G-20 and UN Agency Adopt Strategy to "Rebalance the Global Economy"
Wednesday, December 9, 2009
Not wanting to "let a serious crisis go to waste," there has been a concerted effort made recently by the G-20, the International Monetary Fund ("IMF"), and other international organizations to increase their control over national financial systems, an effort they hope will "rebalance the global economy" and pave the way for consolidated governance of the world’s monetary policies. In a speech on November 19 in Brussels, new European Union President Herman Van Rompuy reaffirmed this sentiment when he proclaimed "2009 is also the first year of global governance, with the establishment of the G-20 in the middle of the financial crisis. The climate conference in Copenhagen is another step towards the global management of our planet."
An analysis of recent actions taken by these international financial institutions provides a better understanding of the implications that increased control of the world’s financial systems have for national sovereignty. For example, at the November 7 meeting in Scotland of the G-20 Finance Ministers and Central Bank Governors to discuss the G-20’s new approach to economic cooperation, several options were presented with the goal of preventing another financial crisis that have dangerous implications for democracy and national sovereignty.
One option, according to British Prime Minister Gordon Brown, is “a global financial levy, such as a tax on transactions or an insurance fee, to build up a ‘resolution fund’ as a buffer against future bailouts. Banks needed "a better economic and social contract" that reflected their responsibilities to society.” Another option, presented by IMF Managing Director Dominique Strauss-Kahn, is a financial sector tax “to incentivize markets to take less risk and to provide resources to an insurance fund if risk does materialize.” Though it remains to be seen if a levy is actually implemented, there are obvious global governance concerns when international bodies are given a power such as taxation that is traditionally reserved to democratically-elected legislative bodies.
While no tax policy was set out at the November meeting, after its conclusion, a communiqué, titled “A Framework for Strong, Sustainable and Balanced Growth: Developing the ‘Mutual Assessment Process.’” was issued that lays out the G-20’s economic policy objectives and provides a system for how the G-20’s vision for global economic management will be implemented. Under the system, countries will present national and regional economic plans by the end of January 2010 “to support sustainable recovery and job creation.”
Specifically, the communiqué provides a template for “national and regional policy frameworks” for 2010 that calls for G-20 members to publish their medium-term policy frameworks “on a consistent basis with other G-20 members,” and provide the IMF and each G-20 country with domestic economic policy frameworks and plans for the next 3-5 years.
If the policies contained within the communiqué are followed, they would dramatically increase the power that the IMF, World Bank, and other international organizations have over domestic economic policies. Specifically, the IMF, with input from groups such as the International Labour Organization and the World Trade Organization, will be given the task of determining how compatible the respective national and regional economic policy frameworks are and analyzing the global impact of different domestic policy options.
Moreover, the IMF will be charged with “calculating the aggregate impact of the frameworks and policies for global economic prospects.” Based on their analyses and calculations, the IMF will produce an initial report that, in addition to containing a 3-5 year projected assessment of global economic prospects, will offer recommendations for model alternative domestic policies. Based on the IMF’s recommendations, the G-20 will develop a global “basket of policy options,” which, in one hand, will enhance policy coordination among the members of the G-20 and in the other, further consolidate control over domestic financial policies into a few international financial institutions.
In another recent action that raises concerns about the global governance of economic policies, the IMF issued a press release on December 3 where it set out its plan of responding to the global economic crisis and building a stronger international monetary system going forward. In the press release, the IMF illustrates how it has initiated a process of examining national economic exit strategies in order to “reorient their traditional growth models, and reshape policy frameworks to foster greater macro-financial stability.” Further, the IMF explains how it is currently reassessing its policy of domestic economy surveillance and is considering adding to the current modalities it uses to perform that task.
It is clear that officials from the Obama Administration have signed on to a long-term arrangement for the global management of the U.S. economy. Yet, the increased authority granted to the G-20 and the IMF to regulate our national economic policies have been given without the advice and consent of the Senate and the approval of two-thirds of the Senators present, requirements for treaties laid out in the United States Constitution. Not only is this transfer of power constitutionally suspect, it facilitates global governance to the detriment of national sovereignty.
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