G20 shows power shift to multipolar world

By Paul Taylor
April 2, 2009

Paul Taylor Great Debate — Paul Taylor is a Reuters columnist. The opinions expressed are his own –

A year ago, mere mention of the notion of a multipolar world was a sure way to lose friends and dinner invitations in Washington.

The London G20 summit shows just how far power has ebbed from the United States, and from the West in general. Until late 2008, the Group of Eight mostly Western industrialized nations — the United States, Canada, Germany, France, Britain, Italy, Russia and Japan — was the key forum for economic governance.

The new, unwieldy top table has emerged faster than anyone dared predict because a humbled America and a chastened Europe need the money and cooperation of rising powers such as China, India, Russia, Brazil and Saudi Arabia to fix the world economy.

The United States remains the pre-eminent military and economic power, and how it manages to clean up its banking system will be the biggest factor in the length and severity of the crisis. But how the emerging countries manage their currency reserves, exchange rates, trade policies and energy exports will also determine whether we recover from recession in the next 18 months or slide into a depression.

U.S. President Barack Obama, on his maiden foray in global diplomacy, showed he understands the new dispensation by paying respects in prior bilateral meetings to Chinese President Hu Jintao and Russian President Dmitry Medvedev.

The Europeans acted as midwives to this new world (dis)order, but they have yet to accept that they too need to be cut down to size. To make way for the legitimate aspirations of emerging and developing nations in international financial institutions, the number of Europeans at the table will have to shrink. This should force them to pool their representation under the European Union, as they do in trade negotiations.

That may be unpalatable not just for Britain but even for core euro zone members such as Germany and France.

Yet French President Nicolas Sarkozy and German Chancellor Angela Merkel made the best case for a single EU seat by working like a tag team to pressure the United States and Britain into stricter regulation, notably of hedge funds, and tougher action against tax havens.

Managing the new power constellation won’t be easy and may not work. It will take trade-offs between Washington and New Delhi to clear the path for a global trade pact, among Western nations, China and India to fight climate change, and between industrialized and developing powers to reallocate power in the IMF, the World Bank and the United Nations.

At least now almost all the key players are at the table, except for Iran. But that’s another story.

13 comments

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[...] Reuters columnist Paul Taylor writes: The London G20 summit shows just how far power has ebbed from the United States, and from the West in general. Until late 2008, the Group of Eight mostly Western industrialized nations — the United States, Canada, Germany, France, Britain, Italy, Russia and Japan — was the key forum for economic governance. [...]

Sounds good to me. The successfull materialization of the summit’s resolutions will create new economic order while the failure to do so may auger ill a new economic disorder………

Posted by MEAH | Report as abusive

Paul Taylor is correct. Beyond the obvious, however, there is much to be done to achieve a stable global capitalist system. It is clear how interconnected the global economy is today, and how radically different the trade patterns have become (USA seemingly determined to be the world’s foremost importer, other nations determined to be producers). All major econonomies of the world claim to believe in free trade; they have made some very positive steps this week toward better understanding and cooperation. The lynchpin will undoubtedly be better global fiscal governance. Yet underlying issues exist, and remain unreported.

Tax havens still exist, and there is little the world can do against a sovereign nation that chooses to base its economy on the industry of money laundering. Some solution must be found. Health care, which is becoming one of the most costly items in family and national budgets in first world nations, will be under pressure for outsourcing (e.g., globalisation), yet the foremost capitalistic countries place trade barriers on the movement of medical personnel, patients, drugs, and equipment. The Fortune 500 companies have spent the last several decades transitioning as much of their production as possible to the countries with the loosest employee unionization, lowest fiscal standards, and weakest environmental regulation. Can the world finally adopt sustainable human, ecological, and fiscal practices? This MUST be the goal. To accomplish this, international governments must resist the whining of the richest corporations, which of course will resist global governance and reform.

And what of currency manipulation? This remains a key reason for some of the greatest trade imbalances (and not only the much-bemoaned Chinese fiscal policies). Finally, what global supranational organization will finally be given the clout to prosecute egregious international behaviour? Since the primary strategy for maximization of corporate profit has been to seek out the cracks in international law — operating not within a single nation, but rather as international enterprises that easily avoid national laws by operating outside them wherever possible, then exploiting loopholes or simply lobbying against international cooperation to protect their semi-covert business models.

If corporations operate worldwide, then a unifying basket currency and strong global corporate/trade law, including very complete and strict financial reporting rules, must be established and maintained by an international organization with the power to enforce the rules. Otherwise, a stimulus to prop up the failing banking system — the greedy corporations who initiated the current malaise — will only reinforce their bad behaviour.

