Leaders of the Group of twenty (G-20) countries met in Washington DC on November 15 and deliberated upon the current financial meltdown. The text of the declaration issued at the end of the meeting is worth studying to understand the approach of these leaders and the remedy suggested by them. The declaration with carefully selected more than three thousand and six hundred words is devoted mostly to the recovery of the market to overcome the ‘difficult financial conditions’ and the actions in short term, medium term and long term that should be taken in this regard. Five common principles for reform of the financial market have been identified as: Strengthening Transparency and Accountability, Enhancing Sound Regulation, Promoting Integrity in Financial Markets, Reinforcing International Cooperation, and Reforming International Financial Institutions.
Although no analysis as to the causes of the crisis has been done, an analysis of remedies suggested reveals that liquidity crunch has been considered to be the main problem. The solution as per the declaration basically lies in the effective role of the International Monetary Fund (IMF), World Bank and other multilateral development banks (MDBs). Thus strengthening the hands of these institutions is called for. For this the world leaders should “ensure that the IMF, World Bank and other MDBs have sufficient resources to continue playing their role in overcoming the crisis.”
It has been categorically stressed that the recovery from the present crisis “will only be successful if grounded in a commitment to free market principles, including the rule of law, respect for private property, open trade and investment, competitive markets, and efficient, effectively regulated financial systems.” In order to make these reforms successful it is essential to avoid over-regulation and protectionism. Hence the countries of the world should effectively pave the way of globalisation and desist from “turning inward in times of financial uncertainty” and “refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organisation (WTO) inconsistent measures to stimulate exports.” In order to achieve these objectives the G-20 leaders “shall strive to reach agreement this year on modalities that leads to a successful conclusion to the WTO’s Doha Development Agenda with an ambitious and balanced outcome.”
The declaration highlights immediate actions to be taken by March, 2009 which include the leading role of the IMF in drawing lessons from the current crisis, and ensuring the adequacy of the resources of the IMF, the World Bank Group and other multilateral development banks.
An overview of the declaration shows that the concerns expressed by international economists, analysts, civil society activists have not merited any deliberation by these leaders of the world. It appears that these G-20 leaders and civil society activists are living in two different worlds. Thus we find that the declaration of the heads of G-2 countries have no mention of any need of structural change in the economic system. The economists and other analysts are talking about the ills of de-regularisation, financial liberalisation, free market capitalism, and globalisation, etc. But the G-20 declaration talks in favour of all these measures.
It was reported that the Dr. Manmohan Singh, an economist on his own right, quoted the famous lines of John Meynard Keynes, who wrote about the havoc created by speculators in economy. “Speculators are harmless as bubbles on a steady stream of enterprise. But the position is serious if enterprise becomes a bubble on the whirlpool of speculation. When the capital development of a country becomes the by-product of the activities of a casino, the job is likely to be ill-done.” The result is that the livelihoods of millions of people became dependent on the whims and caprices of a bunch of financial speculators.
The text of the declaration proves that such sane remarks have been treated as bubble on the stream of the partisan interest of the developed countries. One may pity poor Dr. Manmohan Singh, poor Indians, and poor humanity at large. The high and the mighty have the last laugh and the final say. And they have swayed the house.