The Broken “New Normal” and the G20 Mirage

By: Dorothy-Grace Guerrero*

That is a mirage, cheap mirage, revolting, romantic and fantastical — that’s another ball on Lake Como. 

Fyodor Dostoyevsky
Notes from the Underground

The Group of Twenty (G20), informally recognized as “the other UN”, is an unofficial, unaccountable, yet very powerful platform for international cooperation on the most important issues of the global economic and financial agenda. It was originally set up to deal with the global implications of the Asian financial crisis in 1998 with goals ‘to provide a new mechanism for informal dialogue in the framework of the Bretton Woods institutional system, to broaden the discussions on key economic and financial policy issues among systemically significant economies and promote cooperation to achieve stable and sustainable world economic growth that benefits all’[i].

Although the idea to broaden the international architecture beyond the G-7 or G-10 developed during the early 1990s in the U.S. Treasury, Paul Martin, Canada’s finance minister, championed the idea that emerging economies must be part of the solution to the Asian crisis within the G-7. Germany supported the idea of a new forum, and shepherded it through the G-7 summit process[ii]. The G20 brings together leaders, finance ministers and central bank governors from 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, the Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States of America plus the European Union, which is represented by the President of the European Council and by Head of the European Central Bank.

The geo-political reconfiguration of the international system due to the relative weakening of the US, the still unresolved crisis in the Eurozone and the rise of new powers such as the BRICS countries (China, Russia, Brazil, India and South Africa), brought about a changed global power rivalry. US president George W. Bush elevated the grouping into a Summit of Leaders in 2008 to enable it to deal with the financial crisis that started from the US and the EU economies, which they could not fix themselves. Since then this self-selected clique of big and emerging powers designated themselves as the new steering group for the global economy.

Non-G20 governments, intellectuals, and activists (antiglobalists, alterglobalists, etc.) have questioned its legitimacy and reason for existence. G20 Summits also became a focus for protests. Although it does not have the power to create policies and arrive at legally binding agreements, it undermines the UN process and insufficiently represents poor countries. Its track record of failures (for example, in resolving the Asian crisis in 1998 and the 2008 crisis originating in the US and EU) and unwillingness to veer away from neoliberalism has condemned the global economy into a vicious cycle of recurring economic crises. The Financial Times refer to the cycle as “an endless cycle of bubble, financial crisis and currency collapse”[iii].

It is not comforting to the poor in developing countries that new actors are joining the big league. The rise of new powers like the BRICS countries and their actions, so far, have yet to prove that they are offering a new and better leadership in global governance. If we look in the recent World Bank and UNCTAD experiences of selecting leaders and making decisions on how the financial crisis should be managed, we could see that rich countries will not easily give up their control of the global institutions.

It is still a big question if the BRICS countries are offering a positive alternative of economic and social progress to other developing countries. However, what is becoming increasing clear is that these new powers are merely continuing the same or more intense practices of exploitation and extraction of resources from poorer countries to further enrich themselves. The G20, instead of providing an alternative is merely resuscitating a flagging and failing capitalist system. It is giving new energy to the same unsustainable and unjust paradigm that facilitates the accumulation of wealth by a few while resulting in dispossession and pauperization of the already marginalized and disempowered.  

Russia’s Leadership of G20 Summit in 2013

The global economic crisis is far from being resolved and at the same time climate change is happening faster than predicted, which would need vast amount of resources and political will from governments and big business to address. The intensity of economic, social and ecological crisis demands ambitious and bold ideas.

Over the years, there have been an increasing number of issues that were added to the original G20 focus on finance. Among these is “development” during the South Korean presidency and “green growth and fight against climate change” by the Mexican presidency. Apart from the Leaders’ Summit, there is now a Business Summit and a Labour Summit for the dialogue with trade unions. Mexico also added Think20 (academia, think tanks and specialised research centres), as well as G20 YES (Young Entrepreneurs Summit), Civil Society dialogue and a T20 (on tourism).

Russia took over the G20 presidency for the first time in December 2012. Since 1999 when it was first set up, the global financial system became increasingly lacking in transparency and accountability. The official G20 2013 website states that the core objective of the Russian Presidency is to concentrate the efforts of G20 forum on developing a set of measures aimed at boosting sustainable, inclusive and balanced growth and jobs creation around the world. The three overarching priorities, aimed at starting the new cycle of economic growth are: growth through quality jobs and investment; growth through trust and transparency; and growth through effective regulation and these will be further discussed in eight areas.

It is not surprising that the G20 drivers still insist on growth as the fundamental lens by which the G20 sees the path towards solving the world’s problem. We could not expect neoliberals to easily step out of their neoliberal roads despite the hype of new new actors in the table and steering the world economy. We can expect more of the same ecologically destructive, anti-people, consumer-centred, climate change inducing mal-development model that these governments, as adjunct of neoliberal international financial institutions, promoted. Despite the critique against previous Summits, growth is still deemed as the magic bullet that will magically end poverty in the Summit documents.

