About the Author:
Sergio Abranches, Ph.D. in Political Science, is an independent researcher, writer, journalist and blogger, writing and commenting on Ecopolitics, the relationship between economic development, societal progress and the environment, with an emphasis on climate change and the Amazon; digital journalism, and future trends.
He has a daily op-ed commentary on the Brazilian all-news radio network CBN (Ecopolítica) and edits two blogs: Ecopolity (www.ecopolity.com) in English, and Ecopolitica (www.ecopolitica.info) in Portuguese.
His work on the Muriquis (Brazilian spider-monkeys), primates of the Atlantic rainforest, co-authored with Brazilian journalist Míriam Leitão, published by O Eco and the O Globo daily newspapers was awarded the SOS Mata Atlântica Prize for environmental journalism.
The leaders of the G20 have pledged that they “will spare no effort to reach a balanced and successful outcome in Cancun”. Will this really come through?
It is clearly in the G20’s power to lead Cancun to deliver sound outcomes. But will they use this power? The leaders of the member countries have included a supposedly strong paragraph on the Climate Talks in the final ‘Declaration of the Seoul Summit’. They said that:
“We reaffirm our resolute commitment to fight climate change, as reflected in the Leaders’ Seoul Summit Document. We appreciate President Felipe Calderón’s briefing on the status of the UN Framework Convention on Climate Change negotiations, as well as Prime Minister Meles Zenawi’s briefing on the report of the High-Level Advisory Group on Climate Change Financing submitted to the UN Secretary-General. We will spare no effort to reach a balanced and successful outcome in Cancun.”
From the Seoul Declaration
To have a hint of what they might do in Cancun, we should first look at what they’ve done about the global currency disequilibrium in Seoul. This crisis is a more pressing problem, one that requires prompt, coordinated action. The economic diagnosis of the present imbalances is clear, so are their causes. The actions to be taken are well-known and have already proved to work on more than one occasion. All that said, one should expect a clear, direct, practical and operational statement about what is to be done, by whom and within which timeframe. Not a diplomatic note written to suit any circumstance whatsoever and giving everyone an excuse to opt out.
The decision-making setting is very similar to the climate change one. Typically, a situation where the players say to each other: “I’ll do it if you do more of it”, or “I’ll do my part after you’ve done yours”. Positions are framed on the basis of each ones’ appraisal of everyone else’s ‘primary responsibility’ for what happened as well as for what continues to happen. This is a game that has no optimal solution, only sub-optimal ones. In other words, a situation that leads to the decision to muddle-through.
Let’s look at what the leaders have put on paper about fiscal policies, financial reforms, and monetary and exchange rate policies, the three-pronged policy requirements to adequately face the crisis:
“Fiscal Policies: Advanced economies will formulate and implement clear, credible, ambitious and growth-friendly medium-term fiscal consolidation plans in line with the Toronto Commitment, differentiated according to national circumstances. We are mindful of the risk of synchronized adjustment on the global recovery and of the risk that failure to implement consolidation, where immediately necessary, would undermine confidence and growth.
Financial Reforms: We are committed to take action at the national and international level to raise standards, and ensure that our national authorities implement global standards developed to date, consistently, in a way that ensures a level playing field, a race to the top and avoids fragmentation of markets, protectionism and regulatory arbitrage. In particular, we will implement fully the new bank capital and liquidity standards and address too-big-to-fail problems. We agreed to further work on financial regulatory reforms.
Monetary and Exchange Rate Policies: We reaffirm the importance of central banks’ commitment to price stability, thereby contributing to the recovery and sustainable growth. We will move toward more market-determined exchange rate systems and enhance exchange rate flexibility to reflect underlying economic fundamentals and refrain from competitive devaluation of currencies. Advanced economies, including those with reserve currencies, will be vigilant against excess volatility and disorderly movements in exchange rates. Together, these actions will help mitigate the risk of excessive volatility in capital flows facing some emerging market economies.
Nonetheless, in circumstances where countries are facing undue burden of adjustment, policy responses in emerging market economies with adequate reserves and increasingly overvalued flexible exchange rates may also include carefully designed macro-prudential measures. We will reinvigorate our efforts to promote a stable and well-functioning international monetary system and call on the IMF to deepen its work in these areas.”
From The Seoul Summit Document: Framework for Strong, Sustainable and Balanced Growth
The paragraphs above need no comment. The Seoul Summit has failed to decide on a clear set of concrete actions to tackle the so-called “currency war”. The detailing paragraphs deal with what has been done – to no avail – what has been decided, and has not been implemented, and future work. A well-known story of leaders making vague commitments at global fora, not taking any strong action back home, only to meet again to promise to implement what they’ve failed to implement before. This was exactly what happened with the “fast-start” finance agreed upon in Copenhagen. It was decided and not delivered.
Now, why should we expect that the G20 leaders will be more affirmative and decided in Cancun? Why should we expect Cancun to be more successful than Seoul, and to go beyond Copenhagen?
