Abstract
The G20 is not able to move forward with reforms necessary to prevent future financial crises. Successes as in crisis management cannot be transformed into joint crisis prevention. The global regulation of financial markets, agreed upon at previous G20 summits, was intended to make the international financial system more stable and more resilient against future crises. Alas, the resultant expectations were unfulfilled. Likewise, we cannot expect meaningful steps towards a reinforcement of the global regulation of financial markets from this year’s G20 summit in Australia. At least as serious are the failure of the Doha Round and the incapability of the G20 to prevent it, despite the frequently voiced commitment to a multilateral order. The structural crisis in global regulation of today is not least the result of an asymmetric sovereignty in financial politics: States possess only marginal influence on international financial markets, but they are liable in times of crisis. The result is a re-nationalization of financial policies. At the same time, the increasingly critical perception of globalization, in particular in OECD societies, complicates the further evolution of the multilateral trade order.
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Notes
- 1.
Despite the comprehensive conditionality of the Troika, Greece continues to be a state that exercises paramount authority. When Greece defaulted in March 2012, it changed the conditions for bondholders ex-post and added so-called collective action causes. Of course, only a sovereign country can unilaterally alter contracts.
- 2.
OECD, Economic Outlook 89 database.
- 3.
Under the gold standard, the political climate was of course different. Trade unions were non-existent or much weaker, and policy makers had more freedom to set interest rates according to external economic conditions.
- 4.
For a discussion of the effects of liberalization see Eatwell (1997).
- 5.
The countries in the sample are Argentina, Australia, Belgium, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Great Britain, Greece, Italy, Japan, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the USA, i.e. the leading economies in that 120 years time span.
- 6.
Of course, China does not permit borrowing abroad, so the case is hypothetical. Today, anecdotal evidence suggests that 34 million dwellings are unoccupied in China and this surely constitutes a real estate bubble. The point is that from London and Frankfurt, an assessment of the sustainability of a boom will always be more difficult than for domestic central bankers and supervisors.
- 7.
For a detailed discussion of the motives for and the disadvantages of preferential agreements see the report of the Warwick Commission (2007, pp. 45–53).
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Dieter, H. (2016). The G20 and the Dilemma of Asymmetric Sovereignty: Why Multilateralism Is Failing in Crisis Prevention. In: Kathuria, R., Nagpal, N. (eds) Global Economic Cooperation. Springer, New Delhi. https://doi.org/10.1007/978-81-322-2698-7_3
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