As we all know, this economic summit is taking place at a time of unprecedented economic turmoil, and it’s critical that actionable solutions are agreed and pushed forward by the countries taking part.
Although I agree with the fact that people should be able to protest, and indeed should protest when they believe in something, I do hope that these protests are peaceful and there is no action taken that will hinder the G20 from fulfilling its ambition to stem this downturn and return the global economy to growth.
Given the fact that market forces are powerful and unstoppable, however, I do have grave doubts that any Government or group of politicians actually has the power to stop this runaway train from continuing along the path it has set, and crashing headlong into the barriers.
However, what this group of politicians do need to do is understand what is within their power, and to ensure that they 1. don’t allow such extreme risk-taking and short-termism to permeate the culture and everyday workings of the banking system moving forward, and 2. ensure that a more liberal form of pure-market capitalism is developed to ensure greater equality of wealth between developed and emerging markets.
The first point – to eradicate the culture of extreme risk taking – is simple enough if stringent regulations are put in place at both a national and international level to ensure that investment bankers, hedge funds, currency speculators et al are not able to destabilse the system or certain institutions by shorting them, making runs on them, or betting against them within relatively miniscule time-frames.
The second point – to create a more liberal form of capitalism – is a harder task but one that must be aggressively pursued. Although I don’t agree with Sarkozy’s stance of walking out of the G20 summit if he doesn’t achieve his aim of a global financial regulator, he does have a point. That is to say that some form of supra-national system needs to be imposed by every national Government to create a co-ordinated approach to delivering tangible, sustainable systems through which to assist and support developing economies.
One notion that I have believed in for a very long time is to create a sliding-scale tax on all corporate profits in every developed country, where the monies are distributed to developing markets to aid state infrastructure and local industry. This would redress the imbalance of the structures set in place by the IMF and World Bank over the last 20-30 years. Of course this doesn’t address the issue of corrupt governance in developing markets, but that is another topic for another time.
This idea may be overly simplistic, but now that the banks are being part-nationalised, and may need to become wholly state owned for a period to save the financial system, this is an unprecedented opportunity for liberal leaders such as Obama, Brown & Sarkozy to impose developmentalist ideologies to any future credit arrangements between banks and the corporate sector. These developmentalist ideologies should also include clauses relating to the environment regarding targets for carbon emissions and climate change.
Again, my knowledge of the intricacies of global finance and high level politics is sketchy at best, but it seems to me that we have reached a watershed in the evolution of the global economy, where un-fettered profits in the developed world to the detriment of huge swathes of the global population will no longer be tolerated.
The time for action is upon us, and the G20 summit is the best chance we have had in decades for achieving real change.