this month, ennui had set in. A boilerplate communiqué was released expressing the group’s conviction that “by working together, we can secure a more prosperous future for the citizens of all countries”. But in reality, the leaders failed to reach an agreement on any of the contentious issues that threatened economic recovery. It would be a mistake, however, to dismiss the G20 meetings as just another travelling circus, full of platitudes signifying nothing. It will take more than a few meetings to change old mindsets and accept the compromises that are necessary for effective global governance.


It is only the Year Two of a new era in which the old established powers are learning to speak with newly emerging countries to deal with issues that affect all. Meeting all the major stakeholders is already better than leaving panicky developing countries facing unprecedented challenges to fend for themselves. As the experience of the Asean (Association of the Southeast Asian Nations) has shown, the mere fact of having a multilateral forum — where disparate countries with often antagonistic interests meet for face-to-face meetings — has helped reduce tension.


More than the annual hobnobbing of heads of governments, the regular consultations between senior officials of member countries have helped create deeper understanding of each other’s problems and facilitated work towards common solutions. Besides, the routine of the summits generates pressure to push through deliverables. The Basel III international banking rules that now require banks to hold more capital against riskier financial assets would perhaps have procrastinated, had it not been pushed by the deadline of the G20 meeting.


The other indirect benefit of the G20 countries coming together is to make public their pledges to uphold an open trading system. Contrary to the widespread fears of a beggar-thy-neighbour protectionism taking hold in countries mired in recession, the free trade regime has so far received only minor dents. The latest Global Trade Report, published by an independent monitoring group (www.globaltradealert.org) notes that “pressures for across-the-board protectionist measures have been contained, for now”. Despite growing criticism of China’s low renminbi policy — which has allowed it to emerge as an exporting behemoth — generally the countries with large current account surpluses have not been targeted unduly. Ironically, it is the poorer countries that have faced discriminatory trade action, mostly from G20 members.


According to the Global Trade Report, India, a new member of the big boys’ club, which fancies itself as a defender of the least developed countries, ranks second among countries whose trade policies hurt poorer nations. As newcomers to the global power club, China, India and Brazil in particular are loath to accept formal limitations on their national budgets and are unwilling to accept constraints on their economic growth, which has afforded them a seat at the table.


Meanwhile, the fact that the world’s biggest power, the US, feels powerless to address its yawning budget deficit and has to resort to flooding the market with cash in order to stimulate the economy, underscores the difficulties facing the G20.


Yet for all the challenges, global governance, often confused with global government, is the only recourse to solve the myriad problems arising from an increasingly integrated world. The G20 countries dashed the hope about cooperation on trade, foreign exchange, and control over financial flows that could prevent the creeping rise of a currency war or what has been called “murky protectionism”. After all, the leaders who strut on the world stage as statesmen are ultimately just politicians, who are accountable to domestic constituents that are afraid of what the future holds.


Unless people back home can be convinced that cooperation with others requiring painful adjustments are essential to come out of the crisis, local concerns will prevent effective global governance. It is a long way before the disparate group of 20 can undertake the planetary governance that Sarkozy talked about.