Looking Beyond the G-20

Gary Weaver is a co-author

As the G-20 Meeting in Washington proved, it is finally becoming apparent

that our world has crossed a point of no return. Invited by the departing

Bush Administration prodded by the peripatetic President of France, all

understood that no immediate and lasting decisions could be made in this

exploratory meeting because of the absence of President-elect Obama. By

setting April 30 for the next G-20, the group diluted President Sarkozy's

sense of urgency. Between now and then, working teams are to prepare

recommendations for G-20 action.

But time is short and, surely, 2009 could prove to be a year of equal

significance with 1945 when the existing United Nations system of

international organizations was launched.

Following the end of the Cold War the deep division separating stagnant

centrally planned economies in the East from the more advanced laissez-

faire ones in the West gave way to the dominance of free market principles

on a global scale. Post-Soviet Russia and, more significantly, China led

the way. Adam Smith was back in vogue marginalizing a bankrupt Karl Marx.

Milton Friedman Chicago School economics held center stage and guided

International Monetary Fund policies and programs around the world.

Globalization became practically synonymous with a permanent,

free-floating and essentially unregulated (by national governments) global

village -- trusting that economic interdependence and fast economic growth

accompanied by "trickle down" effects would benefit everybody -- rich and

poor, developed and developing countries alike

For some years it worked quite well -- at least on the economic side of

things. Unprecedented growth rates were achieved by the so-called emerging

economies, while the advanced countries continued on paths of solid growth

and relatively low unemployment.

But, ultimately, there was a price to be paid: The gap between rich and

poor widened alarmingly within countries (even wealthy ones) and reached

explosive proportions in the less developed countries of the global South.

Also, public goods such as environmental protection, infrastructure

projects supporting job creation, public health and education, and

unemployment benefits lagged.

In 2008 it all came to a head with the global financial crisis that has

governments, markets, and the general populace reeling, caught by surprise

by its speedy onset, global reach, severity and projected longevity. On

both sides of the Atlantic, in Russia, China, Japan, India, Australia and

elsewhere, governments went into high interventionist gear. John Maynard

Keynes, the great bridge builder between laissez-faire and interventionist

policies, was resurrected and his ideas are being implemented even by

unfettered free enterprise true believers in the US.

Globalization clearly extends to economic and financial crisis, as well as

to sustained growth and development. The global crunch that so suddenly

engulfed us all is dramatic evidence of the irreversible

interconnectedness of the world economy.

Luckily, after a few missteps in Europe and in the first Paulson plan, the

futility of resorting to narrow actions became apparent. The world's

public financial and economic authorities are now moving in parallel

toward increased governmental intervention within states (e.g. forced

mergers and selective national investments in banks). But we are also

hearing demands voiced by European leaders such as French

President Sarkozy and British Prime Minister Gordon Brown for radical

reform of the global system of economic institutions, including the World

Bank, the International Monetary Fund and the World Trade Organization.

In effect, the G-20 have launched a broad discussion of whether we can

square the circle by abandoning laissez-faire for dramatically increased

accountability and transparency, through simultaneous, coordinated

regulation and intervention by both national governments and international

institutions.

Such a return to Keynesian guidelines and policies requires patient but

also determined international consultation, and it is significant that the

convened G-20 includes China, India, Russia and Brazil, whose large and

growing economies and substantial reserves are viewed even by the US as

indispensable to forging concerted actions. It also sends a real and clear

message that territorial disputes and hard-power-driven policies in an

ideologically divided world are becoming less and less relevant at a time

when the entire planet is threatened by economic, financial, and

environmental crises.

These interwoven challenges will serve as the central test of the incoming

Obama Administration. The new US president will have a unique opportunity

to apply his obvious leadership skills to leverage the current reserve of

general American and global goodwill, avoiding the hegemonic daydreams of

his predecessor.

The G-20 and the new US administration's objective must be to refashion

for dramatically changed times the post-World War II international

institutions that inevitably reflected the power distribution of 1945.

Transcending the old divisions and ideological hatreds will have a huge

symbolic as well as real value. But more importantly, the new cultural and

religious fault lines separating the world will also have to be bridged.

Instead of the clash among civilizations, the G-20 needs to mobilize broad

global cooperation in support of universal economic as well as political

human rights.

We believe the world is witnessing the birth of what we call

"state-centric globalization." We expect greater and more coordinated

public institutional intervention in national and individual decisions and

activities. This will impact individual and national freedom of action and

raise the perennial question of "who will regulate the regulators"?

In the age of the Internet and electronic interdependence, there is a huge

opportunity for civil society -- including non-profit and non-governmental

organizations, free and uncensored media, regional and global blogs, and a

multitude of ad hoc as well as continuing communities of interest to act

as pluralist watch dogs over the neo-Keynesian policies and practices that

are already emerging. A world of multiple and matching centers of

oversight will continue protecting us against the excesses of all forms of

unchecked and unbalanced power.

In one word, what will be needed is even more democracy.