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ON THE

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TheGroupofTwenty(G20)comprises19

countries:Argentina,Australia,Brazil,Canada,

China,France,Germany,India,Indonesia,Italy,

Japan,Mexico,Russia,SaudiArabia,South

Africa,SouthKorea,Turkey,theUnitedKingdom

andtheUnitedStatesofAmerica,andthe

EuropeanUnion,whichisrepresentedbytherotatingCouncilpresidency.

TheG20isplayinganincreasinglyprominent

roleinthecurrenteconomiccrisis,andthefirst

summitmeetingofG20headsofstate/

governmenttookplaceinNovember2008.The

secondoftheselandmarksummitswilltake

placeinLondoninApril2009.Aswellastheheadsofstateorgovernmentoftheabove

countries,plusSpainandtheNetherlands,the

ChairofTheNewPartnershipforAfricas

Development(NEPAD),theChairofthe

AssociationofSouthEastAsianNations

(ASEAN)andthePresidentoftheEU

Commissionareinvited.TheChairmanoftheAfricanUnionCommissionwillalsoattend.

Informationtakenfromwww.g20.organdwww.londonsummit.gov.uk/en/summit-aims/faqs/general-questions/who-will-attendMarch2009

WHAT IS THE G20?

ThisbookletwasfirstpublishedinApril2009.ippr2009

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FOREWORD

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On2April2009leadersoftheG20countries,togetherwiththoseofSpainandthe

Netherlands,andrepresentativesofmajormultinationalorganisations,gatherfortheLondon

Summit.Theymeetatatimewhentheglobalfinancialsystemisexperiencingitsworstcrisis

sincethe1930sandtheworldeconomyisinthemidstofthedeepestglobalrecessionsince

WorldWarII.Inahighlyunequalworld,thecrisisishittinghardestthosewhoaremost

vulnerabletopovertyorinjustice.

G20leadershavealotontheiragenda.Expectationsarehighandfailureisnotanoptionasfar

asthemillionsofpeopleworldwidewhohavebeenaffectedby,orarethreatenedby,thecrisis

areconcerned.

Tohelptheleadersfocusonwhatreallymatters,weaskedanumberofleadingprogressive

thinkerstoeachcomeupwithonepolicyrecommendationfortheG20andtoexplaintheir

choiceinaround200words.Theresultsarecontainedinthisbooklet.

Ourthinkersrangefarandwidewiththeirproposals.

Somefocusontheimmediateeconomiccrisis.Theyrecommendmeasurestocounterthe

downturn,suchasGerryHolthamscallforacoordinatedfiscalstimulus;ortoalleviatethe

plightofthosemostaffectedbyit DianeCoylewantsspecificmeasurestohelpthe

unemployedandthoseindangeroflosingtheirhomes.

Othersareconcernedwithrightingtheimbalancesthatareperceivedtohavecreatedthecrisis.

TheseincludeDieterHelmsrecommendationforaswitchfromconsumptiontoinvestmentand

JayatiGhoshscallforaredistributionofincometoallowwage-led,ratherthandebt-led,growth.

JohnPodestaandProfessorJiahuaPan,twomembersoftheGlobalClimateNetworkestablished

lastyearbyippr,areunitedintheirpleaforfiscalstimulitobefocusedonlow-carboninitiatives.

Bothalsowanttoseegreeninnovationandfinanceflowingfromrichtopoorercountries.

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Athirdgroupcomesupwithsomeverydifferentsuggestionsforwaysinwhichtheglobal

economicsystemshouldbereformed.JimONeillwantsanoverhaulofthesystemofglobal

governanceandthecreationofanewG4group,whileRobertSchillerwouldliketheG20to

establishaninternationalmarketinGrossDomesticProductsofthecountriesoftheworld.

Therearealsocallsforreformofthefinancialsystem.DavidPitt-WatsoncallsfortheG20to

agreetheprinciplestowhichallregulatoryregimesmustconform.CostasLapavitsaswants

commercialbankstobeplacedunderpublicownership.

Lastly,theG20areurgednottoforgetissuesthatwereontheagendabeforethecrisis

developedandthatremainimportanttoday,includingpovertyandclimatechange.For

example,GobindNankaniandNancyBirdsallwantincreasedresourcesforthedevelopingworld

andRowanWilliamscallsforacommitmenttoagreementonclimatechangeatCopenhagen

laterthisyear.

TheproposalscontainedinthisbookletcouldhelptheG20limittheeffectsoftherecession,restorestabilitytothefinancialsystemandputtheglobaleconomybackoncoursefor

sustainableandbalancedgrowthwhichdeliversforthemostvulnerable.Theproposalspoint

towardsthekindofprogressivepoliciesthatipprbelievesareneededtobuildafairer,more

democraticandenvironmentallysustainableworld.

Ofcourse,theG20sworkwillnotbefinishedaftertheLondonSummit.Oncetheimmediate

crisisisover,worldleaderswillhavetocomeupwithpoliciesthatensureamorestableglobal

economyinwhichfairnessandenvironmentalsustainabilitytakecentrestage.ippr,throughitsnewGlobalChangeProgrammeandinitiativesliketheGlobalClimateNetwork,planstobepart

ofthedebatethathelpsdevelopthesepolicies.

