Too Soon to Declare a New World Order

We will not know for six months or even for six years whether or not this G20 Summit has been a success. But what we can be sure of is this: it will not create a 'new world order.' Indeed I believe it could be worse. I am willing to bet that the Group of 20 leaders will very likely fail in their aim of stabilizing the global economy.

The Summit Communique makes plenty of fine noises about being kind to the poor. Once again there are promises of $1 trillion for boosting lending to poor countries and export support for these countries. There were similar sound-bytes, and similar commitments made at the Edinburgh G8 Summit in 2005 - commitments yet to be fully honored.

Second, and as if to hide their disagreement over the really big issues (a global fiscal stimulus, and more stringent regulation of the financial system) much was made by Gordon Brown of the re-financing of the IMF -- the most loathed and marginalized of international financial institutions.

The motivation is clear: the IMF is a Euro-Atlantic institution, and the Europeans want its finances bolstered so that the economies on the fringe of Europe -- like Hungary, Latvia, Ireland, Iceland and Greece -- can be prevented from bringing down the whole of the European project, and with it the Euro.

The IMF is largely irrelevant and shunned by Latin American and particularly Asian countries. Many of the countries I have worked with struggled to get out from under its inflexible economic austerity, and abhorred its double standards. (Fiscal stimulus for the rich countries, austerity for the poor.)

Especially after the disaster of the 1998 financial crisis, in which the IMF's approach and policies accelerated the collapse of banks, the rise in jobless numbers and the impoverishment of millions. When Mexico, Brazil, Singapore and Korea recently needed financing - they did not go to the IMF, but to the US Treasury, as Devesh Kapur and Arvind Subramanian noted recently.

So propping up an institution that is largely marginal to this crisis does not convince me that G20 leaders are serious about salvaging the international financial system.

But then how can we expect them to be?

Asking the G20 to fix the international financial architecture is counter-intuitive. Like asking a bunch of cowboy builders to re-build the gutted kitchen, illegal loft conversion and rumbling extension of a collapsed McMansion home.

They just can't do it. The McMansion that is globalization -- or global financial de-regulation -- was built on shaky foundations by these and previous G20 leaders and their central bankers. After thirty years, it has collapsed and left behind piles of rubble, financial angst and heartache.

This is because of the way it was designed, project-managed and constructed -- by most of the political leaders arrayed before us at the Summit in London.

They cannot remedy the calamity of its collapse. All they want to do is to cover up the botched building works. They are all working hard to rebuild the existing, dodgy, financial McMansion while making sincere efforts to help the poor - and at the same time doling hand-outs to their 'mates' in the financial sector.

The fact is that our unstable, global financial and trading system can't be rebuilt. We need to downsize the system. To break it down into smaller pieces. We need to re-structure banks, and fire their managements -- just as the President fired CEO Wagoner of General Motors.

We need to separate deposit-holding institutions from gambling outfits. To make banks and financial institutions, and capital, more localised and accountable. It will be easier to keep an eye on them if they are small and local.

Big and global is hard to monitor, to hold to democratic account and to regulate.

We need to remove the moral hazard caused by encouraging and subsidizing the cowboys of the banking system -- so that they may smash up more banks, business and individual lives.

We must end the expropriation of taxpayer funds, and stop flushing taxpayer money into bonuses and dodgy off-shore bank accounts.

Above all we need to regulate the cowboys. And where appropriate, prosecute those that have acted criminally.

All this is needed, but cannot be done by these particular G20 leaders, their Treasury Ministers and their economic advisers. They are too responsible for the current mess. They lack the vision to make democracy meaningful.

So the failure of this expensive Summit may be a good thing. Why? Because then, just as the failure of the 1933 World Economic Conference brought good news and a renewed world leadership (Roosevelt) so it might be possible for a new leadership to begin to work for a real transformation of the global economy.

Back in 1933 the World Conference of political leaders fought desperately to prop up the pre- 1929 financial architecture -- in particular the 'barbaric relic' that was the Gold Standard. They failed. Roosevelt had boycotted the World Conference, and soon after it approved the dismantling of the Gold Standard.

Immediately unemployment fell, and prospects improved. See the chart below, courtesy of Geoff Tily (Keynes, Policy and The General Theory 2009).

The likely failure of the G20 Summit may therefore give us hope: that there will soon be intellectual and political space for a renewed leadership -- and for the building of a new, more sustainable, accountable and ethical financial architecture. That will green our economy, stabilize our financial system, create jobs and restore peace and security.

A global economy that will once more make democracy meaningful.

Comments

[suzc]

So you too want Obama to fail..... how sad.....

[PersonaNonGrated]

If there's one thing I've learned from progressive blogs, it's that it's NEVER too soon to declare a New World Order.

