The financial crisis presents a rare opportunity to build a system of international finance that works in the true interest of the global public, but the G20 ministers seem intent on maintaining the unsustainable growth-oriented global economy of the past, writes Rajesh Makwana …
… Unrepresentative Institutions
Another area of concern is the G20’s support for international financial institutions that have a history of creating economic havoc in the developing world. At their April meeting earlier this year, G20 leaders agreed to treble their funding of the International Monetary Fund (IMF) to US$750 billion in order to ease international lending.
But the Fund’s work in low-income countries is dogged by a controversial history, since the structural adjustment policies pursued by the IMF and World Bank in the 1980s and 90s destroyed safety nets in many developing countries. Instead of establishing essential welfare infrastructure, indebted countries were encouraged to redirect public funding to debt repayments – leaving them particularly vulnerable during the current crisis.
The G20 communiqué did purport to consider more seriously the matter of tax havens and the need for a more representative IMF membership, but there is little expectation of any purposeful action on a bailout for the world’s poor. Of the US$750 billion pledged, the IMF will only make US $8 billion available the poorest nations over the next two years. In addition, as the recession continues to bite donor counties, the G20s already insufficient aid commitments are also increasingly unlikely to be unmet.
Despite the raw memory of the Lehman Brothers fiasco, the outcome of the latest G20 meeting demonstrates that this group of finance ministers and central bank governors from the world’s largest economies is not fit for purpose. If the group’s leaders intend to make genuine progress at their upcoming meeting in Pittsburgh, they will need to act far more decisively on financial and institutional reform.
Instead of merely reinventing the old system, the G20 need to prioritise equality and stability over profitability and growth. A meaningful transformation can only happen when policymakers address the structural inequalities within the exclusive and competitive form of international finance they continue to pursue. The financial crisis has presented a rare opportunity to make a clean break from the tired, profit-oriented economy of the past, paving the way for a system of international finance that works in the true interest of the global public. (full text).