CareyOppenheimandLisaHarker,Co-directors,ippr

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CONTENTS

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RaymondW.Baker wantstheshadowfinancialsystemdismantled ... 6

NancyBirdsallwantsUS$1trillionfordevelopingcountries ........ 7

Ha-JoonChang urgescandidnessaboutprotectionism............. 8

DianeCoylewantshelpfortheunemployedandat-riskhomeowners.. 9

DianeElson callsfortherightsofthepoortobeprotected ........ 10

JayatiGhosh urgesafocusonwage-ledgrowth ................. 11

DieterHelm wantsaswitchfromconsumptiontoinvestment....... 12

GerryHoltham callsforacoordinatedfiscalreflation ............. 13

CostasLapavitsas proposesthecreationofpublicbanks .......... 14

PhilippeLegrain wantsresistancetoprotectionisminlabourmarkets .15

GeoffMulgan wantsinvestmentininnovationforthefuture ....... 16

GobindNankani urgesincreasedresourcesfordevelopingeconomies 17

JimONeillcallsforanewG4grouping........................ 18

JiahuaPan proposeslow-carbonrecoveryinitiatives.............. 19

DavidPitt-Watson wantsprinciples-basedregulation ............ 20

JohnPodesta callsforaglobalstrategytoreducecarbonemissions . 21

RobertShiller callsforaninternationalmarketintrills ........... 22

GrahamTurner proposeslimitsoncurrentaccountsandcapitalflows 23

RobertWadewantsmorestabilityandlessinnovationinfinance .... 24

KevinWatkins wantslow-carbontechnologytransfer............. 25

RowanWilliams urgesagreementonclimatechangeatCopenhagen. 26

MuhammadYunus callsforcreationofaglobalsocialbusinessfund . 27

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RAYMOND W. BAKER

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TRANSPARENCY!ThisisbecomingtheneglectedareaintheG20process.Economic

stimulusisreceivingenormousattention.Talkaboutstrengtheningregulationofthe

globalfinancialsystemisongoing.Buttransparency dismantlingtheshadow

financialsystemthatgotusintofinancialcrisis isincreasinglyde-emphasised.

TheG20leadersspeakoftheneedforregainingstabilityinglobalfinancial

operations.Doesthismeanreturningtothepre-crisisstatusquo?Toanextent,thestructureoftaxhavens,secrecyjurisdictions,disguisedcorporations,anonymous

trustaccounts,fakefoundations,abusivetransferpricingandmoneylaundering

techniquesliesattheheartofthecurrentchaos.Regulationwithinthissystemwill

notpreventfuturecrises;dismantlingtheshadowfinancialsystemwill.

Transparencymeanssubstantiallycurtailingmispricingoftrade,requiringknowledge

ofbeneficialownershipinallcross-borderbankingandbrokerageaccounts,

automaticexchangeofpersonalandcompanytaxinformationbetweennations,andcountry-by-countryreportingofsalesandprofitsbymultinationalcorporationsand

financialinstitutions.Notrocketscience,butamatterofpoliticalwill.

IftheoutcomeoftheG20processistoapproachtheambitionsarisingfromthefirst

G20meetinginWashingtonDConNovember15,transparencymustbereturnedto

thetopoftheagenda.

RaymondW.BakerisdirectorofGlobalFinancialIntegrity,aguestscholaratThe

BrookingsInstitution,andseniorfellowattheCenterforInternationalPolicy

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NANCY BIRDSALL

UptoUS$1trillionofofficialfinancewillbeneededby2011tohelpdeveloping

countriesweatherthestormunleashedbyrich-worldregulatoryfailures.Dealing

withdebtmightabsorbhalfthatamount.$500bnwouldbeavailabletofillrevenue

gapsandforemergencyjobandfoodprogrammes,providingafiscalstimulusthat

thesecountriescannototherwisefinanceinthecurrentclimate.$500bnisequalto

about3percentoftheGDPofalldevelopingcountries,comparedwithUSand

Chinesestimuluspackagesof7and10percentofGDPrespectively.

$1trillioncouldbemadeavailableatalmostnoimmediatecosttothetraditional

donors.TheIMFcouldmake$400bnavailablethroughmeasuresincludingthe

issuanceofnewspecialdrawingrights(SDRs).TheMultilateralDevelopmentBanks

(MDBs)couldprovide$300bnbymakingbetteruseofcurrentcapital;and$50bn

forlow-incomecountriesthroughmeasuresincludingfront-loadingdisbursements

fromsoftloanwindows.IfsomeofthesefundswereusedinconjunctionwithUSandEuropeanswapstodevelopingcountrycentralbanks,andifmorecountries

werewillingtolendtotheIMF,$1trillioncouldbefound.

TheG20couldmakethishappenbyencouragingtheIMFtoissueSDRs,callingfora

temporarysuspensionofrestrictionsontheMDBs,andcallingontheMDBstomake

betteruseoftheirexistingcapital.

