From eight to twenty – too little too late?

Why does it al­ways take a crisis or a cala­mity to prompt change? It was no secret to anyone that the post World War II financial and political structure was lopsided in favour of the victors of the war and for some time now did not reflect the current geo-political situation.

The international institutions set up after the war, like the World Bank and the International Monetary Fund (IMF), did not prevent the current financial crisis that threw the whole world into a panic and forced, in particular, the countries that were responsible for the present financial framework to take extraordinary action to support and sustain their banks and other financial institutions to prevent a complete meltdown.

This extraordinary reaction did not, however, prevent some questioning of the basic tenets of the capitalist system and also revived some hope in the staunchest ‘closet’ supporters of Marxist ideology. It did not take long for the latter to point out that Marx was turning in his grave and evoking his ‘I told you so’ warnings.

The crisis did not last long enough for the critics of capitalism to write its epitaph. The concerted and aggressive support of the banks and other financial institutions seemed to have checked the downward spiral and the situation may have been brought under control, at least for the moment.

The actions taken, namely the governments’ intervention by making available huge amounts of cash to failing banks and other institutions to bail them out were anything but capitalist instruments. In fact this was more a Marxist intervention than anything we have seen in the gradual transition of the capitalist economic system into the present day mixed system.

Since the early signs of the crisis brought about by the sub-prime lending in the US, the political leaders, primarily in Europe, UK Prime Minister Gordon Brown and French President Nicolas Sarkozy among them, called for an urgent reform of the international institutions including the IMF. Former US President George W. Bush and to some extent also Barack Obama preferred to concentrate on the establishment of a new regulatory mechanism and to strengthen current ones to prevent a similar crisis from developing again, rather than “changing the basic international financial architecture”.

Curiously, neither the last EU summit nor the last G8 summit mentioned anything again about the reform of the IMF. The G8 summit did, however, declare its own demise and established the new G20, including the countries that represented most of the international financial and economic activity.

This is certainly a step in the right direction – a move that should have happened a long time ago.

This, however, should not stall the already slow-moving efforts to create the right regulatory financial mechanism in the US and the reform of the IMF and other international financial institutions.

The setting up of G20 does not on its own solve the current woes in the world or even prevent them from recurring or from getting worse.

The G20 should now ensure the implementation of the proposals and ideas referred to above, including the reform of the IMF and other international financial institutions announced a few months ago when the world was faced with the financial crisis that checked development in the developed world and brought more misery to the majority of the peoples elsewhere on the planet.

The G20, which represents an unprecedented democratisation of the informal political and financial international structure, should now work to have this process also take place in the more formal international organisations, including the Brettons Woods institutions and the United Nations, particularly the UN Security council.

If this does not take place, there is the risk that the transition of the G8 to the G20 would be seen as too little too late.