The G20 summit in Pittsburgh was essentially a bust. The big decision is that the G20 will replace the G8 as a mechanism for coordinating the response of the major economies of the world to development global challenges – the economy, climate change, global health issues and terrorism. This is something that Canada’s former Prime Minister, Paul Martin, was promoting some time ago. Now, five years later, the G20 agrees.
Other than that, the agreements reached were modest:
1. Most but not all banks, but not other financial institutions, will be required to increase their capital. Specifics are left to a Working Committee. Monitoring and enforcement is left to the national governments.
2. Bank salaries and bonuses are to be restricted and made to conform to performance over a three year period. Specifics are left to a Working Committee. Monitoring and enforcement is left to the national governments. These prospective rules will not come into force until 2013 – after the next US Presidential election and the British general election. Britain is likely to lead the way with reforms to be announced this week in the run-up to the British general election.
3. Leaders agreed to work to reduce the economic imbalance between those countries that have large balance of trade surpluses and rely heavily on export trade (e.g. China, Germany) and those who have large, chronic deficits and consume too much, i.e. the United States and Great Britain. Specifics are left to a set of Working Committees and the goodwill of the governments involved.
4. Some adjustments will be made in the voting quotas of the IMF to give greater weight to Brazil, Russia, India and China (the BRIC nations). The U.S. retains its veto and the power shifts only modestly.
Not much to boast about here, though more than most finance ministers thought possible when they met two weeks before the summit itself. These decisions come after three meetings of the G20 (and close to $500 m spent on organizing them).
Noticeably absent were any substantive agreements on the link between economic recovery and the economic response to climate change. Each of the Presidents and Prime Ministers present had lauded “green jobs” as the cornerstone of sustainable recovery as well as the focused response to climate change. Yet the communiqués from the G20 said nothing, despite the fact that the world leaders are working to negotiate a treaty to replace the Kyoto Accord, which expires in 2012.
The fact that climate change and the economy were not a substantive focus for this meeting is significant. It indicates what many have been saying for some time, namely that progress towards a global climate change treaty is stalled and that the US Government is backing off – lowering expectations for the Copenhagen meeting of over one hundred governments in December. In the US, given the furor over health care reform, climate change legislation is now very much on the back burner.
If this is the level of G20 decision making, then we have little to fear from the emergence of the G20 as a new mechanism of global governance. Just as the United Nations demonstrates its impotence on a daily basis, the G20 now does so quarterly. All of the issues they “decided” in Pittsburgh were also decided in principle at each of the past three meetings. This is the one “green” thing they are doing – recycling old press releases, reusing old rhetoric and reducing their significance. I bet you can’t wait for the next meeting in Huntsville, Canada in 2010.