Satyajit Das: Forget these financial forums: global co-ordination is a utopian dream

After the Sydney meeting, it did not take long for the feigned unanimity among G20 members to disappear

The G20 finance ministers’ meeting in Sydney last month provided a convivial winter break for the global economic elite. Travellers from the northern hemisphere could enjoy the southern summer. Everybody could escape domestic political traumas, spending a few days among their peers in luxury paid for by taxpayers. They could bask in the slavish adulation of the local popular press, who were in awe of the central banking “rock stars” and the charms of International Monetary Fund’s president, Christine Lagarde.

The G20 has a poor record in meeting targets. The 50 per cent reduction in government debt by 2013 has not happened. Action to minimise tax avoidance, another objective of the Sydney Meeting, has been subverted by individual countries using differential tax rates and other policies to encourage businesses to relocate or remain in particular jurisdictions. Objectives such as reducing the dominance of banks deemed too big to fail and shrinking the shadow banking system have not been met. Any decline in the size of the shadow banks was a direct result of the financial crisis; there has been little change in scale since.

A key reason for failure is the lack of  co-ordination resulting from the primacy of individual national interests. After the Sydney meeting, it did not take long for the feigned unanimity to disappear.

The European Central Banks and the German Finance Minister were sceptical about the growth targets, pointing out that no new measures had yet been adopted to make these easier to attain. Jens Weidmann, the head of the Bundesbank, damned the agreement with faint praise, stating that quantitative growth targets, while “fundamentally positive”, were “problematic”.

The Indian Finance Minister, Palaniappan Chidambaram, said he did not consider the growth targets binding. The South African Finance Minister flew home to announce a reduction in the nation’s forecast growth. Growth numbers from Brazil, and even from the US, released shortly after the meeting were disappointing.

Zhou Xiaochuan, governor of the People’s Bank of China, emphasised the need of his country to balance economic growth, reforms and stability and refused to commit to measures to increase growth. Shortly afterwards, the Chinese authorities moved to reduce the value of the yuan against foreign currencies to restrict capital inflows and increase China’s competitiveness.

Divisions became apparent even on previously agreed principles. The US Treasury Secretary, Jack Lew, argued for more  co-ordination on regulation of financial markets and banks. Before the meeting the host, Australia’s Treasurer, Joe Hockey, stated that all those regulations should be “evaporated” on the grounds that they were impeding efficient resource allocation. He was particularly opposed to European plans for a financial transactions tax. Mr Hockey argued that transparency was all that was needed.

The reality is that, to the extent that individual nations’ policies serve domestic interests of growth, the G20 measures may be implemented, with potential spill-over benefits for the global economy. But important, often-repeated steps, such as increasing domestic demand in exporting nations such as Germany and China, are unlikely to be taken if they are seen as detrimental to national interest – even if they would benefit the global economy.

In effect, the G20 consistently fails the real measure of co-ordinated global policy identified by Mario Draghi, president of the European Central Bank, which is that countries should pursue policies that would not be adopted if they were acting solely in their own domestic interests.

The G20 commitments are largely meaningless. Few, if any, initiatives are likely to be implemented. Based on its previous performance, few targets will be met. This poses a fundamental question about the point of such forums.

As several commentators observed, the real point was to illustrate the indispensability of the global financial and political elite and to reassure citizens that they were in control of the situation.

The propositions are inconsistent with the fact that it is the same individuals, or their ilk, that created the conditions for the crisis in the first place. They are also inconsistent with the fact that after nearly six years of meetings, communiqués and targets, the global economy is no closer to a sustainable recovery.

The most honest course of action would be recognise that the policy options are limited, the level of understanding and degree of control over the economy compromised, and the idea of global co‑ordination a utopian dream.

The bad news is that the heads of the G20 are scheduled to meet in Brisbane in 2014 for a new round.

Satyajit Das is a former banker and author of ‘Extreme Money’ and ‘Traders, Guns & Money’

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
filmPoldark production team claims innocence of viewers' ab frenzy
Life and Style
Google marks the 81st anniversary of the Loch Ness Monster's most famous photograph
techIt's the 81st anniversary of THAT iconic photograph
News
Katie Hopkins makes a living out of courting controversy
people
News
General Election
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Sales Team Leader - Wakefield, West Yorkshire

£21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...

Ashdown Group: Head of Client Services - City of London, Old Street

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

Why Mohammed Emwazi chose Isis

His friends were betrayed and killed by al-Shabaab
'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

Open letter to David Cameron

Building the walls of fortress Europe has had deadly results
Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

You don't say!

Tory candidates' election tweets not as 'spontaneous' as they appear
Mubi: Netflix for people who want to stop just watching trash

So what is Mubi?

Netflix for people who want to stop just watching trash all the time
The impossible job: how to follow Kevin Spacey?

The hardest job in theatre?

How to follow Kevin Spacey
Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders