G20 makes molehills out of mountains

01 October 2009
Article

Not knowing how to deal with it, the G20 leaders avoided discussing the crisis, which will come back to haunt us when a new wave of the crisis inevitably hits.

As expected, there was no big news from last week’s Group of 20 summit in Pittsburgh. In contrast to the previous summit, the meeting was marked by excessively formal declarations and a lack of desire to discuss — much less find answers to — the underlying causes of the global economic crisis.

There were plenty of generalizations and reassuring speeches about positive economic trends, but the most significant results of the summit are limited to two issues: First, the G20 will replace the G8 and, second, the decision was made to reallocate participation quotas among participants in international financial institutions. From now on, the West will have slightly fewer votes and all other countries will have slightly more.

Some time ago, these kinds of decisions might have made sense, but today they are largely meaningless. The decision to redistribute votes would have been more appropriate in the 1960s and 1970s, when states that had formerly been Western colonies raised the call for a new world order and for a radical overhaul of the whole system of global trade and the division of labor.

Today, however, there is little ideological or political difference among the G20 countries. They are united in their support of a neo-liberal approach to the economy and convinced of the need to preserve the existing order. Over the past 20 years, a new elite has emerged among the developing and former Communist states that fully shares the thinking and the interests of their Western partners. They are completely satisfied with the existing system, and they fear change to the status quo. What’s more, they are even less susceptible to public pressure than Western leaders and are far less concerned about the opinions of their own people. The result is that the G20 is even more conservative than the G8.

The entire discussion boils down to finding ways to prevent global economic and social changes. Of course, something must be done because the old order is coming apart before our eyes. But even understanding that, the G20 leaders were incapable of making a concrete proposal. Governments have gone to enormous expense to mitigate the effects of the crisis, but the moment they stop spending trillions of dollars in budgetary funds, the same old problems will resurface.

Moreover, the practice of increased government spending not only fails to resolve the fundamental problems that caused the crisis, it also threatens to make a bad situation worse. It is obvious that when a government prints and spends money in huge quantities, the value of that currencies drops. The financial instability that everyone is united in lamenting was primarily caused by the need for states to use budgetary funds to prop up private businesses that — accustomed to a parasitical existence — are becoming increasingly less effective, thereby further aggravating the crisis.

Since no G20 leader knows how to solve the problem, they avoided it, preferring to discuss the distribution of votes in the International Monetary Fund and the World Bank instead. In short, they are making molehills out of mountains.

Unfortunately, today’s inaction will come back to haunt us when a new wave of the crisis inevitably hits. The lofty, optimistic speeches of G20 leaders might put the trusting public somewhat at ease, but, unfortunately, they will have no effect on the real state of affairs.