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Making globalization work
By the Right Honourable Paul Martin, former prime minister, Canada
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G20 members must leave behind narrow nationalism and embrace their sovereign duties if the G20 is to rise to meet the challenge of globalisation
As Canada and Korea prepare for this year’s G20 summits, the question arises as to the measure by which the world’s new steering committee should be judged. The answer is its capacity to relieve the gridlock on those issues it inherited from the G8 and that go to the very heart of globalisation.
Three that immediately come to mind are the global financial crisis, climate change and food security.
The G20 came into being because the world has changed. Its members are members because they have power and position, but they also have responsibilities. In short, multilateralism must mean more than a camouflaged concern only for one’s national interests. It must recognise the needs of others including those who are not at the G20 table.
This is certainly true in the case of the financial crisis. What the world is experiencing now is not simply another economic downturn. It is one that mutated into a perfect storm because at its core was a banking crisis of unprecedented global reach. The world cannot afford another one. To put it starkly, the recession of 2008-09 has done its damage and the United States, the United Kingdom and, indeed, too many countries must now deal with decimated balance sheets. None of them can afford to engage in their own massive deficit fight only to have their efforts unravel because another bank liquidity crisis has appeared on the horizon.
While the G20 made progress initially, it is now bogged down as its members appear unable to come to grips with one basic point. In a world of seamless capital markets, there are no borders; if those are the rules of the game the bankers play by, then those must be the rules of the game the referees referee by as well.
At present, the G20 story is one of headline-grabbing differences within and between the US and Europe. What this has led to is the failure to implement the key measure, which is determining the core equity standards and leverage ratios for G20 financial institutions. Given the vacillation between the political players on the wider host of regulatory issues, the most urgent need today is to establish these core standards and ratios forthwith, all the while working out the other differences before memories of the financial crisis fade.
In short, the time for the G20 to draw the line in the sand is now. What the disputants should remember is that they are not there to speak only for themselves, but also for the 173 countries that are not at the G20 table.
The G20 is a global steering committee, not a small club of the self-interested. The question to ask is not how to keep New York, London or German bankers happy, but how to keep the global economy healthy.
As in the case of many issues, what is important are the signals the G20 sends to the world’s negotiating tables. In the case of climate change, this meant Copenhagen where, suffice it to say, the wrong signals were clearly sent.
Historically, the prime responsibility for carbon dioxide emissions lies with North America and Europe. But this does not mean that all of the G20 members do not have an increasing responsibility as their emissions increase to Bangladesh, the Philippines, Central America and Africa, for instance – regions of the world that are virtually innocent of the causes of climate change and yet whose poor will bear the greatest cost in terms of creeping deserts, flooding and famine.
The next climate change summit will be held in Mexico in November-December 2010. Rather than a last-minute, ad hoc meeting between the US, China and a few others as was held in Denmark, let the G20 prepare now to send the proper signals well ahead of time so that the Mexican meeting has a chance to succeed.
Furthermore, if after five meetings of the G20, not to mention countless expanded meetings of the G8, the differences between the developed and emerging economies show as few signs of being bridged in Mexico as they were in Copenhagen, then clearly the world will have a problem that extends far beyond climate change to the very heart of the effort to revive true multilateralism after its lengthy siesta.
In terms of food security, the United Nations predicts that within a generation the demand for food will increase massively as the globe’s population soars by a third and growing, affluent populations intensify the pressure on agricultural resources already depleted by drought and major imbalances in the food chain.
The year 2008 was the canary in the coal mine. The price of the world’s staples tripled in price and developing countries’ budgets were decimated as they struggled to import food, and famine spread throughout Africa and Asia. The world has been warned.
So where does all this leave the world as the Canadian and Korean meetings approach?
What is common to the financial crisis, climate change and food security, and what in the end will determine whether the G20 meets the test, depends on whether the leaders of the member countries show a capacity to rise above the political comfort of narrow nationalism – because making globalisation work requires a consensus that cannot be squared with the traditional definition of sovereignty.
In short, the parochialism of rigid borders makes no sense, not if one wants to make globalisation work. The Treaty of Westphalia established the definition of national sovereignty in 1648. That was a long time ago and it was all about sovereign rights. However, the world has evolved and the definition of sovereignty today must now include sovereign duties.
Clearly, if the G20 is to do its job, it is here in the definition of sovereignty where the battle lines will be drawn, for with the designation of the G20 as the world’s new steering committee, the debate is no longer what will replace the G8. It is whether any steering committee can succeed under the old rule of sovereign rights without sovereign duties.
The future of globalisation is the great issue of our time. The issues of the financial crisis, climate change and food security are all manifestations of the need to make it work better. Quite simply, how the G20 deals with them will provide an indication of how it will deal across the board with the interdependence of states in the future.
The question the G20 has to answer is, now that there will be not one or two, but, for the first time, five or six giant economies at the table, what must be done to ensure that this works to everyone’s benefit. The answer does not require genius, but it does require a level of international cooperation that improved in Pittsburgh but failed the test in Copenhagen.
If the G20 is to succeed, it must ensure that its dialogue takes place not just on the basis of the sovereign rights of its members, but on the basis of their sovereign duties as well. Indeed, this could be the most important role the G20 has to play as the world’s steering committee.
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