As another global economic crisis looms, is it time to disband the G20?

We need to be aware that the failure to bring global finance to heel and, in fact, the encouragement given to it, have brought the world to the brink of another major crisis

Nirmala Sitharaman is attending the G20 finance ministers meeting this weekend in Riyadh. The formal name of the gathering is “Summit on Financial Markets and the World Economy.” It serves neither purpose.

Between 2011 and 2013, I covered four summits for the Hindu Business Line where I was employed at the time. The first one that I covered was at Toronto. The second at Cannes. The third at Seoul. And the fourth at Los Cabos in Mexico.

It had become clear even in 2011 at the Toronto summit, that it was a complete waste of time, for a very simple reason: Wall Street and the City of London, for whose benefit the first two G20 meetings had been held in Pittsburgh in 2009 and London in 2010, were more powerful than the 20 countries whose combined GDP accounted for 85 percent of world GDP.

Or, to refine that statement, the US got what it wanted at the first two summits in 2009 and 2010, which was gigantic bailouts. The other 19 had agreed to do the same. It was this that gave Pranab Mukherji the opportunity to run up huge deficits.

This suited the UK nicely which was a major beneficiary. But not for nothing has it been called Perfidious Albion. While it encouraged everyone else to go for huge fiscal expansion, it did the opposite and called it austerity.

Thanks, guys

After 2009 the US and UK, the two big powers in the world of international finance, having got what they wanted lost interest and G20 became an annual ritual. The one held in Seoul in 2012 talked about the development of Africa!

It will soon be 12 years since the Lehman crash of September 2008. It triggered the last global financial crisis. The best way to deal with it would have been to save the real economy and let the financial sector take care of the haircuts.

Instead, what happened was the opposite. Globally the financial sector has prospered while the real sector has shrunk.

Thus if you review what the G20 has been doing since 2010, you will come up with a big zero. Not just that. Thanks to massive fiscal expansions, fully 15 of its 20 members are in trouble.

And guess which two aren’t. The US and the UK. The Anglo-Saxon Western Hemisphere alliance has shafted the world again.

The US has unleashed a trade war, not because it believes this will lead to its industrial revival but to punish who caused its decline. And the UK has exited the EU because the City simply can’t afford to comply with the EU’s transparency directives. This suits the US, Russia and the oil rich Arabs perfectly.

File photo of world leaders meet at G20 summit

What next?

The question therefore must be asked: has the time come to disband the G20? Or is it that even if it’s not doing any good, it’s not doing any harm either? Or has it become meeting place where side deals that have nothing to do with global finance are struck?

On balance, the second answer seems the best. The G20 summits do no harm and can go on because they provide a welcome break to elected government officials.

But we do need to be aware that the failure to bring global finance to heel and, in fact, the encouragement given to it, have brought the world to the brink of another major crisis. It’s only a matter of time.

Last time there was a commitment not to hurt trade via protectionism. This time even that is gone. It’s this that our finance minister should stress on.

Twitter: @tca_tca