Could global growth be stunted by the fact that almost half of the world’s wealth is owned by less than 1% of the population? In other words, the wealth of 85 people is equivalent to that of half of humanity (3.5 billion people), as described by Oxfam International’s report, Working for the Few: Political Capture and Inequality.
The Pope, Barack Obama, the World Economic Forum (WEF) and the IMF decry inequality. The WEF climbed on the bandwagon, declaring that extreme inequality is a top global risk; the IMF endorsed redistributive policies, stating that they seem to have helped support “faster and more durable growth.” But, in fact, the lack of such policies can destroy economies. Nevertheless, the G20 (and the institutions it controls) not only ignore the need for redistributive policies, it actively promotes policies that exacerbate inequality, as this issue of the "G20-BRICS Update" describes.
The G20 is producing too many reports and too little progress. But, to its credit, it is trying to curb the tax avoidance and evasion which rob developing countries of over $1 trillion per year. At the 2013 G20 Summit, Leaders committed to automatically exchange tax information with each other by the end of 2015, but it will take mighty political will to implement this commitment and related ones. The authors in this issue identify dynamics that foster inequality: suppression of returns to labor; speculation in risky infrastructure assets; trade and ﬁnancial liberalization; and mega-project development.
Our latest G20 Update includes pieces by Sharan Burrow, Manuel Montes, Jayati Ghosh and Mzukisi Qobo. In her article, “The Global Social Crisis: the Labour 20 Challenges the G20 to Respond,” Sharan Burrow, General Secretary, International Trade Union Confederation (ITUC), calls on the G20 to resume the kinds of economic stimuli that produced a 5% global growth rate in 2010. Ironically, the G20 aims to raise its collective GDP by more than 2% above the current trajectory for the next 5 years. But, since the 2010 growth rate was 2% higher than the 2013 growth rate of 3%, the G20 could resume its stimulus policies and help get people back to work. Burrow identiﬁes the approaches which can reverse the rise in global unemployment, now at more than 202 million, and to begin to ﬁll the 55 million jobs gap in G20 countries.
In his article, “If You Build It, Will They Come? [If the G20 Helps Build Platforms for Trading Infrastructure Assets, Will Investors Care?]” Manuel F. Montes, Senior Advisor on Finance and Development, the South Centre states that decades of ﬁnancial deregulation have made it impossible for developing countries to receive the long-term funding for infrastructure they need. Now, instead of re-regulating ﬁnance, as it should do, the G20 is intervening in markets in an effort to mobilize investment of pension funds in infrastructure assets in emerging and developing countries. Montes warns labor unions about the safety of their pension funds in such ventures and warns governments of G20 schemes which could result in speculators using this new “asset class” to earn excessive proﬁts at their expense.
In her article, “What will it Take? Achieving sustainable industrialization in the BRICS and other developing countries,” Jayati Ghosh, Professor of Economics, Jawaharlal Nehru University (India), identiﬁes ﬂaws in the current growth model: the impact of ﬁnancial liberalization; the obsession with export-oriented growth model; and inadequate attention to ecological imbalances. She contrasts this model (which fails to produce adequate employment growth, among other things) with the potential for a different set of policies aimed at “sustainable industrialization.”
In his article, “High Ambitions, High Risks: the Programme for Infrastructure Development in Africa (PIDA),” Mzukisi Qobo, Senior Lecturer and Deputy Director, Centre for the Study of Governance Innovation, University of Pretoria describes how PIDA is developing continental infrastructure, especially in energy, transport, and water sectors estimated at US$360 billion up to 2040. These mega-projects provide a destination for rising infrastructure ﬁnance from external actors, such as the World Bank (see page 2); new institutions, including the BRICS Bank; and countries, such as China and India. Qobo concludes that PIDA could become a “bane for the continent,” if it fails to create and nurture the governance mechanisms to ensure that infrastructure projects are undertaken with greater sensitivity to the environment and social inclusivity. If, as the World Bank claims, Africa’s infrastructure funding gap is $93 billion per year until 2020, then the G20 should take note: the continent’s recovery of an estimated $50 billion per year in illicit ﬁnancial ﬂows would go a long way toward ﬁlling that gap.
Read the latest issue of the G20 and BRICS newsletter and earlier work of the Boell Foundation on the G20:
Director, Economic Governance Program
Heinrich Boell Foundation
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