Undergraduate Studies Essay for POL 460: Politics of Globalization (12/8/2008)
The global financial crisis of 2008 has been one of the most catastrophic crises in the history of the world. How catastrophic? Writer Anup Shaw describes, “Around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems (Shaw, 1).” Shaw goes on to explain, “As of October 2008, the world’s financial firms have lost $2.8 trillion as a result of the continuing credit crisis, global taxpayers have spent around $8 trillion to shore up the world’s banks, and these amounts will increase as the crisis spreads into the real economy (Shaw, 1).” Leaders around the world have been working desperately to keep their countries’ economies from collapsing. President Nicolas Sarkozy of France proposed a meeting of the leaders of the world to discuss how to address the global financial crisis (Landler, 1). United States of America President George Bush agreed to host the meeting, and also decided to broaden the invitation list by inviting the entire G20. Bush stated he did this because, “The financial crisis had become a global affliction that demanded global responses (Landler, 1).” The meeting, which included the G20 heads of state, was held on November 15th 2008 in Washington, and because of the nature of the meeting, has been referred to by many as Bretton Woods II.
To better understand the context of the meeting, one must comprehend specifically who was involved and what was being discussed. The G20 is an international body that meets to discuss economic issues (Rampell, 1). Who is in the G20? Nineteen countries with some of the world’s biggest industrial and emerging economies and the European Union. Or to be exact, Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States of America, and the European Union (What is the G20, 1). As one would expect, with so many countries being represented at the Bretton Woods II meeting, a diverse amount of opinions and views were voiced. So what’s the best solution? Because this crisis has affected virtually the entire modern world, one issue that was discussed was the best approach toward globalization.
Author Jackie Smith explains that there are generally two ideologies when it comes to globalization: neo-liberal globalization and democratic globalization. Smith provides a detailed comparison of the two perspectives, stating, “We might usefully think of this struggle as one between two major transnational networks: a neo-liberal network more densely linked and rich in material resources, and a democratic one that is loosely integrated around somewhat diffuse and vaguely conceptualized goals (Smith, 5).” She also explains, “This struggle might be seen in terms of a global society (democratic globalization) versus a world economic system (neo-liberal globalization). A global society is a community of citizens and states organized around a shared human identity and common norms that promote cooperation and social cohesion. Advocates of a world economy are not necessarily opposed to such a vision of global society, but in their view the most efficient way to allocate the world’s resources is through markets. Global markets are seen as the key to the prosperity that will bring peace to the human community. Thus, while advocates of global society seek to socialize states and others actors in ways that place human rights norms at the center of policy, those advocating a world economy want to subordinate societies and states to market forces (Smith, 4-5).” The Bretton Woods Project claims that during the meeting, the attendees agreed little of substance, and were criticized for an opaque, closed preparation process (G20 heads…, 1).” Because of this, it’s hard to tell which of the two ideologies the G20 will embrace to solve the global crisis.
In terms of the individual nations, both of these ideologies appear to be represented. The United States of America, which has traditionally been the biggest player in the world economy, seems to take the neo-liberal approach. Smith further describes the neo-liberal perspective, stating that it, “Envisions a world orders according to market principles. It assumes that markets generate and distribute wealth most efficiently (Smith, 6). At the summit, George Bush stated, “The best way to solve our problems and to solve the people’s problems is for there to be economic growth, and the surest way to that growth is through free market capitalism (G20 delivers…, 1).” In terms of any regulation, the United States feels that they primacy of regulatory authority should be in national governments, rather than with international organizations (George, 1). Bush’s perspective worries The Transnational Institute, a well known institute that supports democratic globalization. Writer Susan George of The Transnational Institute writes, “His insistence on free markets reflects a dangerous and outmoded ideology with regard to financial regulation – abundantly demonstrated by his speech prior to the G20 meeting convened in which he re-visited the ideas that are the source of the worst worldwide financial crisis of the past 90 years (George, 1).”
