Final post from the London Summit – full analysis to follow tomorrow

April 2, 2009

     By Duncan Green     

So, it’s 7.30pm, some 14 hours after I started blogging this morning, and Obama is wrapping up his press conference. He looks exhausted. And the big question is, has this been a historic day or not? The answer is ‘maybe, but it’s too early to say’, but at least there’s a ‘maybe’ in there. I feel unusually optimistic for the end of a summit, so let’s see if that optimism is justified, scrutinising the final communiqué:

The event: it’s very hard to imagine how we could ever go back to the old days, when the G8 politely invited a few developing country leaders to join them for a photo opportunity. It feels like the G20 is the real show now, with the G8 perhaps morphing into some subsidiary role. That’s a huge shifting of the geopolitical plates, and today may be the moment when it became irreversible. There’s still 172 countries left outside, and the issue of their representation, especially of Africa (which currently only has one G20 member – South Africa), is vital. We have been told that the 4 African leaders here today (3 of them at the invitation of Gordon Brown) were assured that Africa would be properly represented in future. That matters.

Institutional winners and losers: The big winner, apart from the G20 itself, is the IMF, which has received a massive increase in funding and therefore influence. This is bittersweet – we realize that the Fund is best placed to rapidly get the money out the door to developing countries, but equally the Fund has earned a terrible reputation for imposing unsuitable policies on developing countries, forcing them to cut jobs and public spending in the middle of recessions (the exact opposite of what the US and Europe is currently doing). The IMF has been a ferocious advocate of deregulation and liberalization and its governance is heavily skewed towards the rich countries (Belgium and the Netherlands have as many IMF votes as China!). This summit gave the IMF a big cheque in exchange for promises of sweeping reforms. We need to hold them to those promises.

The big loser is the United Nations. It is the representative body for all nations, and yet its role here has been marginal – it merits two mentions in the text, one on the UN climate change conference in Copenhagen, the other on it being asked to ‘monitor the impact of the crisis on the poorest and most vulnerable.’ This was predictable (see my previous blogs), but nonetheless is an unwarranted exclusion of an institution that is effectively the ‘G192’ of all countries, and does a lot of really good work.

How about Oxfam’s four main asks? Apologies in advance – I’m going to get a bit techie in places.

Bailing out the poor: The communiqué announced a $50 billion rescue package for the world’s poorest countries. If it happens, it will provide a much needed lifeline for poor countries. We estimate that some $31 billion is coming from the IMF, from a combination of the new IMF Special Drawing Rights allocation, sales of some IMF gold and other forms of IMF financial alchemy. But we need assurance this will come without harmful IMF conditions. The rest looks like it will come from the Bank’s trade facility and some private sector financing, again from the Bank. We need to ensure there are no bad conditions attached to this money too.  The G20’s reaffirmation of its aid commitments is also encouraging and will give us further means to hold governments to their promises. Evidence to date though shows that many G20 members are way off track, and some are evening cutting their aid budgets. 

Reforming the international institutions: (see above)

Tax Havens: Compared to where we were a year ago, this could prove a big step forward. But after what we’ve seen in the last month, where many tax havens made concessions on secrecy and transparency, we were hoping for the G20 to finish the job. That means automatic exchange of information between countries at multilateral level, and country by country reporting by companies. We didn’t get any of that. We are left with a huge question mark on how far the tax haven commitments really go. There has clearly been a big fight within the G20 on whether to release a list of bad guys, so they passed the buck to the OECD, who are supposed to release something today (nothing so far).  They say in the communiqué that the era of bank secrecy is over. Now they need to prove it. Tax heavens? Not yet.

Green New Deal: Very disappointing. The communiqué has ‘best endeavours’ language (e.g. ‘best possible use’, ‘we encourage’) on a green recovery (para 27), but there is nothing binding. It is better that there is a reference to Copenhagen than leaving it out altogether, but essentially, action on climate change was deferred until later in the year, reportedly through agreement between the US and China.

Finally, on trade, the communiqué reaffirms the G20’s commitment (until the end of 2010) to avoid protectionism, but these promises look cheap when according to the World Bank, 17/20 G20 members have introduced protectionist measures since the last G20 meeting promised to do just that in November 2008! And there’s no recognition of the need for policy space and a more nuanced discussion on protectionism when considering developing countries (see my blog on this here). There was a big $250bn trade finance deal announced, but our sources tell us only $12bn will go to low income countries. We’ll need to examine the detail on that, as with everything else in the communique! Night everyone.