G-20 summit: What's in there for the people?

Much of the news reports, commentaries and analyses on the Group of 20 (G-20) summit this week in Seoul, South Korea, pertains to the intense disagreements over the US approach to push the world economy into “strong, sustainable, and balanced recovery” from the 2008 financial and economic crisis that began in the US, deemed the worst since the Great Depression of the 1930s. 

The contentious issue is the US Federal Reserve decision to buy $600 billion in US treasury bonds (a form of borrowing) purportedly to lower long-term interest rates, induce consumers to spend, create jobs, and lift economic growth. 

Critics of this step, within and outside the US, doubt it could achieve its objectives. They fear that it would drive US investors and banks, with their huge hoards of cash, to invest more dollars in the “emerging markets” where profits are higher. The latter, among them China and Brazil, resent this. They worry that such massive dollar inflows would further spike the value of their currencies, cause trade and financial imbalances, and spur social turmoil.

The G-20 summiteers may not resolve their disagreements because, as economist Jeffrey E. Garten of Yale School of Management observed, “it’s become every country for itself.” Garten jabbed at the US: “In letting domestic considerations completely trump international considerations, the US is reinforcing the views in France and China, among others, that the entire monetary system is a political toy of a dysfunctional US political system.” True!    

The bigger question, whatever may come out of the Seoul summit, is: what’s in there for the peoples of the world, especially the big majority who are poor?

Not much, if at all, given the record of the G-20 since it was set up in 1999 by the Group of 7 top industrial countries and the leading emerging-market nations in response to the 1997 Asian financial crisis. Like the G-7, the broader G-20 has failed, after four summits since 2008, to redress the worsening underdevelopment and impoverishment of most of the 192 countries victimized by the neo-liberal globalization policies aggressively promoted by the G-7 since the 1980s. 

A policy brief issued last month by Ibon International, a division of the nongovernmental think-thank Ibon Foundation, Inc., gives a bird’s eye-view of the problems. It identifies four major “structural imbalances” in the global economy that must be resolved “to avoid another downturn and shift to a truly equitable, just and sustainable development path.” I’ll try to present them as simply as possible.

1. Income distribution imbalance between capitalists and workers. This is a classic condition that has been gravely worsened by the liberalization of investment and trade, privatization of public assets, deregulation of markets, and cuts in spending for social services and welfare, even as productivity increased in many countries.

By 2000, a Wider UN University study shows, the richest 1% in the world held 40% of global wealth, while the poorest 50% of world population held barely 1%. Another source provides this situation in the US: in 2005 the richest 1% of Americans took 24% of income, up from only 9% in 1976. Over 25 years, the 1% richest cornered 4/5 of the total income increases in the US.

2. Imbalance between the real economy and high finance. Declining workers’ income has induced lower consumption of goods and services, which has discouraged investments in production and employment. Excess funds have been diverted to financial speculation as banks developed diverse quick-profit financial products. In 2004, one study says, trading in these speculative products and in currencies totaled $7.6 trillion, $300 billion more than the total world merchandise exports.

 Financial speculation and markets deregulation have rendered the world economy volatile. Developing countries responded by building up their currency reserves, mainly in US dollars being the main international currency, to protect their economies against sudden capital outflows. By 2007, a UN report says, these countries, led by China, held $3.7 trillion in reserves. To finance its economic growth and current-account deficits, the US has drawn from these reserves by selling government bonds. 

3. Imbalance between developed and developing countries. Most developing countries dependent on foreign loans and investments, such as the Philippines, have been tied down to paying huge sums in debt interests and profit remittances yearly to developed countries, resources that should have gone to eradicating hunger and poverty and financing their sustainable development.  

 4. Imbalance in representation in policy-making bodies between the rich and poor countries. The G-20, and before it the G-7, have been setting the rules in such multilateral bodies as the IMF, World Bank, and World Trade Organization. The recently agreed “reforms” in the IMF voting shares and representation in its governing board would involve only G-20 members, not the majority poor nations.

These structural imbalances are missing in the policy agenda of the G-20 summit, points out Ibon International, since it focuses on currency problems.

No wonder huge anti-G-20 protests have sprung up in Seoul and in major cities all over the world.