RT Expert View: global economy decision making

25 October, 2008, 09:04

This week RT’s expert panel looks into the upcoming G20 summit that is hoped to flesh out a coordinated plan to address global economic problems. What are the chances for it to come true?

Peter Lavelle, RT’s political expert and anchor

U.S. President George Bush has announced a number of high profile crisis summits on the global economy after the November election. The G8 has been asked to attend, as well as a number of other important large and emerging economies.

Russia has said it will attend, but China, Brazil, and India have not – to date – shown much enthusiasm about participating. What is in play? My sense is that many of the new economies (read non-Western) are more interested in a new global economic order – with new rules and a fair division of leadership. The BRIC countries are certainly not interested in bailing out the U.S. economy.

What are the chances we will see Western countries take a genuine interest in allowing other countries being part of a new global shareholder regime for the world’s economy? Does the West have any choice at this point?

Sergei Roy, editor, www.guardian-psj.ru security website

Taking part in the summit scheduled for November 15 in Washington DC will be the leaders of the world’s 20 economically most advanced nations. Curiously, Spain, which ranks eighth in the world economy stakes, was not invited – but this is by far not the most curious feature of the forthcoming gathering.

Originally, the idea of such a meeting aimed at dealing with the world financial crisis and working out measures to make the world an economically safer place was mooted by presidents Nicolas Sarkozy of France and Dmitry Medvedev of Russia. However, not to be outdone in the PR game, the White House held out an invitation for G20 leaders to come to Washington, DC, the “invitation” totally ignoring Messrs Sarkozy and Medvedev’s original move. A clear case of trying to steal the thunder.

But the big question is, ‘Is there much thunder to steal?’ What can the G20 (or G21, if Spain is after all invited) do to beat the crisis and avert a world recession? What sort of consensus can be reached, given the widely divergent situations and policies of the nations involved? What chance is there that they will all “advance a common understanding of [the crisis] causes and agree on a common set of principles for reform of the regulatory and institutional regimes for the world's financial sectors,” to quote press secretary Dana Perino who announced the “invitation”?

Suffice it to hear what was said next: «… we expect the leaders will discuss the effects of the emerging economies and developing nations. The summit will also provide an important opportunity for leaders to strengthen the underpinnings of capitalism by discussing how they can enhance their commitment to open, competitive economies as well as trade and investment liberalization.»

See? The leaders are supposed to “strengthen the underpinnings of capitalism” – while the US administration, along with the UK, French, Swiss, and other governments, indulges in direct government intervention, in honest-to-goodness dirigisme, including outright nationalization. Shades of George Orwell! War is peace, capitalism is socialism?

The nature of the current situation, particularly as reflected in the minds of the world’s politicos, is aptly encapsulated in a Russian phrase translatable, in a somewhat bowdlerized form, as “fire in a nuthouse during a flood.” A new and more secure economic world order may arise out of the current crisis – or else it may not, but this is something that can only happen, or not happen, in a more or less distant future. Not during the crisis itself. The crisis will first have to be overcome – and this will occur strictly on the sauve qui peut principle. No gathering of presidents will help him qui ne peut pas.

Indeed, what do the nations of the world, particularly those of the BRIC camp, desire most of all? Surely it’s some mechanism restricting the current uninhibited dollar emission and the spread of those “toxic derivatives” that were the immediate cause of the crisis. But how can they achieve anything of the kind while dollar liquidity is the most desirable asset, and the dollar is going from strength to strength? The world has eaten of the dollar cake, and it must go on eating it, which, put simply, means that it must bail out the US economy. Whoever holds dollars is sharing in the US debt – and cannot permit the US economy to go bust.

No doubt, this turmoil and the race after the dollar will come to an end one day – once the recession is over and commodities other than the dollar begin to rise in value. Then a gathering of the heads of G20, or G21, or G any other number may turn out to be more than a talking shop – as this one, scheduled after the US presidential election and symbolically presided over by a very lame duck, is most certain to be.

James Blake, RT’s business expert

In short – the nations of the west have no real choice. As the global financial crisis evolves into a global economic crisis, the global economy finds itself in a situation where the major debtor nations are from the West, and the major creditor nations are someone else, but particularly China, Russia, and the Arab petro-states.

Those nations haven’t been getting a front seat on global decision making processes in recent years, largely because, with a booming world economy, all problems were largely being swept under the carpet. They have to come out with the world heading into a recession, and the creditor nations have to be part of any globally coordinated response. The mechanisms and global bodies that are part of developing and coordinating this response will need to be restructured to reflect needs.

The economic issues the world faces go far beyond the imbalance, and far beyond simply credit and debt issues – with the equation: creditor equals good with debtor being bad not reflecting the interrelationships (which have both positives and negatives for creditors and debtors alike). But resolving other issues without addressing these, and incorporating all major parties to this relationship, will ultimately be a waste of time.