NancyBirdsallisthefoundingpresidentoftheCenterforGlobalDevelopmentin

WashingtonDC

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HAJOON CHANG

Despitethecontinuedaffirmationoftheircommitmentstofreetrade,therich

countriesarenowincreasingtheprotectionfortheirkeyindustriesthrough

subsidiesandgovernmentprocurementprogrammes.Thisschizophreniaisonly

goingtoencouragehidden,open-endedprotectionism,whichwillslowdown

adjustmentsanddamagetheintegrityoftheworldtradingsystem.Theyshould

admitthevalueoftime-bound,conditional,andtransparentprotectionismintimes

likethis,andcomeupwithaninternationalframeworktoaccommodateit.

Moreimportantly,therichcountriesshouldadmitthatthedevelopingcountries

needevenmoreprotectionismthantheydo.Theforced,excessivetrade

liberalisationofthelastthreedecadeshasreducedeconomicgrowthinmany

developingcountriesbyhamperingtheirabilitytoprotecttheirinfantindustries.

Indeed,therichcountriesthemselvesstartingfromeighteenthcenturyBritain,

throughnineteenthcenturyUnitedStates,totwentiethcenturyJapanandKoreausedsuchprotectionismwhentheyweredevelopingcountriesthemselves.

TheDohaRound,whichisthelatestintherichcountriespushfortrade

liberalisationinthedevelopingcountries,shouldimmediatelybestopped.Anew

roundoftradetalksshouldbestartedthatwillreversemanyoftheexcessivetrade

liberalisationmeasuresandcreatemorepolicyspacefordevelopingcountries.

Ha-JoonChangisareaderinthepoliticaleconomyofdevelopment,UniversityofCambridge

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DIANE COYLE

Thecrisishasunderminedthedealgovernmentshavebeenofferingtheircitizens

forthepost-1989globalisationgeneration:thatthescopeofgovernmentcanbe

safelylimitedbecausethemarketwillprovide.Forthedurationoftherecession

especiallybecausenobodyknowshowlongorhowsevereitwillbegovernments

willneedtoprovideadditionaleconomicsecurity.

Twomeasuresarevital.First,keeppeopleintheirhomes.IntheUK,thisshouldmeanapromisethatover-extendedborrowerscanstayintheirhomesaspart-

owners,withtheGovernmentthroughlocalauthoritiesandsociallandlords

takingonownershipsharesasnecessary.

Second,provideaguaranteeofmeaningfulwork.Thereshouldbeapledgethat

anybodywhowantspublicsectorwork,onpaythatgivesabitmorethanthe

benefitstheywouldotherwisereceive,canhaveit.Thisworkwouldrestoresome

much-neededcivilityandfundstopartsofourpubliclife.Itisimportanttokeepasmanypeopleaspossibleconnectedtothejobsmarketandderivingsatisfactionand

socialconnectionsfromtheirwork.Andtaxpayersaremuchbetterfinancingmore

artsgrouppersonnel,better-tendedparks,visitorsfortheelderlyandsoon,than

unemploymentbenefits.

DianeCoyleOBErunstheconsultancyEnlightenmentEconomicsandisavisitingprofessorattheInstituteforPoliticalandEconomicGovernanceattheUniversityof

Manchester

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UsethemoralcompassprovidedbytheUniversalDeclarationofHumanRightsto

guidealleconomicpolicy thisisthemostimportantstepthattheG20leaders

couldtaketoprotectpoorpeoplefromtheeffectsoftheglobaleconomiccrisisand

toensurethatrecoveryfromthecrisisleadstoareductioninpovertyandinequality.

Trustinfinancialinstitutionshascrumbled.Socialsolidarityisweakandgetting

weaker.Reregulationandreflationarenotenough.Areturntogrowthandgreedwillnotreduceinequality.AsAdamSmithemphasised,economiesdonotworkwellif

guidedbyself-interestalone;theyneedtheguidanceofmoralsentiments.

TheDeclarationsetsoutaninternationallyagreedsetofmoralsentiments,

includingnotonlypolitical,civilandculturalrightsbutalsoeconomicandsocial

rights,includingtherighttowork,therighttoanadequatestandardofliving,the

righttoeducationandtherighttohealth.

TheG20leadersshouldcommittoensuringthateconomicandsocialrightsare

progressivelyrealisedintheirowncountries.Theyshouldcommittodoingnothing

tohinder,andasmuchaspossibletohelp,othergovernmentsincarryingoutthe

samecommitment.Alldetailedpolicyproposalsshouldbeevaluatedinthelightof

thiscommitment.

DianeElsonisaprofessorintheDepartmentofSociologyandtheHumanRightsCentre,UniversityofEssex

DIANE ELSON

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Recently,globalcapitalismhasgrownbylurchingfrombubbletobubble,

encouragedbystatepoliciesandfedbyspeculativemarketforces.Thedangeris

thattheG20(whichisanywayanillegitimateattempttobypasstheUnitedNations)

willtrytorevivegrowthbydoingmoreofthesame.Butthatreplaybuttonwillnot

work,becauseothermajorglobalimbalanceshavetoberesolved:betweenfinance

andtherealeconomy,withaconsequentlargedebtoverhanginmajoreconomies;

betweensurplusanddeficiteconomies;betweeneconomicgrowthandnatural

resourceuse.

