The charade: will it work?

On April 2, in a matter of six hours, the G-20 leadership claimed to have set the globe on course to economic recovery. Great stuff! Not really. The G-20 bureaucracies in the ministries of finance, commerce and trade had already completed a joint plan that was formally approved by the G-20 heads of state. But the unanswered question is "will it work?"
The leaders seemed relieved because demonstrators couldnt bother them too much. Given the hike in Londons bus and tube fares, most demonstrators couldnt pay for travelling up to the Excel Center in East London, and those who did were kept almost a mile away from the conference centre. But to assume that this low level of dissent amounts to approval of what the summit concluded may be over-optimistic.
Throughout the day, TV anchors kept emphasising the fact that the summits aim was to convey to the world that its leadership was aware of its problems and also had the remedies. Of all the leaders, French president Nicholas Sarkozys post-summit remarks achieved this objective perfectly. For someone who had earlier threatened to walkout, he felt that "the results achieved were more than what we could have hoped for".
The following day, a BBC correspondent said something even more interesting. According to her "we never [until this summit] gave Asian countries so much prominence in fixing the world economy". Whether she implied that this prominence was a tactic to forestall popular criticism of the Anglo-Saxon concept of free (for all?) enterprise system or correction of an overdue distortion is what you must decide yourself.
But the night before, BBCs New York correspondent was forthright in saying that President Obama was happy at not being made a target by the G-20 leadership because he represents the country that caused the recent global financial crisis. Her feeling hints at EU leaderships forgiveness of the US government and its regulators for not reigning in its banking system that went absolutely berserk by all estimates.
The summit had three main issues to address viz. 1) support for revival of market confidence to re-vitalise trade and, consequently, economic growth, investment and employment, 2) taking steps necessary to eradicate deceit, corruption and organised malpractices in the global financial system and, 3) come up with an alternate to the US dollar as a reserve currency. To be fair, the summit addressed all three but in generality.
The G-20 leaders agreed to provide $1.1 trillion to the WB and IMF for financing development and economic rehabilitation of the developing and under-developed countries. Of this amount, $250 billion will be allocated to the IMF for economic and financial re-structuring (including issue of SRDs) and another $250 billion for securing foreign trade (presumably through performance guarantees) to counter demands for trade barriers.
In the context of strengthening financial sector regulation, the summit agreed to set up a Financial Stability Board to review financial sector practices (especially the regulation of the un-regulated hedge funds and risk-rating agencies) and accounting standards to recommend reformatory steps, but refrained from appointing a global regulator indicating that the West still wont agree to oversight by any independent authority.
The summit also decided to do away with bank secrecy and to name and shame tax havens but. While, for a start, it named only four countries (all non-European), you can hope for more names being added to this list. What exactly would be the profile of shaming and how would it punish the country for continuing with its tax-haven profile, is unclear.
It amounts to a good, high-sounding promise but given its excessive generality, bothers the ordinary. While it is obvious that that the finer details of the proposed reforms (to be worked out by subject experts) could not be announced by political leaders, they could certainly be more specific as far as the changes in the basics are concerned. This creates the impression that the charade was more of a cover-up for past incompetence.
Indeed, there was a lot of it. Whether it was incompetence or collusion with powerful interests is no longer a mystery. While incompetence can be excused, collusion, of which there is ample evidence, cant be excused. An example thereof was the abrogation of the Glass-Steagall Act. The terms numbered accounts and off-shore banking were in vogue for decades. If politicians didnt know what they meant, God help us all.
Neglect of the globalisation-generated distortions in the global economy - un-checked rise in commodity prices, over-reliance of one country on exports to another, over-dependence of the Basle-II regime on risk-ratings, deploying exchange reserves to a criminal extent in the US Dollar as the US transformed into the worlds biggest borrower, and failure to agree on WTO and Kyoto recommendations - are unforgivable acts.
Besides these, the worst was that successive US regimes kept blowing up the worlds wealth deposited with the US in fighting wars from one end of the globe to the other, and instead of stopping it from pursuing these misadventures even the EU supported the US. Although that wealth has now disappeared into thin air in the shape of smoke from US guns, the politicians seek praise for their caliber for remedying the current crisis.
These leaders havent realised as yet the extent of the damage done to peoples faith in the institution of the state and the world economy, but there are others who do. The weakest link in every economy is the quality of governance. And that cant improve unless politicians make improving it their most important objective.
In public as well as in the private sector, the quality and social acceptance of governance can make the difference. While the G-20 summit was on, the Financial Stability Forum in Geneva made some apt recommendations for revamping the current corrupt practices of the financial services sector. If implemented globally, they could make a major contribution in reviving market and saver/investor confidence.
The G-20 leaders must realise that they have little time to ensure this. IMFs Dominique Strauss-Kahn has repeatedly pointed to this fact. The charade may still work and politicians forgiven, if the final act leads to a swift improvement in governance styles that meets peoples expectations. Trickery is gradually becoming an obsolete technology. The sooner politicians realise it, the better.