Well the G20 process – which many said would “redesign capitalism” – has now finished. Various agreements were reached, which are predictably being touted as “historic”. Some of the main points from summaries here:
Bankers’ pay and bonuses will be subject to stricter controls
A new Financial Stability Board will be set up to work with the IMF to ensure co-operation across borders and provide an early warning mechanism for the financial system
There will be greater regulation of hedge funds and credit ratings agencies
A common approach to cleaning up banks’ toxic assets has been agreed
The world’s poorest countries will receive $100bn extra aid
G20 countries are already implementing the biggest economic stimulus “the world has ever seen” – an injection of $5tn by the end of next year
and here:
But the biggest changes in the IMF will come after 2011, when it has been agreed that there will be a review of the voting structure. That could lead to the US losing its veto power, while China and other emerging countries get a bigger voice…
In return, China will be asked to lend some of its reserves to the IMF – and will continue to push for the idea that the SDR will become a real reserve currency, ultimately replacing the dollar.
The changes to the resources and the role of the IMF are historic and perhaps the most important outcome of the G20 summit. But it must be borne in mind that providing more resources for the IMF can be only a short-term solution to the immediate crisis now engulfing developing countries.
It is no substitute for a fiscal stimulus, as the money is loaned and must be paid back. Nor will it counter the need for additional development aid to counteract poverty. But it is a move towards a more global system of international finance.
Sounds like rearranging the deck chairs to me.
What do you think? And how would you have “redesigned capitalism”?
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