Therefore,evencoordinatedfiscalstimuli(whichareobviouslynecessary,if

currentlyunlikely)andtransnationalregulationoffinance(equallynecessarybut

evenmoreunlikely)willnotbeenough,andmayjustleadtoanother,possiblyeven

bigger,globalcrisisafewyearsdowntheline.

Instead,coordinatedpoliciesshouldfocusonwage-ledgrowth,whichrequiresprogressiveredistributiongloballyaswellaswithincountries,andchanged

productionsystemsthatmeettherequirementsofmoresustainablelifestyles.This

requiresallowingtradeandcapitalaccountstobemanageddifferently,and

encouragingdiversificationoftradeandinvestmentawayfromexistingpatterns.

JayatiGhoshisprofessorofeconomicsatJawaharlalNehruuniversity,NewDelhi,andtheexecutivesecretaryofInternationalDevelopmentEconomicsAssociates

(IDEAS)

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Thecurrenteconomiccrisishasbeencausedbyexcessconsumptionsupportedbyhighlevelsofborrowingindevelopedcountries.Economicstabilityrequiresareturntosustainableconsumptionlevels.Short-termkick-startstoconsumptionandborrowingwillsimplyperpetuatetheimbalances,andmakethetransitiontoasustainableconsumptionpathmorepainful.

G20leadersshouldinsteadplacetheoverwhelmingemphasisonaswitchfromconsumptiontoinvestment.Intheshorttomediumterm,thatinvestmentshouldbetargetedatinfrastructure,andwithininfrastructurethosecomponentswhichhelpthetransitiontoalow-carboneconomyshouldbeprioritised.Electricitygridsanddistributionssystemandsmartmeteringarethemostimportant,followedbymoresustainabletransportnetworks.Thelong-terminvestmentpriorityfromaclimatechangeperspectiveisR&D,facilitatingtransformationaltechnologiesbythe2020sand2030sincludingbatteries,technologieswhichmovetransporttoelectricity,and

large-scalesolarenergysystems.

Afocusoninvestmentratherthanconsumptionwillrequireamajorexerciseinleadership.Dealingwithclimatechangeisurgentandexpensiveworldleadersshouldstoptellingpeopleitischeapandthatboostingconsumptionnowismoreimportantthanholdingconsumptiondowntoprovidethefundsforinvestment.

DieterHelmisprofessorofenergypolicyattheUniversityofOxford

DIETER HELM

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GERRY HOLTHAM

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TheG20shouldagreetoacoordinatedfiscalreflationwithascheduleofspecific

commitmentsfromparticipatingcountries.Thecurrentaccountsurplusshouldbea

keyindicatorwithsurpluscountriescommittingtoproportionatelybiggerpackages

ofspendingandtaxcutsthandeficitcountries.Somemayresist,butanunbalanced

programmeinwhichthedeficitcountriestookonthemajorroleinboosting

demandwouldperpetuatepaymentsimbalancesintheworldeconomy,makethe

programmelooklesssustainableandsoweakenconfidence.

ThisshouldbebackedupbyareformprogrammefortheIMFwithanincreasein

quotas,particularlyforkeyemergingeconomies,andadilutionofthevetopowerof

theUnitedStates.ArevampedIMFshouldbechargedwithmonitoringthereflation

programmeandreceiveexpandedresourcesthroughtheGeneralAgreementto

Borrowsothatitcanlendtothepooreremergingeconomiesthatarenowshortof

bankfinance.Thusitwouldprovidesupportforworldtrade.Thesewillbedifficultgoalsandthetemptationwillbetofocusonimportantbut

lessurgentissueslikeaspectsoffinancialregulation.Somehowpolicymakersmust

concentrateonthefirstimperative,whichistopreventaslideintoglobal

depression.

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Largecommercialbanksinseveralcountriesareeffectivelybankrupt.Publicmoney

shouldnotbewastedonthem.Theyshouldbeplacedunderpublicownershipand

reorganisedunderfulldemocraticscrutiny.

Publicbankswouldhavesocialauthoritytorevealbaddebts,assignvaluetoasset-

backedsecurities,anddealfairlywithbankbondholders.Theywouldprovidecredit

tosupportoutputandemployment,insteadofusingpublicfundstoprotectshareholderswhilereducinglending.

Publicbankswouldhelprestructurewesterneconomiesawayfromfinance.They

wouldfinancegreenindustries,healthandeducationservices,advanced

technologies,andprovidemortgagesandconsumercreditwithoutimposing

exploitativechargesandrates.Publiccreditwouldofferchoicewhilebuttressing

expandedpublichousing,educationandhealthprovision.Publicbankswouldalso

createmoneyandoperatethepaymentsmechanism,supplementedbythePostOfficeorsimilar.

