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financing development

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In a world society in which economic forces are already well structured to act globally, political structures are still largely national in scope. Transnational enterprises as well as financial speculators operate in the global marketplace with staffs which have been recruited for their ability to work transnationally and whose tenure is usually longer than that of the leaders of elected governments. The transnational economic elite know each other, and while in competition are able to keep their competition within the bounds of self-interest.

There are limits to the ability of private economic interests to keep the economic system stable. There have been periodic crises in Latin America in the 1980s, in Mexico in 1994, in Asia in 1997, in Russia in 1998 and in the United States in 2001 and again today, starting in 2007. While there are people who are hurt in these crises, it is rarely the key firms or the leaders, who, if shown the exit doors are usually given a “golden parachute”.

It is national governments and international financial institutions which have less control over economic trends. The International Monetary Fund, created as a result of the downward cycles of the 1930s, has had difficulty moving from its original aim which was to help national economics caught in a balance-of-payment trap to dealing with a highly interdependent global financial system.

National governments have tried to create a world steering committee — the G 8— with uneven results. The annual Group of Eight summit originated in 1975 as the group of six, called together by France’s Giscard d’Estaing at the chateau of Rambouillet. Giscard d’Estaing had been Finance Minister before becoming President and always had a technocratic approach depending on a small group of well-informed people to make policy. At Rambouillet, each country had only three participants, the president/prime minister and two aides he chose — either a minister or advisors. The Rambouillet meeting, designed to deal primarily with the oil crisis begun in 1972, went well, and it was decided to turn the summit into a yearly event. Canada was added in 1976 as a part of the US economy yet a separate State and Russia in 1998.

Now, once a year, the G 8, a club for the rich and well armed get together to praise each other. Like all exclusive clubs, there are those who would like to join, but if you let in the Chinese and the Indians, exclusiveness may go by the board. Thus, as clubs in colonial times when the natives were let in for a garden party on special days, selected members of other countries are invited for one day to a special session of the G 8. The list of those invited, presidents, UN and EU officials has grown in recent years as resentment has grown over the potential power of an unelected world steering committee. The G 8 does feed into the conspiracy theories that the illuminate or the Elders of Zion or the World Economic Forum are pulling, out of sight, the strings of the world society.

The strengths and the limits of the G 8 are well set out in this study of the Gleneagles Summit of 2005 on the theme of making poverty history. All the authors agree that Gleneagles was the most successful summit since the earlier period in the late 1970s. The 1980-1988 era of Ronald Reagan’s US presidency was a rather dead period during which the US lack of motion was not compensated for by strong leadership from others. A ‘wind of change’ began with the 1998 Birmingham Summit organized by Tony Blair. Blair is one of the only leaders to have organized two summits, and this analysis of the Gleneagles is a good portrait of Blair’s organizational skills and the high altitudes of the UK government. As John Kirton writes of Blair “With nine years of continuous summit experience, he was determined and well positioned to mount an unusually strategic, self-confident and ambitious plan for Gleneagles in 2005.”

Blair brought back the summit to a narrow focus of two topics from the previous agenda’s that had started to resemble that of the UN General Assembly. Blair chose to deal with one issue — Africa — and added climate change because he knew the issue important but could not really invest time and energy on two issues. All summit meetings depend on the quality of preparation by key staff members. The G 8 have developed a pattern of having one person per country in charge of preparations — called a sherpa after the Nepalese guides who lead up Mt Everest. Blair was well served by his sherpa, Sir Michael Jay who had much diplomatic experience. Blair was also fortunate to have Gordon Brown as his chancellor of the exchequer, for whatever the personal relations of the two men by that time, both Blair and Brown were in agreement on policy toward Africa. Often there is tension between the pledges that leaders make at summit conferences and the budget managers of the different countries, resulting that pledged funds are often never paid out.

Blair and Brown were also in agreement that there should be large public support for the African policy and encouraged a dynamic NGO coalition “Make Poverty History” along with concerts in each of the G 8 countries — the Live Eight — led by Bob Geldof and Bono. On the policy front, Blair helped to organize a top-level Commission for Africa of 17 members which held hearings with many groups in Africa as well as having interviews with African political leaders. The 427-page report Our Common Interest remains a good overview of African issues and difficulties.

As we know from recent hunger riots, poverty has not been made history, and there are still deep structural issues in any sustained development in Africa. There are weaknesses in any self-selected steering committee of the world society, but no alternative has yet come into place. Thus because they are not yet fully institutionalized, the G 8 meetings merit attention. This study, which is part of a series on global finance, is a good guide and merits close reading.

Rene Wadlow

Financing Development The G8 and UN Contribution. Michele Fratianni, John Kirton, Paolo Savona (Eds). Ashgate 2007

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