G20 London 2009


Global Imbalances have Consequences
April 2, 2009, 9:33 am
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Ruth Davis  Junior Research Fellow, International Economics, Chatham House

boutros-ghaliThe Chatham House panel discussion held on the eve of the London Summit promised “Multiple Perspectives on the G20” and it delivered just that. This event marked the launch of the Chatham House-Atlantic Council report “New Ideas for the London Summit”; there is broad support for this summit and a will for the G20 to succeed in delivering the “ambitious, but manageable and focused agenda” which the report deems necessary.

However, there are dissenting voices or at least notes of caution too – quite apart from the much publicised intransigence shown by certain EU leaders. Dr Boutros-Ghali, the Egyptian finance minister and Chair of the IMFC, will be attending the summit although Egypt is not in the G20. He reminded the audience that these “twenty countries represent themselves. They don’t represent the rest of the world even if they work for it.” Though he acknowledged it was a strong word, he noted that the G20 is technically “illegitimate” as it is not part of an international treaty backed system. Acting as a conduit for the voices of the 172 countries not in the G20, he spoke of the crowding out taking place in the world debt market, which means that US and EU borrowing requirements are pushing out countries like Indonesia and Mexico where the human consequences of financing shortfalls will inevitably be more grave than in developed countries with established welfare systems.

Dr Boutros-Ghali also talked about the IMF: the adult meant to be supervising the global economy but who was “out of the room” when the crisis happened. He noted the problems surrounding the provision of extra funds for the IMF; although this new money is necessary to prevent the collapse of vulnerable emerging economies, refinancing by means of bilateral borrowing rather than by expanding IMF aggregate quotas negates the need for immediate governance reform and a rebalancing of country representation within the organisation.

Stephen Roach, Chairman of Morgan Stanley Asia, also drew out what he saw as contradictions in the G20’s approach to crisis resolution and sequencing of policy actions. While Lord Malloch-Brown and others feel that the global fiscal stimulus measures are a necessary and imperative short term response to substitute for the collapse in global demand, Roach challenged this view and asserted that policymakers are misreading Keynes. For Roach, “this is our time to deal with the heavy lifting” and “shame on us if we fail to do it at this summit.” This means tackling the global imbalances head on (essentially, raising consumption in the Chinese domestic economy and encouraging saving in the US) and addressing the interplay between asset bubbles and global imbalances – a complicated task that he is not convinced politicians are up to. For the sake of countries both inside and out of the G20, let’s hope he is wrong.

Disclaimer: This blog is solely intended to spur discussion, while the opinions expressed are those of the author(s) and do not necessarily reflect the views of CIGI, Chatham House or their respective Boards of Directors.



Star Power and the G20
April 2, 2009, 8:13 am
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Andrew Schrumm  CIGI Research Officer
From the London Summit Media Centre

The massive media stage that the G8/G20 has become is a magnet for big personalities and star power. Without a doubt, the biggest star of today’s G20 meeting has been US President Barack Obama. The London Summit marks his first major international meeting, which has drawn huge attention from both journalists and state officials.

Major UK news outlets have been overcome by an Obama phenomenon, covering his every move (alongside wife Michelle’s fashion choices). Everyone has been trying to capitalize on his time in London. For instance, discount airline RyanAir even put Mr. Obama’s face on a full-page ad in Tuesday’s Daily Mail, playing off his arrival at their main depot at Stansted Airport.

World leaders too have been anxious to score time with the new president, hoping to build new relations with the Obama administration as it scales back many of the Bush-era foreign policy decisions. There is a sense the established diplomatic stiffness is lessening as Mr. Obama’s relaxed but confident style of diplomacy allows for fair and frank negotiations.

Here at the media centre, a different type of star power is taking hold. The ever-present and bombastic Sir Bob Geldof has created a stir that most leaders are unable to achieve. The most recognizable face among a crowd of journalists, he has begun to shift the ‘buzz’ back on African issues, amid heavy economic discussions. With the lead editorial in yesterday’s Financial Times, he provocatively posed the need for a global fiscal stimulus for Africa to cancel toxic debt and promote economic development. Today, he brought this message to the media centre, forming a large scrum in the middle of the room.

The magnetism of celebrities and star power has allowed some to reach a level of prominence within international affairs few occupy. And yet, such activity is easily dismissed by critics. Not without its flaws, celebrity-driven diplomacy is an emergent, albeit contested, pathway to bolster the legitimacy of international public policy.
Star power – whether employed by a president or a provocateur – is practiced in a fine balance of buzz (firm language) and bite (technical, professional support). In a sense, the power of celebrity provides an accessible a conduit between citizens, advocates and sites of power, in a fashion that no one would have imagined a decade ago.

Serious activists like Geldof – and his regular compatriot U2 frontman Bono – are changing the diplomatic discourse. Their ability to gain extended face-time with prominent national leaders, while their message is heard at both the mass and elite level means that they are engaging in the kind of widespread communication that underpins successful diplomacy. At the other end, the presence of Mr. Obama and his fresh diplomatic approach appears to draw huge attention to otherwise dry and technical international issues.