Inefficiencyandcorruptioncouldposeproblems.Publicbankswouldbeaddressed

throughfullaccountabilityanddemocraticcontrolwithemployeeparticipationand

throughmanagingrisksinlinewithlong-termsocialandenvironmentalaims;they

wouldoutperformprivatebanksintheserespects.

Therearehundredsofthousandsoffinancespecialiststhatcouldhelpoperatepublicbanks.Whatisneededispoliticalwillandpopularorganisationfrombelow.

CostasLapavitsasisprofessorofeconomicsandassociatedeanofresearch,School

ofOrientalandAfricanStudies,UniversityofLondon

COSTAS LAPAVITSAS

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PHILIPPE LEGRAIN

G20leadersshouldcommittoresistingprotectionisminthelabourmarket.

Makingitharderforforeignerstocometoworkinacountry orworse,expelling

thosealreadyworkingthere isasshort-sightedandperniciousasprotectionismin

trade,whichG20leadersrejectedinWashingtonDClastNovember.Itwould

depressdemand,reducinglocalemployment.Itwouldplayhavocwithpublic

services,deprivingpatientsofdoctorsandnurses,theelderlyofcarers,andchildrenofteachers.Itwouldcausefurtherdislocationtobusinessesstrugglingwith

shrivelledcreditandcollapsingdemand anddepriveeconomiesoftheskills

neededtodriveeventualrecovery.

Unfairlyexcludingpoorandvulnerablemigrantswouldalsoexacerbatethe

downturnindevelopingcountries.Themoneytheysendhomeisalifeline,

especiallyinacrisis.RemittancestodevelopingcountriesexceededUS$300billion

lastyear,almostthreetimestotaloverseasaid.TheyaccountforalargeshareofGDPinmanycountries,protectfamilieswherethereisalimitedsocialsafetynet,

andsupportdemandincountriesthatcannotaffordafiscalstimulus.Insteadof

tryingtoreservejobsfornationals,G20governmentsshouldacttogethertoboost

demandandemploymentandsustainremittancestodevelopingcountries.

PhilippeLegrainisajournalist,economistandauthorofImmigrants:Yourcountryneedsthem,andOpenWorld:Thetruthaboutglobalisation

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TheG20needstocombineactionontheimmediatechallengesofthecrisis,and

actiontosolvethelonger-termproblemsthatriskbeingsidelined.Thecrisisispartly

theresultoftheimbalancesoftheUnitedStateshugeover-consumptionanddebt,

combinedwithChineseover-productionandunder-consumption,imbalancesthat

havenoprecedentineconomichistory.

Theonlyplausiblelong-termsolutionswillinvolveamajorrebalancing,withChinaboostingdomesticdemand;reducingsavingsratesbycreatinggovernment

guaranteesforwelfareandhealthsecurity;andslowlyraisingitsexchangerate,

probablywithsomecontrolstoreducetherisksofspeculation.Meanwhile,theUS

willneedtoreshapeitseconomytocurtailcreditanddebt,andtoraisesavings

rates.Almostcertainlythesechanges,whichwilltakemanyyearstoimplement,will

requirenewglobalinstitutionsandarrangements.

Inparallel,theG20nationsneedtocommittoaconcertedprogrammeofinvestmentininnovationinsteadofdirectingfiscalstimuluspackagestofailing

industries:theyneedtofixthefuture,notthepast.Thatrequiresintensiveand

systematicinnovation,muchofitacrossnationalborders,directedtogreenjobsand

technologies,ageingandchronicdisease,povertyandeducation.

GeoffMulganisdirectoroftheYoungFoundation

GEOFF MULGAN

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Theresponsetotheglobalcrisisremainsparadoxicallycentredonthedeveloped

countries.Asitseffectshavemovedtohurtfirsttheemergingeconomies,andnow

thebottombillioneconomies,theWorldBank,IMF,regionaldevelopmentbanks

andtheUKGovernmenthavesoughttoputthespotlightonthem,sofarwith

limitedsuccess.Theparadoxispartlyexplainedbytheasyetunreformed

governancestructureofglobalinstitutionsandforums.Thereislittlerecognition

thatanytransferofpurchasingpowertothedevelopingworldwillsurelybespent,notsaved,andwillgenerateglobaldemand.

Thedevelopingcountriesareindispensabletoovercomingtheglobalcrisis.To

increaseresourcesforthemandtointroducethebeginningsofanewgovernance

structureinthemultilateralinstitutionsweneedto:

DoublethevolumeofSDRs(SpecialDrawingRights),distributingthemequally

betweentheIMFandthemultilateralbanks

IntroduceanewvotingstructurethatreflectsthedistributionofglobaleconomicactivityforalldecisionsontheallocationofthesenewSDRs

Introducefast-tracksupportforsingleissuepolicychangesundertakenbycountriesinsupportoffiscal,monetaryorstructuralreformsthatwillbuild

greaterresiliencefortheireconomiesinthecurrentcrisis.

