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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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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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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