Thursday, November 13, 2008

Ahead of the G-20... the old-world attempts to take charge

How stupid

Stephen Grenville from the Lowy Institute on the East Asia Forum blog:

Just what is World Bank President Robert Zoellick up to?

He attended the G20 meeting in Brazil over the weekend, only to argue that this is the wrong grouping and should be replaced by a more exclusive gathering. To say the least, this is an unhelpful intervention, not just for Australia (which would be excluded from the Zoellick group) but also for the urgent need to address the current world situation.

Zoellick’s attitude ignores the time-consuming negotiations of a decade ago which gathered a consensus around the G20 membership. A cynic might say that it just looks like a spoiling strategy to leave the anachronistic status quo in place, with G7 plus a few ad hoc new recruits who are allowed to sit in on the old club...

The problem with the Zoellick proposal is that it starts with the G7. The G7 is lopsided. It includes Italy, for example, thus giving gross over-representation to Europe. Zoellick’s proposed group also includes South Africa. This might seem a good idea because it gives geographic representation to Africa. But it adds nothing to the group’s ability to confront the financial crisis or future international macro coordination. And if geographical balance is the criterion, then it’s hard to see why all three North American countries have a place at the table.

A better starting point is to ask, ‘who is likely to make the best contribution to an informed and constructive discussion?’ You don’t need to hear the European viewpoint from four separate voices. You do need countries which can contribute to a wide-ranging debate on how to reform the current failed system. Countries with robust domestic economies, strong and sophisticated financial sectors and well-functioning regulatory experience would be a help around the table. A track record of fresh outward thinking, active participation in the international economic debate, and deep involvement in regional economies would also be a plus.

These are attributes Australia brings. We might even cast aside modesty and remind Zoellick that Australia demonstrated a better understanding of the 1997-8 Asian crisis than the G7 countries. And, if we wanted to be less polite, we might ask why he doesn’t ’stick to his knitting’ and concentrate on the World Bank’s job? We might recall his role in promoting preferential bilateral trade pacts, to the detriment of the conceptually-superior multilateral system. And we might explore a governance issue: ‘On whose behalf is he talking?’

Cross posted from the Lowy Interpreter