GobindNankaniispresidentoftheDelhi-basedGlobalDevelopmentNetwork

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IthinktheG20shouldusethisopportunitytooverhaulthesystemofglobal

governance.TheG7andG8havebeen,sincethelate1980s,theprimaryfocal

pointsforinternationaleconomicpolicymakingdecisions.Sincetheaccelerationof

theimportanceofChinaatthestartofthisdecade,toholdanymeetingswithout

thempresentisalmostpointless,whethertheyrelatetoglobalimbalances,foreign

exchangeissues,orindeed,globalresourceusageorclimatechange.

ChinahasrecentlyovertakenGermanytobethethirdlargesteconomyintheworld.

Moreover,since1999,France,GermanyandItalyhaveallsharedacurrencyandthe

samemonetarypolicy,sotheyshouldnolongerbemembersoftheG7separately.In

addition,itisunclearwhyCanadaandtheUKshouldbepresent.Weshouldhavea

newsysteminwhichtheG20meetsquarterlyorbi-annually,whileonglobally

importantcyclicalmattersofimbalancesandforeignexchangemarkets,anewG4,

consistingofChina,Japan,theEuroarea,andtheUnitedStates,wouldmeetquarterlyorthereabouts.

JimONeillisheadofglobaleconomicresearchatGoldmanSachs

JIM ONEILL

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Emissionsofgreenhousegaseshavecauseddangerousinterferencewithsocio-

economicandecologicalsystems.Whobenefitsthemostfromtheseemissions?

Thosewhohaveemittedandcontinuetodoso generallythewealthiest.Who

suffersmostfromclimatechangeimpacts?Thosewhohaveemittedlessandwhose

emissionsareforbasicnecessitiesgenerallythepoorest.

Actionhastobetaken,veryurgentlyandonalargescale.Willingnessandeffortstoreduceemissionsarehighlydependentupontherichinboththerichandpoor

countriesdecouplingcarbonemissionsfromgrowthandwellbeing.Technologyis

importantandfinancingcanhelp,butultimatelyitistherichestsectionof

consumerswhodrivethedemandforalltheemissionsandwhocantakeaction.

Therefore,takingtheleadisnotsimplyamatterofdemonstrationbytherichof

newtechnologiesthatcanhelpincreaseefficiencyanddeveloplow-carbonenergy

supply.Theymustalsoshowhowlow-carbon,high-qualitylifestylesarepossible.ItisimperativethatG20leaderstakethistotheheartoftheirpolicymakingandlead

thewaywithlow-carbonrecoveryinitiatives.

JiahuaPanisexecutivedirectoroftheResearchCentreforSustainable

Development,ChineseAcademyofSocialSciences

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WhatevertheG20triestoachieve,itneedstobepractical.Draftinga

comprehensivesetofrulesthatwillgovernglobalfinancialmarketsandthatwill

workfairlyandeffectivelyinalljurisdictionsisnotapracticalgoal.Butitshouldbe

possibletoagreetheprinciplestowhichallregulatoryregimesmustconform.These

wouldbethat:

Allactorsinthefinancialsystemareresponsible,theyunderstandthatresponsibilityandtakentogetherthoseresponsibilitiescreateastable,trustworthysystem.

Allactorsareaccountableandthosetowhomtheyareaccountablearelegitimate,qualifiedandtaketheirresponsibilityseriously.

Informationisprovided,byindependentagents,thatisrelevantandcomprehensive.

Financialinstitutionshavebeenstresstested,bothforsolvencyandliquidity.

Civilsociety,regulatoryinstitutionsandcentralbankingauthoritieshaverightsandpowersthatgivemeaningtotheabove.

Suchprincipleshavecorollaries:apreferencefortransparencyinalltransactions,

clearlinesofauthority,coordinationamongregulatorsandanendtoopaquetrading

inderivatives.Theyimplynewinstitutionsandalenderoflastresortforsmallercountries.AndtheyraisequestionsovertheincentivestoCreditRatingAgencies

andtheadoptionofdecisionusefulaccountingstandards.

DavidPitt-WatsonisfounderofHermesFundManagersLtd,forwhomhestill

works,andisco-authorofTheNewCapitalists

DAVID PITTWATSON

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JOHN PODESTA

TheLondonSummitisanhistoricopportunityfordevelopedanddeveloping

countriestobegintomakeafundamentalshiftinthewaytheyproduceanduse

energy.Thismustbeapriorityissue.Countriesaroundtheworldaremakingmore

thanUS$2trillioninnewinvestmentsinanefforttorecoverfromtheglobal

recession,andthisspendingmustmoveusalltowardsalow-carbonfuture.The

chancetoalignpublicexpendituresofthismagnitudewillsimplynotpresentitself

againfordecades.

ThetransformationoftheUnitedStatestoalow-carboneconomyisnecessaryto

meettheclimatechangechallenge,butitisnotsufficient.Atrulyglobalstrategyis

neededtoreducecarbonemissionsandtogreentheeconomiesoftherapidly

developingworld.

Aspartofthiseffort,theG20mustalsoensurethattheenergyneedsofthe

poorestcountriesareaddressed.Morethantwobillionpeoplelackregularaccesstomodernenergyservices,and1.6billiondonothaveelectricityathome.Lackof

accesstoclean,reliable,affordableenergyincreaseshealthrisksandearlymortality,

andimpedeseconomicdevelopment.

