G20 nations emerging as broader forum

WORLD VIEW:YESTERDAY EU leaders in Brussels, today and tomorrow G20 finance ministers and central bank governors in Sao Paulo, next Saturday G20 leaders in Washington. The world's financial architecture is being refashioned by a series of emergency summits as political leaders race to catch up with and head off capitalism's financial meltdown.

In the scramble the Group of 20 largest economies in the world, formed in 1999 after the Asian financial crisis, is coming into its own as a broader and more representative forum than the existing Bretton Woods institutions set up under US influence in 1945.

The G20's 19 country members are the hitherto dominant G7 - the United States, Japan, France, Germany, the United Kingdom, Canada and Italy - plus China, India, Brazil, Russia, Mexico, South Africa, Saudi Arabia, Turkey, Australia, Indonesia and Argentina, along with the European Union (making up the 20th member). Spain and Nigeria are lobbying hard to join.

This represents nearly two-thirds of the world's population and 90 per cent of its economy. States like China, Japan and Saudi Arabia have surpluses capable of shoring up deficits in the major western economies and contributing to the new global financial mechanisms being demanded by France and the UK - recapitalising the International Monetary Fund.

There is a general desire to see decisions taken rapidly, in keeping with the impact of the financial crisis; but also marked differences over policy and strategy. Mr Bush is reluctant to agree in advance on the need for enhanced IMF funding and wary of being bounced into agreements during the transition.

Barack Obama has yet to decide whether to participate. But he is well aware of the need for rapid action on international finance and economic questions, since the fate of the US economy depends so much on how they are handled. It will be fascinating to see how he responds to the proposals agreed yesterday by EU leaders in Brussels on the need for tighter global regulation of banks and financial instruments like hedge funds and derivatives, greater transparency, and common accounting rules.

Although there are continuing tensions between the French desire for more international economic governance, German scepticism about it and the UK's desire for flexibility, the fact that a common EU position has been adopted is highly significant. So is their demand that agreements be reached within 100 days.

Nothing will be agreed on surpluses or new international funds without a major reform of the Bretton Woods institutions. These were planned carefully by the Roosevelt administration for an American-dominated, post-war liberal world order to succeed British and French imperialism as well as the defeated Germany and Japan. On this occasion crisis planning has predominated; but the G20 knows well how to bargain about their influence in the new global order.

While the immediate G20 agenda is dominated by financial reforms it will - and should - also overlap with other major international negotiations. The Doha trade round, the Kyoto/Copenhagen climate change talks, achievement of the Millennium Development Goals, the food and energy crises all crowd in on the finance/economic issues. These are linked, as the ecological and growth limits of the existing order are reached.

At the G20 level that capitalist-dominated system is not questioned, since it is now truly global and not as yet widely challenged politically; but its various manifestations certainly are up for decision at these summit meetings. Prominent among them the Anglo-American, European state-regulatory, developmental-authoritarian and Nordic-egalitarian models.

To what extent do each of these project international changes like the domestic ones they address? There is a pressing need for new ideas to match these fundamental economic and political shifts. Can they be linked in a new internationalism, a more radical global politics to match the leftward spirit of this week's political change in the US - and capable of delivering on it? That would have to match the geographical shifts exemplified by the G20's emergence with considerations of social justice and equality.

Revolutionaries are well defined as reformers who are serious about it. Several demands have been resurrected that are capable of making such reforms by raising awareness about the need for change and convincing people the transition can and should happen. Their achievement would be well worth the political innovation required to create democratically accountable international institutions to govern them.

Accepting that international finance needs to be regulated more effectively without rejecting the benefits of globalisation, the economics Nobel Prize winner James Tobin's suggested tax on financial transactions deserves a renewed hearing. Thirty years ago he suggested a levy on capital transfers applied across all major economies to deter speculation and fund public goods.

Levied at a conservative 0.5 per cent on hedge funds, derivatives and credit-default swaps etc, it would raise the $3 trillion that has just been used to bail out the banks. It could be used to fund development goals and subsidise trade liberalisation.

A similar carbon tax on fossil fuels would finance adaptation to climate change, technology transfer to China and India and research on alternatives.

Crises are also opportunities for change. It would be a tragedy if the slogan in four years' time has to be: "Sorry, we couldn't".

pgillespie@irish-times.ie