Catarina's World

Now the permanent stewards of the world economy, will G20 keep the momentum going by improving the global economic regime that has been crafted over the years?

Will G20 leaders from developing countries manage to make their colleagues from the West realize that in order for the world economy to work properly, there need to be advantages for the poor as well?

G20 has come a long way – the new kid on the block in 2004 is now the leader of the pack. It started as an alliance to bring democracy to world trade at the WTO talks in Cancun and has become the main permanent body in the world responsible for economic co-operation, meeting annually at the leaders level

Hopefully G20 will not forget the importance of world trade. Will G20 again, manage to have an impact on world trade? The WTO trade talks in Cancun, as you may remember, collapsed as a result of G20 demanding fairer trade. If so, what strategies will be deployed to negotiate a trade deal that benefits not only multinationals in the North but also the poor in the South? How will G20 make the world focus on making international trade rules fairer? What steps will be taken to decrease rich countries protectionist policies?

G20 is now the key player on the global scene which, at least in theory, enables it to provide the conditions for developing countries to embark on peace, prosperity and pluralism. We have come a long way from G8 to G20 and it will go further. The developing world, representing four-fifth of humanity, is now much better represented on the global scene.

Poverty does not cause terrorism – but it causes frustration and resentment that help foster the kind of atmosphere in which extremist groups can thrive. A much better, and cheaper, way of defeating extremists than war on terrorism would be to give developing countries the possibility to trade out of poverty.

Trade has been shown to be the indispensable means for poverty reduction and growth. There also seems to be a close correlation between a country engaging in open trade and ultimately embracing democracy. With 40 percent of humanity living on less than $2 a day and approximately a billion living under military style dictatorships often engaged in civil war and genocide, we should care a lot. The most striking example of the benefits of a trade oriented economy versus a closed, self-sufficient one is the two Koreas. At the end of the Korean war in 1952 they were both extremely poor. And how North and South Korea have developed since then under their different systems is well known.

What will G20 do to craft a fairer world trade order? Most Westerners would like a fair global economic system. If, for instance, the issue of access to life-saving Aids drugs were put to a vote, the overwhelming majority would not support the position of Western pharmaceutical companies. The power of special interests is high – but will it still be if trade moves up the political agenda in G20? And once that has happened, will people in the West agree to anything that asks the poorest people in the world – the billions living on less than $2 a day – to pay the price? Will G20 leaders from developing countries manage to make their colleagues from the West realize that in order for the world economy to work properly, there need to be advantages for the poor as well? That’s the big question isn’t it ,and my hope is that they will succeed so that we can finally unlock the benefits of the world economy for all.

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When democracies loose economic power democracy itself is weakened. Already now China has the third largest economy in the world and within 5-7 years it will be the main producer of goods globally.

Hu Jintao may be shorter but China has the upper hand

The US on the other hand, has a huge budget deficit and is already borrowing heavily, not least from China. So no wonder China is already starting to show its power.

At the Copenhagen climate summit Obama and many other leading heads of state took part. China however, sent an insignificant deputy foreign minister with no ability to take decisions without confirmation from Beijing. The Chinese government also protest against US actions with a new vigour and confidence.

China continues to produce and Westerners keep on consuming on borrowed money, not least from China, which is an equation that doesn’t add up. Soviet communism declined because the economy didn’t add up but that’s not the case with China whose economy is capitalistic while the government keeps a firm grip on power and its people.

According to the OECD, Western countries’ debts in 2008 were equivalent of to 100% of their GDP. China on the other hand has a deficit equivalent of 21 percent of GDP. So not only is the Chinese economy performing very well, they are also partly bankrolling the West. And money talks.

Unless the democratic part of the world, like the Chinese, start saving and stop consuming on borrowed credit, democracy as a whole will loose out. The US and Europe are the worlds largest democracies and China is the world’s biggest dictatorship. It does matter who has the best performing economy in the world. To ignore that would be a fatal mistake. But for some reason it seems the West can not be bothered to make an effort to stop power slipping away. That the center of the world is moving I have known for a long time, but what surprises me is that the West doesn’t seem to do anything to stop it from happening, or at least delay it. Where’s the fighting spirit?

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