Published Canberra Times, by Luke Fletcher - Policy Coordinator for Jubilee Australia

An interesting thought experiment: what would G20 leaders do if they wanted change that would serve the needs of the entire world (including its most vulnerable), rather than just their own constituencies?

One: If it was truly concerned about a troubled global system, the G20 would undertake serious, rather than half-hearted, global financial regulation. For years, the same financial deregulation that sparked the current crisis has encouraged non-transparent financial actions, such as the constant stream of illicit capital flows leaving poor nations for rich ones – estimated at over US$500 billion ($A715 billion) every year.

Multinational companies operating in developing countries commonly under-declare their profits – reducing the tax burden for the company while depriving the hosting country of the full value of its own resources. Corrupt elites in developing countries squirrel away their wealth and perpetuate the impoverishment of their own people. This capital flight is usually lodged in developed country banks and tax havens under developed country jurisdiction with impunity and secrecy.

To address these huge problems, the G20 would, for instance, agree to laws which curtail the power of the ‘shadow’ banking system. It would lift the veil of secrecy that protects tax havens, and require that the data which describes their trading and ownership be placed on public record. The G20 would also provide for better legal instruments, and the means of their enforcement, for the identification and repatriation of stolen assets by corrupt elites.

Two: The G20 would reform the larger global financial architecture, like making the International Monetary Fund (IMF) democratic and transparent and instituting a fair and transparent international debt workout mechanism.

Despite the fact that it bears more responsibility than any other institution for the creation of this crisis, the IMF’s power looks set to increase. The Fund, cheered on by the World Bank, has for the last 25 years pushed through the liberalisation of financial markets – part of its problematic package of economic reforms that also included fiscal austerity and trade liberalisation, and which, in more cases than not, has caused more harm than good in poor countries.

If the G20 was truly concerned not to repeat history, it would surely see the democratisation of the IMF as a key insurance policy against the IMF ever again pushing questionable advice and policies on poor countries. The IMF is currently controlled by the richest countries (the US still has a veto power), and the small changes afoot to give emerging giants China and India a greater voice are mere window dressing.. The G20 would go far beyond this and support the introduction of a secondary tier of voting rights, in addition to financial share, that gives all participating countries equal voice on major decisions; and it would doubtless support steps to make the institution more transparent.

The G20 would also take steps towards the implementation of a fair and transparent international debt workout mechanism. Such a mechanism, whereby creditors and debtors meet in an impartial forum to examine the nature of past transactions and agree on the settlement of accounts, would be seen as a vital element of global financial architecture reform. It would end, once and for all, the leverage that large debt burdens hold on many poor nations, and would force creditors to adopt more responsible financing practices.

Three: There are steps that the G20 would take to ensure a more just and equitable global trading system and business environment. The G20 would compel multinational companies to report transparently as to the nature of their subsidiaries, and move toward the introduction of country-by-country accounting standards, in order to ensure that these companies disclose profits made and taxes paid. Additionally, it would force multinationals to put governance, human rights, social and environmental concerns at the core of their engagements with developing countries, by, for example, requiring them by law to adhere to the UN Principles for Responsible Investment. 

In this time of financial crisis, it is incumbent upon all of us to tell our leaders that a return to business as usual is not acceptable. This crisis presents a great opportunity for us, as a community of nations, to take the first steps toward the creation of a fairer world.

Unfortunately, we should not expect the G20 to initiate many of these changes to bring about a more responsible global economic system - a particular shame for Australia given our Prime Minister is such an enthusiastic proponent of the G20. But it has been a valuable thought experiment nonetheless.

Luke Fletcher is a campaigner for Jubilee Australia, a non-profit, non-government organisation campaigning for the cancellation of harmful debt accumulated by developing countries and a more fair and equitable world.