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IDS Research Associate Richard Longhurst and the Director of Teaching and Alumni Relations, Robert Nurick hosted an alumni dinner in Brighton.

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Communications


Crisis without borders

Anna Schmidt

There are two things about the global financial crisis that can be agreed about: that the crisis started in  developed countries and that a new interdependence of the global economy has emerged. Albeit in highly differentiated ways, everyone has been affected.

Institutionally, the global financial crisis has accelerated a shift away from the G7/8. The G20 has become the ‘forum de jour’ and carries the world’s expectations of crisis management and for laying the  cornerstones for a system in which current situation cannot be repeated.

The road to many, if not all, current reforms seems to pass by the signals set by the London summit.  The agenda is full of expectations and underlying tensions. But in many ways its public result is a  foregone conclusion: It will be hailed as a success and its final communique will be an exercise in  purposeful ambiguity – a fact that will only encourage commentators to try to detect concrete meaning between and around the lines.

What happens beyond this week’s meeting, raises a number of questions:

Is this shift a grand gesture or real change? Is expanding representation at global summits a first step to reform of international economic institution or a smoke-screen for public consumption?

Institutional authority has many potential sources; it can be based on output and the ability to drive  change, as well as the recognition of representativeness and adherence to the principles of their constitution (note: the G20 includes no developing countries and is not any more transparent a mechanism than the G7/8).

Prior to last year, the G20 was a gathering of finance ministers constituted after the Asian crisis of 1997-98. It was a deliberative forum and, according to a survey of its members, has been largely ineffective in actually changing member’s behaviours, and that of non-members even less so. That said, the London summit takes place at the heads of state level and under much higher pressure for action, so previous dynamics may be only a limited guide for future. Moreover, the crisis is not just shifting economic weight, it seems to propel a re-emphasis of politics in economics (including the rise of ‘creeping protectionism’), so what governments do is important.

Whose problem counts? Or, does blame matter?

Institutional authority at this level also depends on the ability to forge a shared diagnosis of the  problems at hand. And that’s still a crux. Different interpretations of the crisis imply different agendas.
People may blame micro-level incentive structures, global or national-level regulation, macro-economic imbalances, or the ‘immorality’ of capitalism. Here it matters not just what leaders think but how issues are debated domestically. Competing views on what happened reinforce that expanding representation isn’t the solution. While the blame-game can be counter-productive, any pre-designed approach, in which those to blame for the crisis are seen as devising its solution for others to implement, is unlikely to be successfully in the long run.

Dr Anna Schmidt is a Research Fellow in the Governance Team

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