The media hype over the build-up to the London summit of the Group of 20 representing the world’s biggest economies, and over the meeting’s atmospherics, was dismayingly followed by a stunning silence on the content of its decisions and their implications. This makes one wonder if much of the Indian media thought the summit important because of its side events-including the first-ever meting between United States President Barrack Obama and Prime Minister Manmohan Singh-rather than its substance. Or was the media taken in by the highly parochial India-specific spin put on the summit by the Foreign Ministry, which claims India stands to reap handsome gains from the G-20’s pledges? The summit must be seen in perspective. Its purpose was to grapple with the difficult task of finding solutions to the worst crisis of global capitalism since 1929 and agree to radical changes in the way the world economy operates and is regulated while pump-priming it to revive sagging growth. An important goal was to shield poor and vulnerable people from the impact of the slowdown. Judged by this yardstick, the summit was a sore disappointment. Its only gain, a $1.1 trillion infusion into the world economy, was paltry. The $1.1 trillion figure has dazzled many. In reality, it involves double-counting and some “synthetic” or notional sums. Even if the amount were real and fully materialises, it would be less than 2 percent of gross world product, and just one-fifth the US federal budget deficit, or the size of stimulus packages in different countries. It’s being routed primarily through the International Monetary Fund, which is singularly ill-suited to deliver the intended results. It’s less a solution than a backstop measure to prevent further damage, which may well fail. To start with, the G-20 is a welcome initiative insofar as it acknowledges that the world’s richest countries, comprising the G-7 group of Western nations, can no longer solve the global economy’s structural problems. They need the help of larger developing economies such as India, China, Brazil, South Africa, Mexico, Turkey and Indonesia, which currently contribute about two-fifths of total global economic growth. Admittedly, the summit also asked the right questions and set itself some worthy objectives: how to stimulate growth and employment with big-ticket public investment while raising the incomes of those most hurt by the crisis; how to regulate the global economy through a new financial architecture and an international regulatory framework which will discourage excessive speculation via hedge funds and other volatile financial products which have produced today’s Casino Capitalism; how to combine the economic stimulus with the imperative of preventing climate change and promote a “green economy”; and finally, how to trigger a resources transfer from the developed North to the developing South. It’s not in doubt that the poorer countries have been disproportionately affected by the global slowdown. Even the World Bank agrees that the financial shortfall they face this year could be as large as $700 billion. As many of 94 of 116 developing countries have seen a slowdown in growth, including 43 very poor nations. The global slowdown will destroy 51 million jobs and drive 46 million more people below the poverty line, mainly in the South. The summit agreed to make a North-South resource transfer, not directly nor via much-needed debt cancellation, but by trebling the IMF’s funds to $750 billion over two years. (Only a part of this will be lent.) Some of this is to be used to rescue Southern economies in distress and make new resources available for “social protection for the poorest countries”. Now, the IMF is the last agency to be assigned this task. It has functioned not like a benign source of liquidity, which it was conceived to be, but as a shadow super-government dictating terms to the South’s finance ministries and twisting their arms to open up their economies to global capital while internally practising financial austerity, cutting back public services and lowering wages. As US economists Robin Broad and John Cavanagh put it: “No global economic institution has caused more pain over the past 30 years than the IMF. The IMF has long operated like a medieval doctor who has only one remedy to any ailment: stick a leech on the patient and bleed him. Indeed, there is widespread agreement that the IMF’s fiscal austerity measures deepened the Third World debt crisis that erupted in 1982, the Asian crisis of 1997 and the Argentine crisis of 2001-2002.” In the past few months too, the IMF has imposed onerous conditions like wage cuts and higher taxes upon El Salvador, Hungary and Latvia. Although British Prime Minister Gordon Brown has announced the death of the discredited neoliberal Washington Consensus-the policies of deregulation, privatisation and globalisation-the IMF remains wedded to neoliberalism and has never shown that it has learnt lessons from the past. Thanks to the influence of US Treasury Secretary Timothy Geithner, himself a former IMF official, the G-20 decided to rely on the Fund to bring about progressive change, which it’s ill-equipped to catalyse. Yet, countries like India, China and Brazil agreed to enlarge the IMF’s role because they were lured by the promise that their quotas in its Special Drawing Rights (reflected in their voting power) will be increased. Currently, SDRs are indeed distributed in an appallingly skewed and unjust manner and don’t reflect 21st century economic realities. For instance, China’s quota (3.7 per cent of the total) is the same as that of Belgium and the Netherlands. And India’s quota is less than 2 percent of the total. But the US has a 17 percent quota and the European Union a whopping 32 percent. The developing countries’ quotas won’t be raised until 2010. Even then, the new SDRs are unlikely to reflect their real economic strength. The bitter truth is that the IMF, like the World Bank, is a transatlantic duopoly. The Bank president has always been an American-typically, a Wall Street banker blissfully ignorant of Third World realities but full of free-market dogma. And the IMF’s managing director has always been from Western Europe. These institutions, and kindred bodies like the Financial Stability Forum and Basel Committee on Banking Supervision, have proved extremely resistant to reform and will have to be tamed through democratic control, for instance, under the United Nations Economic and Social Council, and severely reorganised, before they can play a worthy and just role. The G-20 has ended up strengthening them without reforming or democratising them. The summit’s decisions on other crucial issues were equally disappointing. It provided incremental liquidity, but failed to launch what has become imperative, a global New Deal, along the lines of US President Franklin Delano Roosevelt’s New Deal of the 1930s. Such a new New Deal would correct global structural imbalances, and create jobs through giant public works and services programmes. But the G-20 set their face against linking their recovery plans with initiatives to provide healthcare, education and social safety nets. This not only goes against decades-old Social Democratic policies in the EU, but also runs against the grain of Mr Obama’s emphasis on targeting assistance at underprivileged Americans. The G-20’s financial sector plans aren’t even a patch on the thoughtful recommendations of the UN-sponsored committee of experts under Nobel Laureate Joseph Stiglitz, which includes former Reserve Bank of India governor Y Venugopal Reddy. This called for a “Global Coordination Committee” to bring about extensive equitable financial reform including majority voting in the IMF. India has missed a precious opportunity to contribute to reforming the global economic order, redress North-South inequalities, shut down the global capital casino and inaugurate a new New Deal. This is not the stuff of which leadership is made. © Pakistan Observer 1998-2009

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Praful Bidwai, a fellow of the Transnational Institute, is a senior Indian journalist, political activist and widely published commentator. He is a co-author (with Achin Vanaik) of New Nukes: India, Pakistan and Global Nuclear Disarmament.