Global Trends by Martin Khor
Tuesday, 22 September 2009
Big week ahead for global affairs
This week’s UN
General Assembly and G20
This will be a very active week for international affairs. On Tuesday a world summit on climate change will be held at the United Nations, organized by the Secretary General Ban Ki-Moon.
It will mark the debut of United States President Barrack Obama at the UN. Leaders from dozens of other countries will also be there, and they will stay on for the annual General Assembly meeting.
Obama will undoubtedly
be the star. He will also address the UN Security Council on the issue
of disarmament. He is expected to announce the
This is bound to
be warmly welcomed, as it would mark the end of the era of his predecessor
George W. Bush who showed a disdain for the UN in general and contempt
for multilateralism in security matters in particular, as witness his
launching of the war on
Later in the week,
Obama will also chair the Group of 20 summit in
the summit will produce decisive action have been reduced in recent
weeks. This is mainly because the global financial system that had
been on the brink of collapse when the first G20 summit was held in
Moreover, the crisis
in the “real economy”, in terms of loss of GNP growth and the rapid
fall in trade, seems to have eased. The need for world leaders to
prod one another to take counter-recession measures, especially expanding
government spending through “fiscal stimulus”, was acute when the G20
That need has receded as signs of the “green shoots of recovery” emerged. However, there is also a new orthodoxy that these green shoots, especially the rapid recovery of the stock markets, are misleading and that there will likely be a double-dip recession.
Once the effects of the large injection of government spending wear off, the economy will decline again, according to this thinking.
There could of course then be further injections of public expenditure, in a kind of Fiscal Stimulus II. But the voices warning about the dangers of the ballooning of government deficits, and of the building of a new bubble that one day will burst into a new crisis, are becoming louder.
There will in other words be a limit to how much fiscal stimulus and monetary easing the governments can do or be allowed by public opinion to do. And if the economy does not take off sufficiently under its own steam because of the first emergency measures, it may dip again, and at that time the same measures may not be available at the same strength.
There is now a debate on “exit strategy,” or when and how much the governments should claw back from their extraordinary spending and bail-outs. Some leaders and experts believe the exit should start now, or soon. Others tend towards continuing the actions for some time, to avoid the danger of the economy falling again.
These differences in policy preferences are likely to be present at the G20 summit. It will probably produce popular measures (like curbing the bonuses of leading bank officials) and new regulations (such as tighter capital requirements for banks) but no fundamental systemic reform
The summit may also urge countries to continue to take expansionary economic measures, but temper this by warning against excessive actions and mention the need for exit strategies.
One area for more
heated discussion will be the rise of trade protectionism. It is here
that President Obama will take a lot of heat. Two weeks ago he authorized
slapping a 35% tariff on tires imported from
Obama has been roundly criticized by leaders and newspapers worldwide for this move.
The President is seen as pandering to his domestic constituency, namely the steelworkers’ union, which he needs to please to garner support for his domestic agenda, particularly getting health-care reform passed in Congress.
move sent shock waves around the world. There are claims and counter
Coming after a “Buy
American” clause in the
He will thus be on the defensive on this score during this week of high international diplomacy.