The search for liquidity -- countries'
ability to get ahold of cash to counter the sharp financial downturn -- is
expected to highlight today's opening of the G-20 summit in London. With US President Barack Obama and others
promoting large economic stimulus packages, issues of protectionism are
complicating the debate among the industrial countries.
say that for developing countries, it is most important to boost trading ties
so that despite the fluctuations in global values of commodities and raw
materials, these nations will be able to sell their goods to rich nations and
trade among themselves to generate income.
Economist Roger Bate of Washington's American Enterprise Institute (AEI)
explains what is at stake for
African countries at the London G-20 summit.
we're not buying the few things that they can sell well to us, it doesn't
really matter how much finance there is out.
They're not going to thrive. So
ultimately, for poorest nations of the world, it's to ensure that protectionism
does not rear its head, not only in Europe and the United States and in Japan,
but more importantly, in fact, between those nations, because the highest
tariff rates are between the poorest nations, and those can be easily ramped up
without being reported on. So that's the
kind of key policy environment I'd like to see discussed," he said.
host, British Prime Minister Gordon Brown, said yesterday that because of
globalization and pressures generated by the transnational mortgage crisis, a
whole new world of remedies must be pursued.
Economist Roger Bate says that such solutions as the realignment of
financial structures will not translate down to developing countries as readily
as they will be able to feel the impact of trade incentives and secure backing
from the richer countries.
of the sophisticated changes in the financial architecture related to the
regulation of financial markets will have very little impact on those
countries. Other areas in terms of
financial assistance, in terms of more direct aid, particularly in the area of
trade, will obviously have greater impact on those countries. And across Africa, I think the most important
thing is that the African nations are able to trade among themselves, but also actually
to increase their exports over the next two to three years into western
countries. And trading globally into
Asia as well, because if they can't do that, with the fluctuations in commodity
prices, which is very difficult for African nations to manage -- and frankly,
with global prices for most of these things, they can't manage the price -- it's very difficult for them to manage the
process of knowing what new investments to put in place. That volatility is going to be hurting them,
and I'm sure it already is. And we can't
stabilize those markets very easily. So
probably, the most important thing is that there is consistent support for
those markets in terms of continuing to buy not just the finished products, but
also the raw materials from these countries," he explained.
Africa is the only African member of the G-20 grouping, although other countries
and regional trading blocs are expected to be attending on the sidelines of the
London meeting. Bate says South Africa
will be representing the financial interests of the continent to a certain
extent, but that as one of the more wealthy powers on the continent, they are
more likely to endorse the interests of the large commodity market traders they
Africa will present itself as representing the interests of African nations,
and to a certain extent, they will. My
concern with South Africa is that they will probably join the rhetoric about
how the financial crisis was caused in America and how they are blameless in
this, and be asking for financial support, not necessarily in the most
appropriate ways. They will be asking
for increasing aid for across the continent.
And I think that they may not be as positively proactive as I would like
to see," he observed.
of protestors have filled the streets of London near the summit to demonstrate
against poverty, unemployment, poor housing, and mistreatment of the
environment, as well as the global recession.
The AEI's Roger Bate, who has just returned to Washington from London,
says much of the anti-G-20 rhetoric has been "senseless," and "a lot of the
ranting that is going on is just incoherent." He says the challenge to summit
participants is to adjust banking regulations, but resist making massive changes to the entire system of capitalism.
it just descends into rabble-rousing and calls for protectionist policies and
the failed policies of what happened across much of the world from after the second
World War until the late 1970's, then we really will be going backwards. And I think that's the biggest danger. And
ultimately, that's the biggest danger for African nations, is that we always
provide cover for those countries which are following failing policies for 30
years by saying, 'this is where the west should go now.' It's not that there have never been any
problems with capitalism. The capitalist
system has always been problematic. It is never as perfect as people have
wanted it to be. But what we have is a crisis
of the banking system – not a crisis of property rights structures and the rule
of law that have brought the wealth to western nations and will bring wealth to
African nations. And if we throw out the
baby with the bathwater, that really will be a disaster," he advised.
Roger Bate denies the current crisis
is a world depression. Rather, he calls
it a banking crisis, which needs restructuring and significant regulatory changes
to sort out the missteps and financial weaknesses. Wednesday in London, demonstrators shattered
windows at the venerable Bank of Scotland as world leaders began arriving for
their working sessions that begin today at the summit.