Crisis management and Global Governance

Peter Niggli, Alliance Sud

Foreign policy circles in Switzerland are feeling «homeless» in the new world. Then-President Hans-Rudolf Merz complained before the UN General Assembly last autumn that the G20 was not transparent and that its decisions lacked legitimacy. He later said that Switzerland should get as close as possible to the G20, or set up an «anti-G20» with other economically powerful states. The Swiss Agency for Development and Cooperation (SDC) believes that multilateralism is in danger: The G20 have reduced «the relevance and influence of genuine multilateral processes and institutions» such as the UN, and the International Monetary Fund (IMF) and World Bank must now dance to the tune of the G20.

G-20: a small step forward

The fact is that small informal groups of states have long exerted a disproportionate influence on the UN, IMF and World Bank. The G7 decided what went on in the IMF and World Bank. For years now Swiss representatives in these institutions have been complaining that in fact they have not been able to do more than rubber-stamp the decisions of the G7. Consequently, G7 summits have always elicited international protests, the charge being that the G7’s claim to leadership has no legitimacy, that the Group is not representative and only champions the interests of the minority of rich countries.
In this respect the G20 is a step forward. On their website they boast of a «high degree of representativeness and legitimacy» because the members are drawn from all continents and account for two-thirds of the world's population as well as 90 percent of world economic output.
The G20 has so far had three impacts. First, on the economic crisis: The coordinated fiscal stimulus programmes of G20 members significantly cushioned the worst effects of the crisis. It would also befit the Swiss government to acknowledge this publicly. Bragging, as it is now doing in the midst of crisis, about posting state budget surpluses and having mastered the crisis the best, is failing to acknowledge the international crisis management endeavours from which it is benefiting but to which it has contributed nothing.

UN Crisis management weakened

Second, on the United Nations: The G20 has denied the UN any major role in dealing with the crisis. Until 2008 there was polarisation between the Bretton Woods Institutions (IMF and World Bank) and the UN over economic matters. Indeed, the final say rested with the Bretton Woods Institutions, which are controlled by the G7 along with smaller industrialized countries. This was why all developing and emerging countries wanted to see economic issues being dealt with more in the UN framework. In the autumn of 2008, they might have used the crisis – which was also a crisis of faith in the Western market model – to strengthen the economic role of the UN. They supported such proposals as were made for the creation of a UN World Economic Council and a programme for new global economic rules.  Had the G7 not co-opted China, India, Brazil, South Africa and other major emerging economies into the new G20 «World Economic Directorate», these proposals would have received stronger backing. Incidentally, under the influence of the Ministry of Finance, the Swiss government opposed an expanded economic role for the UN and in that way has strengthened the G20.

G77: case-by-case

Third, on the G77: In many international negotiations the developing and emerging economies operate through the G77, the platform for coordinating 133 developing countries plus China. They do so even though their interests are by no means identical except in opposing Western hegemony. The G77 carries weight if its heavyweights China, India, etc. stand behind the positions agreed.
This initially appeared to be the case also at the climate negotiations. The G77 wanted to achieve a wide-ranging agreement with binding emission reduction targets for the industrialized countries in accordance with IPCC recommendations, much like the European Union. The points of contention lay in the details, especially in the funding aspects. In Copenhagen, however, the «Gang of Four» comprising China, India, South Africa and Brazil broke ranks with the G77 and negotiated the non-binding Copenhagen Accord with the USA, of which the conference «took note» with consternation. In so doing they helped the USA provisionally push through its idea of a weak climate agreement encompassing all countries. The G20 played no active role in Copenhagen – the United States had resisted Europe's wish to address global warming at their Pittsburgh Summit in September 2009. But had the G20 not been created, the Gang of Four would not have broken ranks with the G77 in Copenhagen.

Internal contradictions

Yet it is unlikely that the G20 will be as cohesive as the G7. The areas of conflicting interests are clear. As yet, the Bretton Woods Institutions have by no means been reformed as the emerging economies would wish. Until that happens, they will neither participate massively in funding them, nor give up on financial institutions under their own control like the Chiang May-mechanism or the Banco del Sur. The same applies to trade and the World Trade Organization (WTO). This is even more so when it comes to issues of power politics power such as the various US wars or imposing sanctions on countries that the West deems to be hostile.
The emerging economies co-opted into the G20 can therefore to be expected to continue playing on the G77 keyboard. This means that there are still chances for inclusive multilateralism. The SDC was too quick to lament its passing.

Peter Niggli, Director Alliance Sud

Article published in: Alliance Sud News No. 63, Spring 2010