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Path through the minefield for G20

Anthony Hilton
16 Mar 2009


Following this weekend's dress rehearsal for the summit meeting in three weeks of G20, the world's leading economic nations, the word has apparently been put out by the Prime Minister that he wants "announceables".

This, apparently, is spin-speak for things that could be unveiled at the end of the meeting to show that genuine progress has been made and the whole thing had not been a waste of time.

The "announceable" for this weekend, when the finance ministers of the same nations had a preparatory meeting in Sussex under Alistair Darling's chairmanship, was that progress has been made towards agreement to provide additional finance for the International Monetary Fund.

This is potentially important because the fund will surely have a major role to play in providing assistance to nations whose finances buckle under the strain of the global recession, as some already are doing and many more surely will.

Having been almost dormant on the lending front since the Asian crisis of 1997-8, the IMF currently does not have the resources to meet the demands likely to be made on it. More money needs to be found. This is where the difficulties start.

The problem is that this organisation is seen very much as a creature of the West, formed as it was at the end of the Second World War and reflecting the power distribution of that time.

Thus the Benelux countries have more votes than China, to cite just one example.

However, as we all know, the wealth of the world is now largely in the hands of newly industrialised nations - China most obviously and several others in Asia - plus the oil producers of the Middle East.

They are the ones with the financial power to help the IMF, but before they dig deep, they understandably want the governance of the organisation to be reformed, better to reflect the current balance of power.

No taxation without representation, a phase from the US Revolution, might usefully if not tactfully sum up their position.

We shall have to wait to see how much actually changes and when, but there is nothing intrinsically wrong with that.

Things that are worthwhile normally take a long time, and it is the recurring mistake of our political leaders, and this Government in particular, that it is always seeking to give the impression it can produce instant solutions.

More than anything else, that has created the impression that they over-promise and under-deliver. After 10 years in power, they really ought to have found another trap into which to fall.

The full meeting of the G20 in early April will be hard-pushed to match the hype.

Politicians have created an expectation that this meeting will play a major part in producing policies to return the world to the path of growth.

But it is quite clear that different nations have different views on how this might be done, so it is going to be difficult to produce a unity of purpose.

Hence the need for announce-ables - and the hope that people will then focus on what has been achieved, not where the summit has failed. Perhaps the real answer, if Government would only have the courage to push it, would be to stress the merits of diversity.

It is all very well seeking to get all the world's powers pulling in the same direction but its foes rather take for granted that the policy around which they unite is the correct one.

However, given that this crisis has no easy historical precedents to serve as a guide, no one can be sure what is the right policy.

So perhaps we would all be better off if the several different approaches put forward by different power groupings led to policies with differing emphases. That would increase the chances of one of them being right.

An island in choppy waters

These are uncomfortable times for Jersey. An island whose economy has moved from agriculture through tourism to the point where fully half its income derives from financial services can only look with extreme nervousness at the onset of a global economic slowdown.

But if that were not danger enough, the island also finds itself facing an unprecedented drive by the world's leading governments to clamp down on tax havens.

At a conference organised by Jersey-based magazine Business Life last week, the island's politicians, regulators and promoters of financial services were at one in positioning it as an offshore financial centre, not a tax haven.

The difference is fundamental. Successful financial centres are well-regulated and transparent; tax havens are secretive and largely unregulated.

In Jersey's case, its policy of openness and co-operation with other countries over the past decade means that it is quite the last place anyone should seek to hide their ill-gotten gains.

The danger is that, in their current mood, the world's politicians are unlikely to allow the very evident distinctions between the good, the bad and the ugly in the offshore world stand between them and a favourable headline.

In time, Jersey may benefit from the flight to quality as other offshore centres lose business. Meanwhile, it needs its friends.

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