Goodbye to the global village?

There must be many millions of citizen-of-the-world Filipinos, OFWS mainly and those who proclaim wishing they were born nationals of some other countries. They are at home in the global village, the planet that—as far as marketing, products and the entertainment media go—has become an economic and, except for passports and visas, political unity.

They would be saddened to realize that the latest international forums of the finance and political leaders who decide how the world should be ordered have been showing that the global village, the one-world of marketing and money-driven entertainment, may be disintegrating.

That anyway is the message one gets from the recent failure of the G-20 Summit held last week in Seoul.

The G-20, or the Group of 20, is the expanded Group of 8. The original eight are the world’s most industrialized and richest countries. These countries have been deciding what the rules of international trading, the transfer of wealth from one country to another, and the valuation of the currencies of each country should be. True, there are larger bodies like the World Trade Organization and the United Nations. But in the end what the most industrialized and wealthiest economies want becomes the rule.

New system of global leadership

This was not exactly palatable to many countries—especially the poorest countries whose voices almost never get given any weight. But the second tier of rich and industrial countries also objected to the world system dictated by the Group of 8. Eventually, not only China and India, brightest of the “emerging economies,” but also Indonesia, which still has so many problems to solve like the Philippines, but is richer in resources and has a very large-population like Brazil and Mexico became G-20 members. As if the richest European countries are not yet represented, the Group of 20 also includes the European Union.

When G-8 was made the G-20 the hope was for a new system of global leadership that would fairly represent the true distribution of financial, productive, buying and consumerist power on this planet and would therefore make decisions for the good of all. The “good of all” is for buying and selling to flow smoothly and all countries to benefit from the process.

Whenever inequalities became so scandalous, putting the rich countries to shame, they—under the umbrella of the summits, would vow to aid the poorer countries by buying more of their products. These vows are in addition to vows to give the poor actual aid to improve their productivity and to banish their massive poverty.

But the richest countries have not delivered their promised aid. Their failure to deliver on their promises has been brought up in every succeding summit—with indifferent results. Most members and the poor countries then began viewing the G-20 as just another hot-air exercise.

When the 2008 global economic and banking meltdown happened, the G-20 suddenly became important again.

Its members quickly decided on how to act collectively and be bound by rules to keep the crisis from turning into another Great Depression and from destroying the global system. To put down the fire, which the rich countries’ banks and stock exchanges (specially Wall Street) caused, the rich countries and most of the emerging economies and the EU cooperated—to save their own banks and their largest corporations.

But as the crisis abated, the quest for a better way to govern the world financial, trading and economic order, got pushed aside again. The 2009 G-20 Summit proved to be as ineffective as the previous annual ones. And this one in Seoul has once again proved that the G-20 is not capable of imposing on its members hard decisions that would really “rebalance” the world economy, suffering from great “imbalances.”

In the Seoul G-20 Summit last week, which President Lee Myuing Bak and his administration ably managed (and became an example of how South Korea can be as efficient as China in organizing such public events), the fear that everybody was acting to protect its own economy at the expense of the rest of the world was evident. It was actually voiced in whispers and in mild tones during the discussions. But signs of the conflict between states—like the USA and China—were diplomatically evaded in the final document.

Unjust attempts to cast US as villain

Germany and China, the world’s most successful exporters, tried to make the US a villain. And China, supported by many members, tried to make the USA look bad because just before the summit the US Federal Reserve (central bank) decided to print $600 billion and pour these into the American financial system and money supply. The US was accused of doing that to drive down the value of the US dollar and reduce the value of the huge US dollar holdings of China and other countries.

Of course, the US Federal Reserve denied that this was the goal. The immediate rise of the value of dollar in money markets seems to be prove that the accusations have been unfair and that indeed pumping more money into the US market would help stimulate the sluggish US recovery.

The unfairness of this all is that the US government effort to revive the US economy—make US consumers more willing to spend—would benefit China and Germany and others in the G-20 that make a killing selling to the American people.

The great imbalance that is surfacing and is hard for the G-20 to solve, without destroying itself, is that the most active economy in the world, China, which has overtaken Japan as the second biggest economy next to the USA, has an internal system that is different from the democratic and difficult-to-manage system of the USA. America can wail and flail, pointing to China’s unfairness in maintaining an artificial low value of the renminbi or yuan. But how can the Chinese Communist Party allow the Chinese government to let the yuan rise and fall freely like the US dollar, the British pound and the EU countries’ euro (and for that matter the Philippine peso) without making People’s China lose the advantage of a state-controlled market economy?

In the end, the G-20 Summit failed to set targets to resolve the current account imbalances between countries. The delegates could only agree to have a deeper look into the imbalances next year. They seem to have agreed that the International Monetary Fund (IMF) should referee the fight. But that too is a big if—if the G-20 Summit in France in 2011 will agree to an IMF intervention.