It looks like there will be some serious demonstrations to welcome the G-20 summiteers to London on 2 April. Protests will reflect anger at the human costs of the recession and a conviction (or hope) that the system has not only failed many ordinary people but is failing full stop. And there will be a lot of sympathy for the protests because it is hard to see the G-20 straightforwardly addressing the big problems. There are four in particular that could do with high-level attention.
By way of preface, it has to be said that multilateral summits are not necessarily the best forums in which to deal with the biggest problems and the G-20 summit has some particular flaws. First, there’s disunity: world leaders are at sixes and sevens about how to deal with the recession – or perhaps at billions and trillions. The US and UK have put in trillions and want to put more into the effort to find a route out of recession. Some EU governments have put in billions and first want to see how that works out before committing more.
Second, there’s newness. The G-20 has emerged out of nowhere to be this year’s must-meet summit, effectively replacing the G-8 (so last decade). Not all the ‘sherpas’ – the government officials who prepare the agenda and pre-cook the final communique – have worked together before: China, India and ten other governments are new players at this level. Actually, what this level really is hasn’t yet been defined to everybody’s satisfaction. And on the topic of newness, there’s the Obama administration, so new it has not yet got even a handful of senior officials in place in the Treasury.
So realism would tell one not to overburden the G-20, not to expect the London summit successfully to get through a big agenda of big issues. Realism suggests this new international institution should start modestly. The trouble is that there are some big problems that have to be discussed; these days, nothing less than high ambition is realistic. If the summit visibly ignores key issues, there is going to be a lot of justified criticism.
The agenda and much of the outcome have been fixed by now, so what follows is not a proposal for what the G-20 summit should discuss. But these are four issues that at present I do not see most governments paying enough attention to, or if they are there are uncomfortably good grounds for believing that too much of what is said is spin and blather with little real substance behind it. They are the kinds of issue a G-20 summit can address and to which it can make an important contribution. Whether it will is something we will shortly get to find out; maybe at that point we shall have a better sense of how long the recession and its consequences will be with us.
1. International financial regulation
There is going to be discussion of this topic and there has been a lot of pressure about tax havens. That’s good. But the problem of creative tax avoidance is not going to be solved by tax havens closing their doors and opening their books, and, anyway, there is much more to financial regulation than ending tax avoidance.
Anybody who has been following the leaks by the Barclays mole to the LibDems and thence to The Guardian about the bank’s Structured Capital Markets department and its strategies for legal tax avoidance can see that there are two key issues here. One I will pick up below. The other is the problem of the differences between different national tax and legal systems; these differences create the openings through which Barclays’ wide boys drove their solid gold coach and all its horses. The only solution to this problem is international cooperation and international financial regulation – attacking the tax havens will not even do half the job.
But it is not only or even primarily over tax that financial regulation failed us in the build-up to the credit crunch. It is in regulating the basic activities of the major financial institutions themselves. And here, whether you look at Iceland, Ireland, AIG, Lehman Brothers and its last-minute whisking home of billions from London, or Czech borrowers with loans in Euros, part of what you see is the need for stronger regulation at the international level. Firmer national regulation must be backed by firmer international regulation and the multiple nationals bits have got to be consistent with each other and with the international pieces.
For all of this, given the will among the national players, an event like the G-20 is essential.
2. The banking culture
A while back, I wrote about the importance of rethinking banking as a public service, out of which it is acceptable to make money, just like public transport, rather than as something driven purely by a business/profit ethic. The Guardian has reported on an organisational culture in the Barclays tax avoidance team that is about as antithetical to the idea of providing a public service as it is possible to get. Super-macho, smart, ruthless and deeply immature behaviour is recounted as the norm. But this is only a particularly vivid demonstration of a problem we have all now read about on countless occasions: the big banks and other financial institutions have made a point of employing people who like taking risks with other people’s money by the tens of billions. And when the house of cards came tumbling down, the ones who walked safelyand prosperously out of the wreckage were those self-same bankers. The weekend story about allegations of intimidation aimed at directors of the Royal Bank of Scotland who asked awkward questions only drives the point home.
If today’s anger against bankers is going to turn into something positive, it will be because, now that governments have taken such major stakes in the banking sector, they can use that leverage to attack the predominant organisational culture. Banks need to become steady, boring and reliable. Flash gits can surely find other places to work.
An event like the G-20 could help this process along: it could act as a focus for taking the anger and turning it into a practical and positive direction. But this is one of those issues that politicians and summits are often very bad at dealing with because what counts is not in the end a matter of big headlines but a question of how banks behave day-to-day for a long time to come.
3. The low carbon recovery
At the risk of getting tediously repetitive about this, one clear route out of recession and a way of getting something good out of the whole sorry mess is by using recovery as a springboard for green investment, with an initial emphasis on energy and ground transport. Because new technologies that are within reach but not yet stably developed are required, these are areas that need and will reward investment. This approach allows politicians to chart a route around the problem of offering low-growth policies in the middle of a slump. And it is the way you answer the challenge from the automobile worker about her/his job prospects if we want to take on global warming. S/he has not much by way of immediate job prospects as recession bites, but could have much better prospects if car companies got incentives from governments to develop zero-carbon ground transport.
If national governments were ready, an event like the G-20 would be the climactic moment of winning this argument and getting policy to move. But actually the G-20 is not needed for individual governments to make this kind of move and the smart ones will go ahead regardless of what other governments do because it is, well, smart.
4. Global risk
There is starting to be increasing recognition of what in an earlier post I referred to as the risk of a perfect storm – the possibility of a violent conflict triggering a major crisis in a poor region, made into a more serious risk by the way that rich governments are necessarily focusing most of their energy and attention on their own economies amid recession. The same term was used by the UK government’s Chief Scientific Adviser to describe the combined effects of food, water and energy shortages in the coming two decades.
More generally, layers of risk are being revealed as the economic recession unfolds. Some of these layers are created by recession, as markets shrink, investment falls and migrant workers send less money home to their families; some are exacerbated by recession because political energy and financial resources are being absorbed by rich country problems; and some have little or nothing to do with recession and, like climate change, have been building for many years and demand immediate remedial action.
Given the structural shortcomings of the UN system, an event like the G-20 is wholly essential for generating broad enough unity and the sort of high-level attention that these long-range problems deserve. Global risk will continue to rise unless and until it is mitigated by global action.
There is, in short, a great deal for the G-20 summit participants to do. Let’s see how they fare.