The G20 summit held in Seoul on November 11 and 12 has failed to reach a concrete agreement to address the rising fears of a currency war. It has also failed to bring out guidelines for curbing trade imbalances as envisaged by the world countries amid discouraging conditions of multi-speed growths for various economies. The fifth communique issued by the G20 countries since the financial and economic crisis broke out in 2008 repeats its rhetoric of addressing concerns of the most vulnerable, providing social protection, decent work and also ensuring accelerated growth in low income countries, or least developed countries.
Jobs at Heart of Recovery!
The communique said the G20 countries were determined to put jobs at the heart of the recovery, which is just a big lie. The leaders of the developed countries and the emerging market economies (EMEs) are not even slightly ashamed to proffer this empty commitment, where at least 100 million have been stripped of their jobs and 120 million human beings have been pushed into hunger after the unprecedented worst global economic crisis since the Great Depression was unleashed by the greedy global financial conglomerates.
There have not been serious attempts to create jobs throughout the world; instead, jobs are lost every day as a result of the austerity measures in European Union countries and jobless growth in the US. A number of economists and analysts, along with Nobel laureate Paul Krugman, have dubbed the growth that we are witnessing as “jobless growth.”
BBC news has quoted Obama as saying there should be no controversy about fixing imbalances “that helped to contribute to the crisis that we just went through.” Obama must have lost his senses or have suffered from short term dementia, G20’s first communique after the financial crisis, and even subsequent communiqués have acknowledged that the financial conglomerates and their risky, greedy financial business practices have created the crisis. There was no mention of trade “imbalances” contributing to the crisis in the G20 communiqués, yet Mr. Obama dared to spell it. If Obama likes to fix imbalances, all well and good, but this kind of miscalculation only contributes to rising trade tensions.
The US and the EU have been accusing China for unfair undervaluation of its currency, the yuan. The US has been particularly critical of yuan value. Its argument has been that China is able to amass trade surpluses due to the artificially low yuan value. It says the yuan should be allowed to appreciate freely, in line with the market movements. But Germany recently accused the US of announcing $600 billion of QE2, which it says is an indirect measure of devaluation of the dollar. The US has come under attack also from Brazil, India, China, Russia and Japan for its QE2, as it would encourage hot money to flow into emerging economies, and even developed economies, putting upward pressure on their currencies, thereby providing a competitive advantage to US exports. The QE2 move has intensified fears over the supposed currency war.
In this background, currency war and trade imbalances have occupied the top priority in the main agenda of the G20 Seoul conference. A separate meeting during the G20 conference between the two main constituents of the currency war, the US and China, did not produce any solution. Even the European leaders have been called in to help produce a solution to the ongoing heated debate over currency devaluations, but to no avail.
They finally have come out with vague statements of framing “indicative guidelines” to tackle trade imbalances. They have said they agreed to avoid “competitive devaluation” without stating any concrete steps to achieve that goal. The leaders have reportedly vowed to follow market determined exchange rates referring to China’s yuan value.
They have pledged not to resort to competitive devaluation, perhaps a reference to the recent announcement of the QE2 by the Federal Reserve. In a bid to address the concern of the EMEs over the flow of hot money, they have been allowed to impose “carefully designed” control measures. One must wonder wht these measures will look like. Perhaps the EMEs need to be careful so that they do not disturb the free flow of globalized capital in the name of curbing hot money. And yet, they should curb hot money flow to prevent inflation, price rises and thus popular discontent in their countries. It is a very difficult task, indeed. And that is the fate of the EMEs resulting from their leaving G77 and becoming members of the G20.