The Russian presidency of the G20 presents the forthcoming Summit as a reorientation and a start of a new development agenda. Two policy shifts[iv] are being mentioned: Firstly, the narrowing of agenda from a long catalogue of development-related work streams adopted at the 2010 Seoul summit into a seemingly more manageable shortlist of priorities. Secondly, “Financing for investment” has been identified as promising lever for growth and employment in the developing world. This is supposed to be a common intent of rich and emerging economies. Upon closer look, however, focus on infrastructure seems to have more weight than the systemic reforms needed for inclusive sustainable development. At the same time, the understanding of development cooperation is still imprisoned to the notion of foreign aid.

The Lingering Priority on Growth

The Rio+20 process introduced the Green Economy as an alternative development concept to the growth model of development. In essence it is not hard to imagine that green growth is actually Green Washington Consensus and the Green Economy an almost cunning manipulation of the economic and ecological crisis. Both insist on growth despite experience and historical proof that it is incompatible with the demand for a sustainable planet and social relations based in justice.

Social movements and climate justice groups argued against the green growth and the green economy concepts in various events and workshops at the Rio+20 Summit and the Cupola dos Povos/People’s Summit on Rio+20 in Brazil last year. They pointed out that the green economy aims to increase and intensify the commodification and financialization of nature through market mechanisms such as carbon markets and various forms of clean development mechanisms and REDD (Reduced Emissions from Deforestation and Degradation), some of which was first introduced a decade ago through the Kyoto Protocol and have proven to be ineffective in actually doing what is needed – to reduce greenhouse emissions that causes climate change. 

There are proposals that if treated seriously can bring about positive changes. In July, European Commission President José Manuel Barroso and European Council President Herman Van Rompuy urged the G20 leaders to prioritize the phasing out of fossil fuel subsidies and strengthen efforts to reinvigorate the economy through investment in clean technologies[v]. This however would have to win against increasing subsidies to fossil fuels. According to the IEA, global fossil fuel subsidies continue to increase and reached $523 B in 2011, up from $412 billion in 2010[vi]. Huge subsidies and tax breaks are undermining efforts to replace fossil fuels with cleaner forms of energy.

Russia placed energy sustainability among the top priorities of the Leader’s Summit. It would be interesting to see the progress of this discussion and if plans to phase out fossil fuel subsidies in the near future will be realized. The G20 Energy Sustainability Working Group will present its recommendations on this process by the end of 2013.

The Counter-Summit

The Counter-Summit organized by Russian social movements and various organisations and networks will discuss why people inside and outside Russia are organizing and finding ways to stop the exploitative and poverty inducing trade and investment regime that neoliberal institutions and actors are pushing. Apart from the WTO, more aggressive, comprehensive and ambitious free trade agreements (FTAs) and bilateral investment treaties (BITs) are being fast-tracked despite the massive expression of opposition by the population of the concerned countries. The economic reforms that are being introduced in poor countries and recently opened economies like Cambodia, Laos and Myanmar in Southeast Asia are giving more powers to the already too powerful TNCs.

Movements and communities that are seeking and pushing for alternatives are developing fresh ideas and strategies to ensure that the trade and investment regime that the G20 maintains and promotes will fail. The powers of the WTO, international financial institutions like the World Bank, International Monetary Bank, regional development banks and finance corporations, as well as transnational corporations and other agents of exploitative capital must be confronted and their schemes must be continually exposed. Collective demands for social transformation and people’s empowerment must be creatively shaped through organizing, political and development education and solidarity strengthened by campaigns in order to build an alternative world.

Counter-summits like the one organized in St. Petersburg on the occasion of Russia’s hosting of the G20 Summit, are part of the continuing globalization of resistance and efforts to reclaim power from structures and institutions of neoliberal capitalism that have perfected the art of sustaining the status quo and global governance. The elite not only control the policy process, more importantly they present themselves as knowledge-bearers and experts on what are the needs of the time, be it in solving the economic crisis, poverty, climate change or upholding social and economic rights.

The G20 counter-summit exposes the mirage created by the elite that the neoliberal system, now wrapped in a new shiny covering of green economy, offers a green path away from the deepening poverty, inequality, climate-changed induced catastrophes, and other social ills created by the very same system. The old powers, now happily joined by new and aspiring actors, are still playing their old game of opportunistic manipulation of crises and the concept of development. This time, they are bringing capitalism to a new level by bringing nature under the control of markets by putting a price to the services of nature.

 Can Russia offer a new brand of leadership as a re-emerging power in the new global stage? It will be the 100th anniversary of the Russian Revolution in 2017. The distant history of 1917 is by now largely forgotten or misunderstood, it could be broadly irrelevant even to the younger generations. It is important to establish the almost forgotten connection between that historic emancipation and the current need to see what could be done against the global hegemony of neoliberalism. It is important that once again, the revolutionary spirit in Russia be rekindled and its progressives join the growing global movements for an alternative world that are constructively promoting emancipatory struggles for social, economic, gender and environmental justice.