Theworldspoorestcountrieshavearighttodevelopmentinacarbon-constrained

world,and,astheprimarycontributorstoglobalwarmingpollution,thewealthiest

nationshavearesponsibilitytoassistinthisdevelopment.

JohnPodestaispresidentandchiefexecutiveofficeroftheCenterforAmerican

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IwouldliketoseetheG20establishaninternationalmarketforGrossDomestic

Productsofthecountriesoftheworld.

SomecountriesJapan,forinstancehavebeenhitmuchharderthanothersby

theworldfinancialcrisis.Onequarterslossaloneisnotserious,buttheextreme

uncertaintysurroundingtodaysworldeconomymaymeanthatsomecountrieswill

sufferseriouslonger-termlosseswhileothersprosper.Wedonotknowwhowillbewinnersandwholosers.Enlightenedriskmanagementwoulddictatethatatleast

someofthisuncertaintyshouldbesharedamongcountries.

TheG20shouldsetinmotionplanstopromoteGDP-linkedsecurities.Governments

mightnowstateanintentiontoissuelong-termsecuritiesinplaceoftraditional

debt,likethetrillsMarkKamstraandIproposed,sharesequaltoatrillionthofthat

countrysownGDP,andtoacceptsuchsecuritiesfromothercountriesaspartof

sovereignwealthfunds,governmentpensionfundtrusts,orcentralbankreserves.Doingsowouldmarkthebeginningofaneweraofsharingeconomicrisksaround

theworld.

TheincreasedintegrationoftheG20economiesattendantwithholdingsoftrills

wouldalsohelptoaligntheincentivesofpolicymakersandenhanceinternational

cooperationintimesofcrises.

RobertJShillerisArthurMOkunprofessorofeconomicsatYaleUniversity

ROBERT SHILLER

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GRAHAM TURNER

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Anewglobalfinancialframeworkmusttackletheenormoustradeimbalancesand

evenbiggercapitalflowsthataroseduringthebubbleyears,requiringbothsurplus

anddeficitcountriestotakeremedialaction.Thesourceofcapitalinflowsneeds,

therefore,tobemonitoredonabilateralbasis.

Internationaltargetsshouldlimitcurrentaccountdeficitsto3percentofGDP.

Capitalinflowsshouldbelimitedtothisbenchmarktoo,andshouldalsonotbeallowedtoexceedcurrentaccountdeficits.

Countriesmustalsocollectivelymonitorthegrowthinprivatedomesticborrowing.

TheIMFprovidesconsistentdataonborrowingacrossover180countries.This

comprehensivedatabaseshouldbeusedasabuildingblockforaninternational

agreementtolimitexcessiveborrowing,particularlywhendrivenbyexcessivecapital

inflows.Internationally-agreedtargetsneedtobesetonborrowing.Borrowing

targetsbasedonconsistentdatawouldthenleadtoabetterunderstandingofthepoliciesneededtocontrolcapitalflows.

Itisunconscionablethatmanyemergingmarketeconomiesexperiencedincreasesin

privatesectordebtthathaveapproachedandevenexceeded1000percentsince

themillennium.

Thepowerofunregulatedcapitaltooverwhelmacountrysdefences,sparking

extremeassetinflation,remainsascourge.Itneedstobetackledwithcleartargetsforcurrentaccounts,netcapitalflowsanddomesticcreditencompassingall

countrieswithintheIMF.

GrahamTurner,GFCEconomics,isauthorofTheCreditCrunch

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Thefinancialsystemneedsreformtotiltthetrade-offbetweenstabilityandinnovation

moretowardsstability.Hereareeightreformcomponents.

1.Repatriatebankingsothatbankscross-borderactivitiesaremoreconstrainedby

thereachoftheirlenderoflastresort.

2.Banks,notshadowbanks,shouldcreateliquidity.

3.Separatesavingandinvestingfunctions.

4.Savingsorganisationsshouldberunonatrustbasis,asnon-profits,manytolook

likecooperativesormutuals.

5.Investingorganisationscouldbebothpublicandprivate,withthepubliconeshaving

somedemocraticaccountabilityandexercisingdisciplineovertheprivateones.

6.Bothprivateandpublicbanksshouldoperatewithleverageceilingsmuchlowerthanthe30+:1debt-to-equityratioswhichthebigUSandUKbankswere

operatingwith.

7.Bothwouldbesubjecttotherequirementthatnewfinancialproductsbeapproved

byathird-partyregulator.

8.Centralbanksmustfindawaytodocounter-cyclicalmonetarypolicy,andlimit

bubbledynamicsinassetmarkets.

TheMillenniumEqualityGoalmightbetocuttheshareofthetop1percentinUS

personalincomefromitspresent23percentto16percentby2020,orhalfwaytothe

9percentitwasin1973.