The Europeans seem to take the democratic globalization point of view. As Jackie Smith explains, rather than simply focusing on the economic market, democratic globalization, “Offers a response to this economy-centered model for global integration by proposing not selfish or xenophobic reactions typical of proponents of neo-liberalism as well as anti-globalists, but rather a vision that accepts and rather celebrates the increasing importance of relations between nations: international trade, international treaties, alliances, protocols, etc (Smith, 7).” Susan George explains, “The Europeans, led by President Nicholas Sarkozy of France, argued that since the 1980s, finance has become a quintessentially global phenomenon with money and credit washing across borders. Financial entities are thus able to exploit the inability of nation states to tax or regulate them effectively. Consequently, the Europeans call for a new global financial architecture that starts with, and gives primacy to, new cross-border global financial regulatory authorities (George, 1).” The Transnational Institute offers a variety of other resolutions from the democratic globalization angle. For example, they feel there needs to be total transparency from financial institutions as well as new national and global regulatory systems that are subject to the widest and deepest democratic participation, including oversight, monitoring, and access to decision-making (George, 1). They also feel that there needs to be a strong commitment that no country be allowed to become insolvent and much better integration of southern countries as well as experts from NGOs, other global institutions other than the International Financial Institutions, and other parts of civil society into all discussions of a new global financial architecture (George, 1).
While there were little concrete decisions made at Bretton Woods II, the G20 did commit to the following five actions: strengthening transparency and accountability, enhancing sound regulation, promoting integrity in financial markets, reinforcing international cooperation, and reforming International Financial Institutions (G20 heads…, 1). The G20 also issued a communiqué that briefly elaborates on each action. One important issue they introduce in the reforming International Financial Institutions section is, “The Bretton Woods institutions must be comprehensively reformed so that they can more adequately reflect changing economic weights in the world economy and there is a need for emerging and developing economies to have greater voice and representation (G20 heads…, 1).” While this notion seems to hint at an approach aligned with democratic globalization, the rest of the message from the G20 is quite vague, making it difficult to anticipate whether the neo-liberal or democratic globalization philosophy will prevail. The next G20 heads of state meeting will be in London April 2nd, 2009. One key difference will be the presence of newly elected United States of America president Barack Obama. How will that affect the outcome of the meeting? As writer Jane Sasseen explains, “For now, little is known about what Obama, not to mention his as-yet-to-be-named Treasury Secretary and other economic advisors, thinks about the actions and general principles that won support at the summit (Sasseen, 2).” While it’s still unclear what will exactly be done about this global crisis, one thing is certain, a lot is at stake. The G20 still has many tough decisions to make ahead of them. What will those decisions be? We’ll have to wait until April 2nd to find out.
“G20 delivers “route map” to economic recovery.” The official site of the Prime Minister’s Office. 15 Nov. 2008. 4 Dec. 2008 <http://www.number10.gov.uk/page17483>.
“G20 heads of state meeting 15th November 2008.” Bretton Woods Project. 17 Nov. 2008. 4 Dec. 2008 <http://www.brettonwoodsproject.org/art-562975>.
George, Susan, Barry K. Gills, Myriam V. Stichele, and Howard M. Wachtel. “Statement on the G-20 Summit on the Financial Crisis, 15 November, 2008.” 17 Nov. 2008. Transnational Institute. 7 Dec. 2008 <http://firstname.lastname@example.org&password=9999&publish=y>.
Landler, Mark. “Nations to Talk Finance, as Pillars of Power Shift.” 13 Nov. 2008. The New York Times. 4 Dec. 2008 <http://www.nytimes.com/2008/11/14/business/worldbusiness/14summit.html?_r=2&scp=1&sq=bretton%20woods%202&st=cse>.
Rampell, Catherine. “The Group of 20: A Primer.” G-20. 14 Nov. 2008. The New York Times. 2 Dec. 2008 <http://economix.blogs.nytimes.com/tag/g-20/?scp=1-b&sq=economics+blog+g20&st=nyt&scp=6&sq=g20&st=cse>.
Sasseen, Jane. “G-20 Summit: Little Action, Many Promises.” 15 Nov. 2008. Business Week. 4 Dec. 2008 <http://www.businessweek.com/bwdaily/dnflash/content/nov2008/db20081115_899204.htm>.
Shaw, Anup. “Global Financial Crisis 2008.” Global Issues. 7 Dec. 2008. 7 Dec. 2008 <http://www.globalissues.org/article/768/global-financial-crisis>.
Smith, Jackie. Social Movements for Global Democracy. New York: Johns Hopkins UP, 2007.
“What is the G20?” G-20. 1 Dec. 2008 <http://www.g20.org/g20/>.