Will the G20 agenda deliver pro-poor public policies?

1. Will the G20 agenda deliver pro-poor public policies? Bridge to South Korea Learning and Strategy Session 1 20 June 2010 Peter Chowla pchowla@brettonwoodsproject.org

2. Growth Framework • The G20's Framework for Strong, Sustainable, and Balanced Growth is a peer review process of national measures taken to drive growth and rebalance the global economy. • “it is a compact that commits us to work together to assess how our policies fit together, to evaluate whether they are collectively consistent with more sustainable and balanced growth, and to act as necessary to meet our common objectives.” • It has a ‘mutual assessment process’ that is driven/facilitated by the IMF and World Bank

3. Growth Framework cont. • Key components: • Fiscal stimulus with cooperative and coordinated exit strategies • Policies to avoid credit and asset bubbles and unsustainable global flows • Adjustments across different parts of the global economy – meaning more savings in some places and more spending in others • Agreed Schedule: • January 2010 - set out our national and regional policy frameworks, programmes and projections • April 2010 - conduct the initial phase of our cooperative mutual assessment process • June 2010 - develop a basket of policy options to deliver against objectives, for Leaders to consider • November 2010 - refine our mutual assessment and develop more specific policy recommendations for Leaders

4. Principles and platforms • G20 finance ministers in April 2010 defined “sustainable growth” as: • Determined primarily by competitive market forces • The IMF should present a limited number of alternative policy scenarios to G20 Deputies (i.e., no more than 3-4) • London summit proposal for a “Charter on Sustainable Economic Activity” has been essentially dropped in favour of the growth framework • Pittsburgh summit agree a set of “core values”

5. IMF oversight – adjustment • IMF during the crisis: fiscal stimulus • However vocal advice only applied in G20/rich countries • Borrowing countries still pushed into structural adjustment, fiscal tightening • Low-income countries massive scale up of IMF/WB lending -> potential for a new debt crisis • Now with European debt crisis, IMF is changing its tune • Immediate retrenchment for countries with large deficits • Projections that too early retrenchment will cost 30 million jobs and negative growth of 2.5 per cent of GDP

6. Transition to green economy • The G20 committed to “move toward greener, more sustainable growth” and “to stimulate investment in clean energy, renewables and energy efficiency and provide financial and technical support for such projects in developing countries”. • They committed to phase out inefficient fossil fuel subsidies and called on their ministers to propose strategies and timelines for this at the next summit. • Overall, however, they did not agree on specific targets or a timeline.

7. Global jobs pact • ILO Global Jobs Pact agreed in June 2009 • In Pittsburgh: “we commit our nations to adopt key elements of its general framework to advance the social dimension of globalization. The international institutions should consider ILO standards and the goals of the Jobs Pact in their crisis and post-crisis analysis and policy-making activities.” • G20 Labour ministers met for first time this year • But ILO does not have a central role in drafting employment related policies under the growth framework, and IMF assessment procedures do not look to be fully incorporating the jobs pact

8. World Bank Governance • In London they agreed that “emerging and developing economies, including the poorest, must have greater voice and representation” in the IFIs. • At the Pittsburgh summit they agreed to move toward "more equitable" voting power at the World Bank, determined through a dynamic formula and committed to a 3% transfer of votes from richer countries to developing countries, to be implemented by April 2010. • This was implemented in April at WB/IMF spring meetings – but using misleading labels for “developing country”. Rich countries still have 60% of voting at World Bank Group.

9. IMF Governance • In London they called “on the IMF to complete the next review of quotas by January 2011” • They repeated that “heads and senior leadership of the IFIs should be appointed through an open, transparent, and merit-based selection process.” • At the Pittsburgh summit, “they committed to a shift in quota share to dynamic emerging market and developing countries of at least 5% from over-represented to under-represented countries using the current IMF quota formula as the basis to work from”. • Already broken commitments: • 2008 IMF reform promised to revise quota formula, now not doing it • New IMF deputy managing director selected without open process in early 2010

10. Trade, Doha and WTO • Every summit has promised to complete the Doha round of trade negotiations • There have not even been promises of returning the talks to their original “development mandate” • Protectionist measures, many by rich countries, have had overall minimal impact on global trade (-0.25% overall)

11. Additional issues • Human rights, social and environmental standards • Gender, women’s rights • Regional alternatives • Capital liberalisation • International monetary system • Aid and aid effectiveness, debt relief • Climate finance • Food security, hunger, agriculture • Just transition to low-carbon economies

12. Overall assessment • Growth framework has vague promises, good rhetoric of core values, but little transparent policy actions agreed yet • Worry that IMF and market influence will push the growth framework in the wrong direction • Austerity packages in Europe reflect what the IMF has already pushed onto developing countries – a new round of debt crises and structural adjustment • Social policies and job creation are not yet at the centre of the G20 thinking

13. Important long-term trends • How will global imbalances be resolved – will it be done to improve equitable distribution of wealth? • Will there be a sufficient transition to low-carbon economies, and will it be done justly? • Continued weakening of public services and public goods, privatisation, adjustment trends in response to sovereign debt crises • Will there be momentum for changes to the underlying monetary system

14. Short term Structural adjustment and austerity – market induced Structural adjustment and austerity – IMF induced G20/IFI governance Longer term Just transition policies – for low-carbon development International capital control framework International monetary system Possible civil society priorities

15. Additional resources • UK paper on progress on G20 http://www.brettonwoodsproject.org/g20progressreview • Eurodad paper on progress on G20 http://www.eurodad.org/whatsnew/articles.aspx?id=3820 • New Rules for Global Finance paper on G20 framework for growth http://www.new-rules.org/docs/fsb_g20/g20_matrix.pdf • ITUC paper on global jobs – path to recovery http://www.ituc-csi.org/report-on-financial-crisis.html

16. Bretton Woods Projecthttp://www.brettonwoodsproject.org Peter Chowla pchowla@brettonwoodsproject.org