[Tena]

Tell you what, if I read every one of your posts I would cut my wrists. You are the most helpful soul - not - posting.

I'm sick of your projections of failure. I do not understand why you are so convinced you are right and Obama is wrong and is going to fail but it's not a helpful attitude when so much right now depends on nothing more than confidence.

[OzzieTonto]

Geez, shoot the messenger guys! Ms Pettifor's not here to tell you what you WANT to hear, but to point out that political-­diplomatic hot air will not change the fact that the Wall Street cabal is about to drive the US economy off a cliff, with Mr Geithner's PPIP sell-your-firstborn bailout plan! Time to sound off at the Wall Street Thieves, not those trying to warn you about them. Read Michael Moore, Naomi Klein, Joseph Stiglitz, Nobel-prize-winning Paul Krugman and many others. Reality bites!

[Asmodeus]

Seriously Tena? So what you're buying into, is the idea that the only thing that has made this economy great, or will keep it going is confidence?!

True confidence is only obtained by two means:
1. Mental illness.
2. A sense of security derived from actual accomplishment, or consistency of trends, allowing the possibility that it can be predicted, and therefore be made safer, or less risky.

So you see, in order for confidence to be restored, there has to be something concrete to base that confidence upon. Otherwise, we go back to number one on the list...

[Hollypop]

Interesting graph ! So FDR turned things around... maybe Obama can do the same.. but as the graph shows it didn't last long..of course WW2 helped productivity and reduced the number of mouths to feed and brought people together (on the battlefields) ...maybe that's what we need to really unite us with our allies abroad ... a common enemy ...of course Bush has tried this and failed and very nearly succeeded in making the USA the common enemy ... is the present Global financial recession a big enough enemy to unite us ? or the shared Global ecology problems. Money problems seldom bring people together but life and death issues often do.
G20 may well turn out to be a failure in the long run as you suggest but for now at least they have agreed as to what their common enemy is and more importantly that it isn't American foreign policy.
The Madness of King George Bush has been set aside and the USA's new management has been welcomed....
It's a start in the right direction...

[strangerinthenight]

George Bush and his Administration looted the National Treasury, but the Democrats looked the other way, most acquiesced to the looting, slept and just plain inept.

And did not Barack Obama promised to do the right thing ? Instead, he open the door for all corporate thugs to openly looted this country's treasury. It's worst than ever. He gave the store away.

The President has absolutely no grasp of the enormity of the problem, and defers everything to Summers and Geithners, who turned out to be the biggest corporate raiders of them all.

Poor choices. Change I do not need.

[dshwa]

And McCain would not have done the same? The problem isn't the people, it's the system. "The Atlantic Monthly" had a great article this week about that. We've been glorifying the invisible hand, Trickle down, and related scams for almost 30 years. That's a hard addiction to break.

[PSM42]

Gore Vidal explained why - with Afshin Rattansi - Congress has never been more corrupt -

http://www.youtube.com/watch?v=jjCBR-vABMc

[wlaurencew]

"That'll never work" .. great, so tell us your better idea - and be specific. We need to "break up", "dmocratize", "monitor the cowboys"? .. this article itself is littlemore than a grab-bag of sound bytes. Offer a detailed, constructive, achievable plan, or be quiet.

[strangerinthenight]

No one can convince me that you read the article.

[wlaurencew]

Read it several times. Found it more hollow and insubstantial with each reading. You should try it.

[Asmodeus]

When someone identifies a problem, doesn't mean they are then responsible for fixing it. Perhaps if you're so smart yourself, you'd care to illucidate us as to what YOUR solution is?

Don't tell people to pipe down because you're too busy wading in De Nile.

[strangerinthenight]

cont.


The proposed "New World Order" will remain an opaque motto without the hallmark of transparency. Absence regulation, accountability, full-disclosure and a unified front against protectionism, "New World Order" is just that - meaningless and self-serving feel-good rhetoric. Another therm for CONJOINED INTERESTS OF THE PRIVILEGE FEW.

World Leaders must sever conflict of interest with the IMF, World Monetary Lending Institution, Banking and Financial Institutions. A win-win for the privilege few, but a losing proposition for the common Citizen.

If and when there is a well debated "NEW WORLD ORDER", an INDEPENDENT envoy for and on behalf of the world citizens must take a sit on that table, an equal voice amongst the Leaders of the New World Order . Absence an Independent Envoy, there can not be a meaningful New World Order.

G20 is not for leaders to flex their political powers, nor to engage in self-serving platitudes. Serving the interest of the common people MUST BE THE PRIME DIRECTIVE.

