Radical Economic Restructuring Needed, But Not Just Any Version Will Do

PITTSBURGH - The G-20 Summit that opens today is unlikely to
achieve much when it comes to restructuring the global economic
order. That's good news for workers, farmers, consumers and
citizens.

What's good about inaction on the part of the leaders of the
world's wealthiest nations? While there is no question that a
radical restructuring is needed, it must be the right
restructuring.

In the midst of the nastiest economic downturn since the Great
Depression, and with so many unaddressed social and environmental
challenges weighing on the planet, the necessity of finding new
ways of organizing and managing the economic affairs of nation
states and global trading and regulatory regimes should be evident
to even the most nearsighted neo-liberals.

But multinational bankers and corporatists that contributed so
mightily to the current crisis are busy peddling more-of-the-same
"solutions" that could actually make matters worse. For instance,
one of the great debates going into this week's meeting of leaders
from wealthy nations such as the U.S., China, Germany, Japan and
Great Britain has been over how to develop an international
framework for what the powers that be define as "sustainable
development."

The thing to remember is that, in the world of the global
economic elites, "sustainable" has a different meaning than in does
at a Friends of the Earth rally or Madison's "Food for Thought"
festival.

The high fliers at the G-20 want to manage international trade
and competition in a manner that keeps banks and corporations on
steady growth trajectories - no matter what that means for working
families, small farmers and the poor of the planet.

In fact, one of the prime debates going into the summit had to
do with a plan to set up a new system to manage trade between
countries that would have what the Financial Times describes as "a
powerful enforcement mechanism ... to fine or punish countries that
built up the sort of large trade surpluses or deficits that
contributed to global trade imbalances."

Reducing trade deficits, like those experienced by the United
States since this country bought into the free-trade dogmas of the
1990s - via the North America Free Trade Agreement, our embrace of
the World Trade Organization and the enactment of permanent
most-favored-nation trading status for China - has great
appeal.

But the big problem with NAFTA, the WTO and other existing
schemes for managing regional and global trade is that they limit
the sovereignty of nation states and thus undermine the ability of
citizens to democratically define the direction of their national
economies.

A new international program, established by the G-20, to
pressure countries with regard to trade surpluses and deficits
would further erode democracy at the national level.

For this reason, G-20 officials fretted on the eve of the summit
that "no country would cede
sovereignty on core economic decisions."

That means that the G-20 won't produce the "new world order"
that many mandarins of the old economic order would have
preferred.

Instead, what's likely to be agreed to is what British Prime
Minister Gordon Brown describes as "a compact" that might develop
what G-20 negotiators imagine as "a process of annual peer review
overseen by the International Monetary Fund, (which) would nudge
countries into pursuing policies that (create) more balanced
economic growth."

From a democracy standpoint, nudging is better than the
surrender of sovereignty.

But it would be foolish to presume that peer review will, in and
of itself, produce more balanced economic growth.

If the IMF uses traditional measures to assess whether the
economic growth of a particular country is sound, we're still in
trouble.

This summit should be about establishing new standards for
measuring growth, and for "nudging" countries to develop along
lines that are genuinely sustainable.

French President
Nicolas Sarkozy plans to propose that the G-20 consider
employing metrics that better measure the well-being of nations.
Economic indicators such as the gross domestic product (GDP) of a
country would still be considered (along with trade surpluses and
deficits). But quality-of-life indicators, including measures of
social, democratic and environmental progress, would also be
considered in determining whether a country was advancing along
sound and sustainable lines.

Nobel Prize-winning economic Joseph Stiglitz refers to "a
balance sheet of society" in describing this broader notion of what
should be measured.

"In many cases, the GDP statistics seem to suggest that the
economy (of a country) is doing far better than most citizens' own
perceptions," explains Stiglitz, a key member of the international
Commission on the Measurement of Economic Performance and Social
Progress that Sarkozy established with an eye toward developing
broader measures of national progress. "(The) focus on GDP creates
conflicts: political leaders are told to maximize it, but citizens
also demand that attention be paid to enhancing security, reducing
air, water and noise pollution, and so forth - all of which might
lower economic growth. The fact that GDP may be a poor measure of
well-being, or even of market activity, has, of course, long been
recognized. But changes in society and the economy may have
heightened the problems, at the same time that advances in
economics and statistical techniques may have provided
opportunities to improve our metrics."

Stiglitz and the team assembled by Sarkozy have proposed those
improved metrics. The extent to which they are discussed and
embraced by the G-20 will go a long way toward determining whether
this summit will play a role in shaping a genuinely sustainable
global economy - one that serves all the world's people, not merely
CEOs and speculators - or be one more missed opportunity.