RobertWadeisprofessorofpoliticaleconomyanddevelopmentattheLondonSchool

ofEconomics

ROBERT WADE

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Anethicaleconomicpolicyinvolvesfactoringintoourthoughtsaboutmoney-

makingtwofundamentalthings.Thefirstisthatwehavetorecognisethatweexist

inaworldofmateriallylimitedresourcewhichmeansthatenvironmental

exhaustionordegradationhastobetakenintoaccountinanyassessmentofthe

costofprojectsortransactions.Thesecondisthatweneedtomoveawayfromthe

superstitionthatsomekindsoftransactionarepracticallyrisk-free.Bothfinancial

andenvironmentalirresponsibilityreflectthesameunderlyingillusions.Bothgeneratepovertyanddisplaceriskontotheshouldersofthoseleastabletobearit.

SoinconsideringwhatpolicyinitiativestheG20governmentsmightbelookingat,

Idwanttoask:whatinternationalprotocolsareneededtoguaranteeaconvergent

senseofhowenvironmentalcostistobereckoned?Isuspectthatgettingthisright

wouldinitselfintroduceintothelanguageofeconomicsasensethatitcouldntbe

onlyaboutthemechanicsofgeneratingmoneyandmightkeepotherissuesinperspective.Wehavetounderstandthat,inaworldofscarceresources,

environmentalexhaustionimmediatelydrivesthepoorestfurtherintothespiralof

povertyandultimatelyimpoverishesusall;andnosophisticatedfinancialproducts

canfinallyoffsetcostonthisscale.TheG20shouldcommittodoingeverythingin

theirpowertopressforanagreementonclimatechangeattheUNconferencein

Copenhagenlaterthisyear.

RowanWilliamshasbeentheArchbishopofCanterburysince2003.Heisthesenior

bishopoftheChurchofEnglandandoftheworldwideAnglicanCommunion

ROWAN WILLIAMS

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MUHAMMAD YUNUS

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Creditmarketswereoriginallycreatedtoservehumanneedstoprovidebusiness

peoplewithcapitaltostartorexpandcompanies.Inreturn,bankersandother

lendersearnedareasonableprofit.Everyonebenefited.Inrecentyears,however,the

creditmarketshavebeendistortedbyarelativehandfulofindividualsand

companieswithadifferentgoal:toearnunrealisticallyhighratesofreturnthrough

cleverfeatsoffinancialengineering.

Urgentredesignoftheworldsfinancialsystemsandamajorshifttoamore

inclusivebankingsystemthroughmicrocreditandsocialbusinessisneeded.G20

leadersmustseizetheopportunityofthefinancecrisistocomeupwithan

alternativefinancialsystem,basedontrustandselflessness.

Themostimportantfeatureofthenewglobaleconomicarchitecturewillbetobring

thehalf-builttheoreticalframeworkofcapitalismtocompletionbyincludingatits

heartasecondtypeofbusinessthesocialbusinessinthemarketplace.Whilethefinancialworldcollapsesallaroundus,theGrameenschemes businesseswitha

socialpurpose arethrivingbyextendingcreditandopportunitytotheworlds

poorest,beggingthequestion:whoisreallycredit-worthy?

TheG20leadersmuststartintroducingsocialbusinessesinthebail-outpackagesfor

thebottomthreebillionpeople,bycreatingaglobalsocialbusinessfundtoprovide

loansandequityforbusinesseslikeGrameen.

MuhammadYunus,2006NobelPeacePrizewinner,ismanagingdirectorof

BangladeshsGrameenBank

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TheInstituteforPublicPolicyResearch(ippr)istheUKsleadingprogressive

thinktank,producingcutting-edgeresearchandinnovativepolicyideasforajust,democraticandsustainableworld.

Since1988,wehavebeenattheforefrontofprogressivedebateandpolicymakingintheUK.Throughourindependentresearchandanalysiswe

definenewagendasforchangeandprovidepracticalsolutionstochallengesacrossthefullrangeofpublicpolicyissues.

WithofficesinbothLondonandNewcastle,weensureouroutlookisasbroad-basedaspossible,whileourinternationalandmigrationteamsand

climatechangeprogrammeextendourpartnershipsandinfluencebeyondtheUK,givingusatrulyworld-classreputationforhighqualityresearch.

ExpectationsfortheG20Londonsummitarehigh.

Tohelptheleadersfocusonwhatreallymatters,ippraskeda

numberofleadingprogressivethinkerstoeachcomeupwith

onespecificpolicyrecommendationfortheG20.Theresults

arecontainedinthisbooklet.

Ourthinkersrangefarandwidewiththeirproposals.

Somefocusontheimmediateeconomiccrisis.Othersare

concernedwithrightingtheimbalancesthatareperceivedto

havecreatedthecrisis.Athirdgroupcomesupwithsuggestions

forwaysinwhichtheglobaleconomicsystemshouldbe

reformedandforfiscalstimulitobefocusedonlow-carbon

initiatives.Therearealsocallsforreformofthefinancialsystem.Lastly,theG20areurgednotforgetissuesthatwereonthe

agendabeforethecrisisdevelopedandthatremainimportant

today,includingpovertyandclimatechange.

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www.ippr.org

ippr,30-32SouthamptonStreet

LondonWC2E7RA,UK

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