Good-Bye G8, Hello G20

The G20 global economic summit which just wrapped up in Pittsburgh was not much different than almost every G8 (and before that, G7) economic summit which preceded it, in that there was practically nothing of substance publicly announced.

There was vague talk about reining in the excesses of greedy (Western) bankers, and of addressing some of the large “economic imbalances” (i.e. reckless U.S. deficits and “excessive” savings by China), but for the most part, the public side of the meeting was nothing but dreary photo-ops.

The real value of these get-togethers lies in what is said “behind closed doors”. It is in that respect that we can look at the one substantive outcome from this summit: replacing the “G8” with the “G20” as the official body for designing global economic policies now and in the future.

For the record, this group of economic elites was originally the “G7”, comprised of the U.S., Canada, Germany, France, Italy, Japan, and the U.K. In 1975, the Soviet Union became the 8^th member of this forum, as an additional communication channel during the “Cold War”.

It wasn't really until this decade that the (new) Russian Federation became a more fully-integrated member of this group – during the brief period of amicability between Russia and the U.S. which followed the economic implosion of the Soviet Union. In addition, the European Union (as a whole) was given an unofficial seat as an observer.

The G20 was founded in 1999, as a co-initiative of Canada and the United States. However, it was largely a symbolic forum, in terms of economic policy – as non-G8 members were clearly “second-class citizens”. It's only real usefulness was in opening up dialogues on “new” issues such as climate change.

The transition to the G20 as the official, premier forum for global economic issues can be seen as an indication of what was really accomplished at this meeting: a restructuring and re-ordering of the global, economic hierarchy. Gone are the days when the powerful and “wealthy” G8 members could dictate their plans on the global economy to the lesser, G20 bystanders, and the rest of the global community.

The rise of the G20 should be seen not as a magnanimous offer by the Western economic cabal (and Japan) to cede power and influence to formerly, less-influential “developing” economies. Instead, it should be seen for what it really was: a humble offer of (somewhat) equal status to these rising economic powers. The alternative which the developed economies of the G8 were confronted with was that a separate forum (and community) would be formed by these developing, creditor economies – which would exclude the G8 debtors' club.

Canada and Russia would have likely been offered entrance to this rival entity, as their massive wealth of resources sets them apart from other G8 debtors for two reasons. First, their commodities-wealth has meant that these countries have not (yet) accumulated vast, un-repayable mountains of debt and secondly, their natural resources makes them integral partners with the rising “emerging market” economies. Germany, as the world's largest exporter (and with relatively responsible fiscal policies) would have also been likely to receive an invitation.

Even so, the remainder of the G20 should not be seen as an homogenous group. The other members of this forum are Argentina, Australia, Brazil, China, India, Indonesia, South Korea, Mexico, Saudi Arabia, South Africa and Turkey (with the EU now gaining an official seat). Australia clearly ranks as a “developed” (rather than “developing”) economy – as is the EU, as a whole. On the other hand, while Argentina, Mexico, and India are all “developing” economies, they share one commonality with the “developed” economies: serious debt problems.

Thus, as political dynamics form within this “new” entity, it will not be a simple division between “East” and “West”, or between “developed” and “developing” economies. The blurring of such distinctions, because of the unique characteristics of member nations ironically enhances the possibility of genuinely useful reforms and initiatives emerging from future summits.

Developing economies with increasing appetites for commodities will share many of the same objectives as resource-rich, developed economies like Canada, Australia, and Russia. Conversely, developing but debt-laden economies such as Argentina, India, and Mexico will share many of the same problems as the even more debt-burdened economies of the U.S., U.K., Italy, France, and Japan.

On the other hand, this new, international economic vehicle offers little hope of advancement in some critical areas, such as the interconnected issues of climate change, environmental degradation, and pollution. Indeed, as we stand at the beginning of the next major era of economic growth (the rise of the “emerging market” economies), we can sadly expect a likely repeat of history.

The industrialization and economic rise to power of Western economies was accompanied by massive pollution, environmental destruction, and the decimation of countless species of plants and animals. The economic and technological sophistication of our own economies was sufficient to generate impressive economic growth – yet woefully inadequate to do so in a sustainable, Earth-friendly manner.

There is no reason to believe that the rise of the world's new “economic tigers” will be any different. The reluctance of these growing economies to sacrifice needed economic growth in order to minimize the “collateral damage” of such growth will likely be seen as an excuse for the economically-crippled developed economies to avoid such action, themselves.

Where positive changes are likely to be more forthcoming is in the monetary policy, and management of global financial markets. Thus, while nothing binding or concrete was announced with respect to putting shackles on the reckless and predatory Western bankers who nearly destroyed the global financial system, this new “balance of power” is unmistakably a warning that if (in particular) the U.S. and U.K. do not control the behavior of these economic psychopaths that remedial measures will be imposed on these banksters.

We are clearly entering a “brave, new world”, yet the ambiguous prospects for dealing with many of the common problems of our species raises the specter of the ancient, Chinese curse: “may you live in interesting times.” Events have been much, too “interesting” over the last few years. We can only hope that this collection of politicians can exceed expectations – and make the world a lot more “boring”.

Comments

[dragonpaw:]

G20 vsG8.. gee, let me think. When's the last time I had less trouble getting eight people (yea, friends even) to go along with my ideas versus having 20 to agree. You get the idea; it ain't gonna happen.
In addition it opens the doors for many more banksters to get involved.
As an aside, while I like the "bankster" term. I prefer to use the more emphatic "gang-bankster". It implies the conspiratirial nature of the group, as well figurative screwing that all involved both directly and collaterally are receiving.
Jeff; keep up the good work!

Oct 03 03:58 PM