Harvard Professor Dani Rodrik uses the graph (below) to illustrate the “great divergence” between Western economies which struggle with crushing debt burdens and political paralyses, on the one hand, and the economic dynamism of developing nations. Emerging market countries want their economic dynamism to translate into political muscle, including at the IMF. In May, when Dominique Strauss-Kahn resigned his post as Managing Director of the IMF after being arrested in New York City for sex-related charges, developing countries had an opportunity to overturn the convention of reserving that job for Europeans. On 24 May 2011, the Executive Directors of the IMF for the five BRICS (Brazil, Russia, India, China, and South Africa) declared that “The convention that the selection of the Managing Director is made, in practice, on the basis of nationality undermines the legitimacy of the Fund.” They called for “abandoning the obsolete unwritten convention that requires that the head of the IMF be necessarily from Europe.” In his article, “L’affaire Lagarde,”Daniel Bradlow, Professor at both the University of Pretoria (South Africa) and American University (U.S.), describes how the selection of French Finance Minister Christine Lagarde as Managing Director undercuts the hard work of officials from emerging market countries and civil society activists to promote governance reform in the IFIs. In light of the Lagarde appointment, Bradlow reassesses the prospects, and tactics for achieving IMF reform in a two-step process: first, by identifying the five ideal elements of global economic governance and, then, since the reality falls short of the ideal, showing where tactical victories (e.g., enhancing financial inclusion; establishing an independent IMF accountability mechanism) can open up the space for later and larger victories. Barbara Unmüßig and Rainer Falk mirror Bradlow’s arguments in a recent article, criticizing the selection procedure while outlining a to-do list that Lagarde now has to tackle. In the English language summary of their article, “G20: Confusion about the current crisis,” Andrés Peñaloza Méndez and Manuel Pérez-Rocha of Bia ́lii and IPS / the Mexican Action Network on Free Trade (Red Mexicana de Accion Frente al Libre Comercio (RMALC)), respectively, lament larger failures of the G20 to achieve reform. The authors emphasize that, because the financial system has no way of forgiving or cancelling sovereign debt, debt-laden countries must cut the basic services and pensions of their citizens in order to continue paying their creditors. Moreover, the centers of capitalism have never taken seriously any real alternative which limits or meaningfully regulates financial speculation. They contend that crises should become opportunities for national governments to put real alternatives into practice, many of which have been put forward by civil society organizations for decades. Steps toward alternatives would include the adoption of financial transaction taxes (FTT); redirection of subsidies given to fossil fuel industries to social programs and elimination of tax exemptions for large industries; and the curbing of illicit capital flight from developing countries to rich countries and vice versa, through regulation and greater transparency.In “The Potential of the G20: A view from Oxfam, ”Steve Price-Thomas, G20/BRICSAM (Brazil, Russia, India, Indonesia, China, South Africa and Mexico) Strategy Manager, describes the view of Oxfam International (OI) that the G20 is unlikely to be a committed champion on key development issues. But, even though the G20’s Development Action Plan is almost exclusively focused on growth, OI sees scope for movement on some key development issues, for example: innovative financing and food price volatility. OI is also responding to the reality that the majority of poor people are no longer in low-income countries, but rather middle-income countries (MICs) where inequality has become the ‘ugly underbelly of global prosperity.’ Therefore, Oxfam's programming in middle-income G20 countries will increasingly address the root causes of political, economic and social marginalization of particular groups. Its program agenda which will place as much - if not more - emphasis on empowerment and political voice as it does on the transfer of resources
In his article, “Infrastructure for What Type of Growth?”Jochen Luckscheiter recounts his observations of the G20’s June 29 Conference in Cape Town, South Africa where he is the programme manager of the International Politics & Dialogue Programme in the Southern Africa office of the Heinrich Boell Foundation. The public conference, entitled “Infrastructure for Inclusive Growth” was held under the auspices of the South African government, the Development Bank of Southern Africa and the French Development Agency. It provided an opportunity for the G20’s Development Working Group (DWG) to consult with the public before meeting in closed session on June 30 and July 1. However, the article describes that this consultation process is limited because the agenda is controlled by the G20 itself and only a few hand-picked international CSOs were able to attend. Moreover, the actual documents that were produced by the closed meeting of the DWG were not shared with the attendees of the public conference. As a result, the fact that they are now available (see links on the front page) is - unfortunately - “breaking news” for most of the civil society community. Luckscheiter critiques not only the DWG’s approach to infrastructure, but also the DWG membership and process. There is only one low-income country (LIC), Ethiopia, on the 35-member Development Working Group (DWG), despite the fact that the focus of the Development Action Plan is on the LICs. The conference focused on large-scale infrastructure with only weak attention to the question of what kind of infrastructure is needed to put the continent on a growth path that will reduce inequality and poverty (e.g., feeder road networks to help smallholder farmers get their crops to markets). While there was a session on “The Greening of Infrastructure,” it did not take sufficiently into account the medium- to long-term consequences of failing to employ green technologies. In preparation for the next Development Working Group meeting in mid-September, the French presidency is proposing consolidation of the nine pillars of the Development Action Plan into three work streams related to: inclusive growth (e.g., infrastructure for trade facilitation and food security), risks and resilience (e.g., social protection); and international cooperation .In her article, “G20 Agriculture Ministers Meet in Paris with Little Result, ”Sophia Murphy of the Institute for Agriculture and Trade Policy (IATP) notes the significance of the first ever Summit of the Ministers on June 23-24 in Paris. President Sarkozy built up expectations for the event saying, “In adopting this plan you will change not only the lives of a billion farmers but the course of capitalism itself so capitalism once again contributes to the development and well-being of people.” The primary purpose of the meeting was to deal with price volatility which is occurring at higher prices and more persistently than ever before. Due to such factors and the reality that increasing numbers of developing countries are net importers of food, the impacts of volatility are lethal. Excessive speculation in commodity markets is a main culprit as set forth by an UNCTAD report and suggested by a document written by ten international organizations at the behest of the G20, Price Volatility in Food and Agriculture Markets: Policy Responses. The final Action Plan kicked the decision about regulating speculation over to the Finance Ministers and adopted a plan to boost market transparency - the Agricultural Market Information System (AMIS), which could be useful if key countries, such as China, and the four multinationals which control most of the global grain trade go along with it (See also Clapp and Martin, “Spotlight G20: The G20 Agricultural Action Plan: Changing the Course of Capitalism?”). Murphy cites a range of disappointing outcomes: the Ministers rejected calls to establish buffer food stocks and to stop subsidizing biofuels and, instead, promoted financial risk management approaches to food insecurity.