Economists are aware that the aftershocks of the 2008 financial crisis are still affecting negatively the global economy. Emerging economies such as China and Brazil, which drove global economic growth in the early stages of recovery, are losing much of their momentum.
Red warning lights continue to flash, especially at a time when geopolitical tensions seem to be worsening. The risk of another recession is now accompanied by the fear of deflation. Prolonged failure to create enough new jobs, especially for younger people, is bound to lead to increased social unrest.
Boosting economic growth inevitably dominated the agenda of the G20 summit held in Australia last month.
Leaders of the G20 countries (these account for 85 per cent of the world’s GDP but are also home to more than half of the world’s poor) want to raise their global economic growth rates by at least two percentage points over the next five years.
Their target is to increase the world’s GDP by $2 trillion, creating millions of jobs.
The Brisbane Action Plan contains some 800 measures that have to be implemented by the individual G20 countries if the target is to be reached. It is no easy challenge.
The G20 has no power to oblige members to implement anything and depends just on ‘peer pressure’ to ensure compliance.
The G20 has no secretariat of its own and it will be relying on the International Monetary Fund to monitor the performance of each country.
Despite all the talk about creating new jobs, the summit failed to come up with specific measures as to how this can be achieved. Member states have agreed to present such measures for the next G20 meeting to be held next year in Turkey.
What the Brisbane summit did agree upon is to target an increase in the world’s labour force by 100 million female workers over the next decade. This would help reduce the gap in participation rates between men and women by 25 per cent.
There seems to have been general consensus during the summit that the world economy can be boosted through significant investment in infrastructure. This is important because it would represent a paradigm shift back to Keynesian thinking. A ‘global information hub’ is to be set up in Sydney to share knowledge on infrastructure projects and financing. This hub was given a four-year mandate and will work with governments, the private sector, development banks and international organisations trying to match private investors with specific projects. The danger with this initiative is that it may overlap with the work done in this field by the World Bank.
The summit also agreed to quicken the implementation of the partial multilateral trade agreement reached within the World Trade Organisation last year in Bali. India, which was very reluctant to sign the agreement in the first place, continues to slow down progress by objecting to the streamlining of procedures for the passage of goods across national borders.
The risk of another recession is now accompanied by the fear of deflation
Tax evasion was once again on the Brisbane agenda. The G20 renewed its commitment to oblige big business to pay a fair share of taxes. Failure to do so means more taxation on families which lessens their disposable income and consumption. Following the summit, Transparency International criticised the G20 for pledging only to share information and stopped short of committing to make it available for public scrutiny.
As host of the summit, Australian Prime Minister Tony Abbott had insisted all along that it should focus on economic matters.
But economics does not operate in a vacuum and is heavily influenced by other forces, especially politics. The Brisbane summit was inevitably overshadowed by the situation in Ukraine. The Russian President spent a lot of his time on the margins of the summit holding separate meetings with Western leaders, including a marathon session with Angela Merkel.
The sanctions imposed by the West are severely hurting Russia, especially as oil prices keep falling. Vladimir Putin is hoping that continued economic uncertainty in the eurozone will lead to the easing of these sanctions. Putin left Brisbane before the summit was fully over and this was interpreted by the Western media as proof of his isolation during the meeting.
The Australian Prime Minister had also been insisting on keeping climate change off the agenda (probably not to upset the strong coal-lobby at home). This did not stop Barack Obama who urged the other leaders to support a new global agreement on emissions. He announced that the US will be injecting $3 billion into the Green Climate Fund (Japan pledged a further $1.5 billion) intended to help vulnerable communities prepare themselves better for the effects of climate change through such measures as early warning systems and an improved protective infrastructure.
Obama urged the other members to come up with specific emission reduction targets by early next year.
G20 summits have become associated with protests by all sorts of NGOs and movements. Many of them were also in Brisbane but this time they were mostly peaceful.
A group of protesters who buried their heads, ostrich-style, in the sand at Sydney’s Bondi Beach, did capture public attention.
Will the Brisbane summit prove to be any different from many of the other big summits that promise a lot and deliver little? The ‘weekend break’ cost Australian taxpayers $50 million. Only time will tell whether such an expense was justified or whether it was wasted in producing another wish list.