[strangerinthenight]

The United States failed in its Globalization efforts. Predictable. Failure of its leaders and political parties to really understand the term yielded a devastating results sending shiver from Wall Street to Washington to the 4-corners of the world. Globalization is irreversible. It's failed application has paralyzed world economies to deep and punitive recession.

The US is the epicenter of the world's recession, it's vortex is widening, its iron clad grip of falling economy and disillusionments punish the world over. Leaders and Politicians failure as watchdogs our National Treasury, manage economic and financial policies - unregulated banking, lending procedures, protectionism, questionable and complex negotiable instruments they never really understood, as well as Conflict of Interest between the Executive, Congress, Senate and Wall Street, Banking Industries and Corporate giants inevitably led to meltdown. Their conjoined powers resulted in an adulterated corruptions at the expense of the common citizen who will carry the brunt of this punishment. Embarking on yet another faux agenda to shift blame and only to appease population outrage without will only send the world in devastating tail spin.

[TJCole]

Thank you Ann; Few understand that the issue of international speculators attacking and running up certain commodities was really not addressed and that was vital...

I'm afraid we'll see more of what they did to the Oil and Gas market in that arena and also other essential commodities they can attack and use to gouge and drain every penny they can get from consumers..world over..

[ianrthorpe]

Too right the G20 will not lead to a New World Order, reason 1 being that not one of the 20 leaders and nobody in their entourages understands what has happened to the global economy.

When people have lost their trust in money, printing money is the very worst course of action.

http://greenteeth.blog.co.uk/2009/04/02/news-from-g20-and-the-palace-5879008/

[suzc]

Interesting comment. Thanks for the link.

[jerrypl]

Ann, once again you are right on it!!! I believe that the $1T will only be used to make sure that the third world borrowers can make interest payments on their IMF loans so their central banks don't collapse. The European banks are sure to experience meltdowns as the Eastern European banks begin to show defaults over the rest of this year. The global economy is coming apart. Smaller, more centralized, more localized economies in the US is the way it MUST go but Obama continues to embrace trickle down voodoo economics.

The G20 experience was only an audition for a new Doo-Wop singing group. Just look at the photos and it is clear. Or, maybe they are bringing back the Three Stooges in another global form.

http://eye-on-washington.blogspot.com

[holeybuybull]

Sounds like the G20 and KBR have a lot in common.

[SamSeven]

New World Order = Welcome to Tryanny
So Long the American Dollar!

I think the writer forgot some other facts.

The World Bank is Bad News. IMF screws Third Wolrd Countries for years. They will screw the US and Canada and Mexico.

All your taxes will be going to the Bank of London.

Our countries are being gutted out here by the Globalist. Check the Trilateral Commission, Council of Foreign Relations and The Club of Rome websites and this is all planned.

The G20 was a big photo-op.

[ricchase]

SamSeven.......You are absolutely correct. This plan, to create calamity and chaos in the financial and social sectors was formulated several years ago in order to decimate social order and have the masses beg for a "Stable and Secure" government to "save" them. Along come the "saviors" to create a One World Government. This after they have pilfered the world's wealth and resources and the people are relegated to little more than serfdom for their "Lords".
Needless to say no one will believe this and no one will listen, until it is too late. As usual.

[darquelourd]

Wow, you actually quoted some facts and used some visual aids in this one just like a real adult economist would ... but your main point is simply a matter of 50/50 guesswork. It doesn't take much of an "expert" to say that the G-20 may or may not fail in its aims.

[CitizenZoe]

I appreciate the points brought up in this article, but it seems to me that the author already had her mind made up about the summit and has been blind to all the good that has gone on there. As it is a fault with our world leaders it is a fault of the author to assume that these problems can be fixed by government, downsizing and de- McMansioning. This is our universal culture and many have spread the seeds of doubt about it's potential for destruction and decay. However, let's look more at the obvious macro points; as these challenges arise it gives the global community a platform to be heard and to have changes made. Albeit these changes come slowly but they do come. Also it is not up to the governments of the world to be kind to the poor, but you and me and all our neighbors. Shame on the author for suggesting anything otherwise.

This article tended toward the "doomsday all is not well" scare tactic model overall and didn't acknowledge any of the amazing strides of leadership and friendship that occurred this past week on behalf of ALL the G-20 members.

[KillTheMessenger]

Weird... and I thought the G20 did a really good job. But maybe my expectations are not just as high. I can live with the same old world order with a few tweaks here and there That's because I trust that slow, evolutionary changes work a lot better than either revolution or "intelligent design". Let's proceed with caution on this road and if the world will be better by an epsilon and a delta today, it will be better by a parsec a couple of centuries down the road.

That's real progress and diplomacy. This blog will have become irrelevant and forgotten by tomorrow. But the new impression the President gave of America will be acknowledged by history. And that is the only thing that counts right now.