A plu­to­crats sum­mit?

Financial Mirror (Cyprus) - - FRONT PAGE -

At an of­fi­cial din­ner in Wash­ing­ton, DC, ahead of Novem­ber’s G-20 Sum­mit in Bris­bane, Aus­tralia-born me­dia mogul Ru­pert Mur­doch lec­tured min­is­ters on the dan­gers of so­cial­ism and big gov­ern­ment. A fer­vent op­po­nent of Aus­tralia’s car­bon price, and a bat­tle-har­dened op­po­nent of US Pres­i­dent Barack Obama, Mur­doch lauded the virtues of aus­ter­ity and min­i­mal reg­u­la­tion, and railed against the cor­ro­sive ef­fects of so­cial safety nets. The min­is­ters were in Wash­ing­ton to at­tend the An­nual Meet­ings of the In­ter­na­tional Mon­e­tary Fund and the World Bank, where they at­tempted to thrash out dif­fer­ences and es­tab­lish common ground be­fore the up­com­ing sum­mit. The tone set by Mur­doch, how­ever, sug­gests that a con­sen­sus on sus­tain­able, in­clu­sive growth will be hard to achieve.

Mur­doch’s com­ments are in keep­ing with views ex­pressed by his friend, Aus­tralian Prime Min­is­ter Tony Ab­bott, and Ab­bott’s cur­rent ad­min­is­tra­tion. In Jan­uary, for ex­am­ple, Ab­bott in­formed a star­tled Davos con­fer­ence that the global fi­nan­cial cri­sis was caused not by un­reg­u­lated global mar­kets, but rather by too much gov­er­nance. This was cer­tainly news to the fi­nance min­is­ters who had spent the past few years strug­gling with the toxic fall­out from fi­nan­cial-sec­tor ex­cess.

Viewed in the con­text of such com­ments, one can bet­ter un­der­stand Aus­tralia’s re­fusal to put is­sues of cli­mate change and in­clu­sive pros­per­ity on the Bris­bane agenda. Of course, stim­u­lat­ing global growth is a big enough chal­lenge in it­self, even with­out con­sid­er­ing in­clu­sive­ness or en­vi­ron­men­tal sus­tain­abil­ity. The IMF’s gloomy growth forecasts at­test to that. And many pol­i­cy­mak­ers view Aus­tralia’s G-20 chair­man­ship as an op­por­tu­nity to reen­er­gise and re­fine the group’s mis­sion to boost global growth, cre­ate jobs, and raise liv­ing stan­dards. G-20 fi­nance min­is­ters have al­ready de­cided on a 2% tar­get for an­nual growth through 2018, and are sift­ing through more than 900 pro­pos­als for struc­tural re­forms in or­der to achieve this.

What re­forms G-20 mem­bers pro­pose in Bris­bane, and how se­ri­ous they will be about im­ple­ment­ing them, re­mains to be seen. The big­ger chal­lenge, though, is hit­ting those growth tar­gets in a sus­tain­able and in­clu­sive way. If struc­tural re­forms are not done right, the Bris­bane Sum­mit will re­garded as a fail­ure.

Struc­tural re­forms, in which cer­tain in­ter­ests are sac­ri­ficed for the greater good, will al­ways be con­tro­ver­sial and dif­fi­cult to ex­e­cute. But when such re­forms in­volve sac­ri­fices by or­di­nary cit­i­zens and ben­e­fit so­ci­ety’s most priv­i­leged groups, po­lit­i­cal grid­lock and in­sta­bil­ity in­vari­ably follow.

Over the past two years, aca­demics, reg­u­la­tors, econ­o­mists and fi­nan­cial in­sti­tu­tions have all linked the sec­u­lar stag­na­tion in de­mand with greater in­come in­equal­ity. It is ironic that, at a time when many in the de­vel­op­ing world are en­ter­ing, or as­pire to en­ter, the emerg­ing mid­dle class, wealth in much of the de­vel­oped world is be­com­ing more con­cen­trated at the top.

In­deed, in­equal­ity of out­comes both in emerg­ing and ad­vanced economies has in­creased within and across gen­er­a­tions. Aus­tralia’s re­fusal to dis­cuss in­clu­sive growth in Bris­bane may please plu­to­crats like Mur­doch, but talk of un­reg­u­lated mar­kets, lower taxes, and the re­moval of so­cial safety nets strongly in­di­cates that the sum­mit will of­fer no sub­stan­tive poli­cies aimed at re­duc­ing in­equal­ity.

With just days to go un­til the Bris­bane meet­ing, the G-20 is ig­nor­ing the main long-



be term threats to the global econ­omy. As the Bank of Eng­land’s Gov­er­nor Mark Car­ney (who I as­sume also heard Mur­doch’s lec­ture) re­marked ear­lier this year, “[U]nchecked mar­ket fun­da­men­tal­ism can de­vour the so­cial cap­i­tal es­sen­tial for the long-term dy­namism of cap­i­tal­ism it­self.” IMF Man­ag­ing Di­rec­tor Chris­tine La­garde re­cently put it more starkly, not­ing that the world’s 85 rich­est peo­ple con­trol more wealth than the world’s 3.5 bln poor­est peo­ple, and that this de­gree of in­equal­ity is cast­ing a dark shadow over the global econ­omy.

In­equal­ity is not a fringe is­sue. Com­bat­ing its rise is es­sen­tial to achiev­ing sus­tain­able eco­nomic growth and po­lit­i­cal sta­bil­ity. The G-20’s real power is to high­light such chal­lenges and gen­er­ate in­formed de­bate on the is­sues as a pre­lude to ac­tion. The ques­tion now is which leader in Bris­bane, if any, will grab the global mega­phone and speak out.

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