Let us hope that the goals of the G20 leaders are long-term stability and global justice rather than this year’s stock prices.

Posted by Michael | Report as abusive

The United States is being played for a fool – again. These actions by the G20 meeting is designed to boost world economies by an even faster parasitic draw-down of blood from the host economy – the U.S. – at the expense of Americans. More job losses, bigger trade deficits and bigger budget deficits. President Obama has reneged on his promise to halt the loss of jobs to lopsided trade deals and has turned his back on American workers.

The G20 are all parasites and the nations not at the table are the hosts. For too long the underdeveloped, underpaid and undernourished peoples of the world have offered up the fruit of their labors for far too little. The IMF and World Bank then offer these struggling nations loans as assistance that they cannot possibly pay back precisely because the wealthy nations won’t enter into equitable trade agreements with these countries. Until recently there has been a great abundance of cheap imported goods for all in the West. This was only accomplished by imposing economic oppression upon the third world.

Posted by Anubis | Report as abusive

The time for expansion of the list of countries that can make a difference in the global governance has come, in fact, is overdue, as the breakdown of our financial systems has shown. It would also help making the world safer and more equitable.

Posted by wevers henk | Report as abusive

If the global government goes bad, there will be no escape; right now, people can usually escape tyrannical governments. The global government you people are building is horrible.

Posted by JimO | Report as abusive

The developing gains from developed loss is a fabric torn from east to west of our multi polar world.Mr.Brown failed to precisely admit to the reporter about the host’s failure of any gains to UK and Mr.Obama lost his dinner taste to flavor the reverse waves of silence job losses in USA.The biggest historic win was for India and China at the expense of developed countries.The bank’s account witch hunting by the develop countries failed to regulate the “Trade flow control valve” and this will lead to huge unemployment in USA,UK and catastrophic depression. The signatures will once again create a momentum of flooding global markets with cheap Indian and Chinese goods…G8 will then be in deep deep recession.

Posted by Peter Vaz | Report as abusive

When you focus all your attention optimistically on a one world government thinking up the best possible scenario, then surely you live the worst case scenario. What is the worst thing that can happen?

Posted by JimO | Report as abusive

Pete, have you already forgotten who started this financial mess? If the US government felt it necessary to risk the world economies by allowing a largely unregulated banking environment, then it follows that there is a price to be payed if that risk culminates in failure. Espousing free trade in the good times cannot suddenly be reverted to a closed market – at the expense of developing nations when you screw up.

Posted by M | Report as abusive

I wish to remember that European Union’s GDP is the first worldwide, followed by the United States and if someone have lost power and reputation during this crisis, I am afraid they’re not the Europeans.
You don’t belive it? Then look at the currency market, stronger the currency bigger the power, and the most of analysis say the becuase of quantitative easing dollar will become even weaker.
Therefore if someone must thinking about his future global position, I think that US comes first, also because every year will become more difficult to finance the US deficit selling T-Bond abroad.

Posted by Fedez | Report as abusive

A year ago, too many people in Washington were burying their head in the sand – and had a rather twisted conception of what leadership is.
Back in the Cold War era, JFK did not play bully or Superman in Berlin. He said, “I’m a Berliner”. A pun in German, but everybody loved this statement, and still does, because it means, “we are in this together and together we will pull it through”. Consideration for your partners and a consensus building attitude are the key to true global leadership. JFK knew that, and so does Obama. This week’s G20 is no decline of the West. It is a long due step forward and an authoritative victory for democracy. Common decisions involve shared responsibility and are proactive against easy and useless criticism.
It would be very sad if someone in Washington still refused to open their eyes to the real world, even in the face of critical war fronts and of an economic meltdown brought about by years of arrogance, denial, and self deception.

Posted by Laura | Report as abusive

one can only pray and dream that upon Barack Obama realising his closing speech to the final G20 he is to inaugurate after a distinguished term as Honourable Leader of the United States of America that his fait accompli was to disarm and relieve the World forever of nuclear weapons; thus we could close that particularly futile passage of human history.

annihilation for annihilations’ sake. what an all encompassing mess of incomprehensible proportions. all leaders of any nation who still embrace these legacies should be stood down without pay. wiped from the public record, receive no further dispensation or sustenance.

Posted by sweeny'60s | Report as abusive

I find it so humorous that everything is the fault of the good old U.S.A. or even justthe fault of George Bush. The world economies survive by our import of their cheap junk. The Chinese pollute, the Russians are corrupt, the Europeans can’t even babysit each other yet we are responsible for all that happens. Gosh the tremendous power that we have. I hope Obama did not apologize for me. I’m tired of his throwing money as fast as it can be printed

Posted by tim | Report as abusive