Disclaimer: This blog is solely intended to spur discussion, while the opinions expressed are those of the author(s) and do not necessarily reflect the views of CIGI, Chatham House or their respective Boards of Directors.



G20: All Systems Go
April 2, 2009, 3:17 am
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Andrew Schrumm  CIGI Research Officer
From the London Summit Media Centre

It’s early morning here in London, and the G20 meetings have just begun. UK Prime Minister Gordon Brown, the eager summit host, is welcoming all the leaders now, in advance of the traditional “family photo”and their working sessions. While the G20 is a fairly new leaders’ grouping, the familiar G8-style of informal interactions (working meals and press briefings) has found its way into the process.

Most significant so far has been the series of bilateral meetings, particularly by US President Barack Obama. As his first major overseas trip, a priviledged few national leaders have had the opportunity to sit down with the president one-on-one. Yesterday, his meetings with both Russian President Dimitri Medvedev and Chinese Presiden Hu Jintao made international headlines – while mainly congenial and a demonstration of good will, these meetings surprisingly engaged in substantive dialogue. With Russia, the US will begin a new conversation on global nuclear disarmament and a broader security agenda. With China, the US is anticipated to launch a renewed dialogue, leading into an official state visit by President Obama to China in late-2009.

Today, we are anticipating the final language on the summit declaration which will outline the G20’s major initiatives to correct the world economy and establish an international financial regulatory framework to avoid future crises. The exact language here must be both cautious and aggressive at the same time; cautious in that leaders will be held to account on their agreements by national groups and international civil society; and agressive in that strong corrective measures are needed to stimulate national economies and bolster international financial institutions.

As posted yesterday, Lord Mark Malloch-Brown (UK’s G20 special envoy) set some clear expectations for the summit declaration, noting that it will avoid setting strict standards on national stimulus programs and will leave climate negotiations to the UNFCCC.  Clearly the G20 won’t be able to accomplish everything in one day – as things continue, CIGI and Chatham House will continue to provide commentary and analysis on develops here in London.

Disclaimer: This blog is solely intended to spur discussion, while the opinions expressed are those of the author(s) and do not necessarily reflect the views of CIGI, Chatham House or their respective Boards of Directors.



Setting Expectations for the G20 Summit
April 1, 2009, 11:36 am
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Andrew Schrumm  CIGI Research Officer
From the London Summit Media Centre

This morning, Chatham House hosted a high-level panel on the G20 London Summit. As both a launch of its new report, New Ideas for the London Summit: Recommendations to the G20 Leaders, and as a public forum on the eve of the major international meeting. Chaired by Chatham House Director Dr. Robin Niblett, the panel included Lord Mark Malloch-Brown, UK prime minister’s G20 special envoy; Dr. Youssef Boutros-Ghali, Egypt’s minister of finance and chairman of the International Monetary and Financial Committee (IMFC); Stephen Roach, Morgan Stanley Asia Director; Dan Price, Sidley Austin Senior Partner for Global Issues; and Dr. Paola Subacchi, Chatham House Research Director of International Economics.

The panel rasied a number of critical questions on the state of the global economy, the nature of the response, and the style of crisis management through the G20 process. The full-length audio of the event is available online at: http://www.chathamhouse.org.uk/events/view/-/id/1105/

Amid high expectations for the G20, the panel acknowledged that there will need to be compromises in both substantive areas and in the process. In his remarks, Lord Malloch-Brown attempted to set expectations for tomorrow’s meetings, by giving insight on the declaration. He noted that there will not be specific agreement on two major items – climate change and a global stimulus benchmark. First, as many participating countries urged that the climate change process continue through the UNFCCC, the G20 should not disrupt the discussions leading in to the major meeting in December at Copenhagen. Second, as many nations are in mid-course of stimulus infusion, a technical judgement was made that the G20 should not promote a standard stimulus rate at a time when most are sorting out the true demands of their domestic economies. Lord Malloch-Brown emphasized, however, that as a peer group the G20 will continue active monitoring and coordination of national economic stimuli, observing and advising one-another on adequate measures to avoid inflation.

These two hesitations emphasize the limitations of the G20, primarily that it is not a legislative body. Any summit declarations must seek compliance first at the national-level after the leaders return home, and second on the international regulatory institutions to employ the G20’s prescriptive measures. With this in mind, Lord Malloch-Brown suggested that the summit declaration will include commitments in a number of areas. First, a strong package on regulation, with broad agreement on enhancement of the Financial Stability Forum (FSF), Basel discussions, and IMF functions. Second, an international emphasis on trade promotion and reduction of protectionist measures. Third, a recognition of stability in poor economies will rely on continued /increased development assistance by industrialized countries to the global South. And forth, a strengthening of the international financial institutions – particularly IMF and World Bank – but with economic support must come reform.

These insights, from a key insider of the G20 process, are telling. Lord Malloch-Brown modestly acknowledged that the world’s economic problems will not be solved in a few hours of meetings, and that progress will have to come over a long period of time. However, he remains optimistic that this phase of international economic diplomacy will mark the ‘beginning of the end’ to the global crisis.