Dr John Chipman
Sanjaya, I think we were all interested in your assertion that the principle of a more widely‑based global ‘board of management’ has come to stay. We are perhaps even more intrigued by your earlier observation that new economic thinking, coming from new economic centres of power, might itself be a metric of such economic power, and perhaps more relevance than other indices of economic strength if intellectual innovation on economic and financial issues were to come from centres of economic power. That might be something – however difficult it might be – that we would like to measure in understanding real power and, to use a phrase from our debates yesterday, ‘real influence,’ since the spread of ideas is also an expression of the importance of soft power.
We have had, in Sanjaya’s presentation, an expression of the tension between working towards global governance structures, while hedging against their potential failure by building strong regional ones. That is another issue for debate. It is for you to contribute to that debate, so I will now take expressions of interest for contributing to that debate. I see the legal counsel for Goldman Sachs smiling, so if she wishes to represent Goldman Sachs intellectual reputation that has been touched upon today, I will certainly give her the floor for that, or indeed any other purpose she might have. Jean‑Pierre Lehmann first.
Jean-Pierre Lehmann, Director, The Evian Group; Professor, International Political Economy, International Institute for Management Development
Thank you very much. I first have a question for Carl Bildt, but I would like to get the reaction of Sanjaya Baru and Geoffrey Allen. Would it make much sense, for the composition of the G20, to have one European representative? You are suggesting more. What was the Lisbon Treaty all about? Should we not just send Herman Van Rompuy and Baroness Ashton? I would like to know how the Australians and the Indians would see this transformation.
To Sanjaya Baru: you talked about ‘Look East’ and you talked about ‘Look West,’ but I don't know whether the ‘Look East’ included Bangladesh and the ‘Look West’ included Pakistan. I think I am right in saying that the region of South Asia is the one that has the lowest share of inter‑regional trade. Should that not be a priority, both from an economic perspective and from a security perspective? Thank you
Dr John Chipman
Thank you. Now to Professor Park from Korea, you might want to say a few words about Korea’s G20 prospects given what has been said.
Dongsun Park, Ambassador for International Economic Cooperation, Republic of Korea
Thank you very much. On behalf of my government Korea, I would like to express my deep thanks and respect to the three most prominent speakers on the podium, Minister Bildt, Chairman Allen and Dr Baru. It is no exaggeration to say that every single line of their speeches deserves our attention and appreciation and certainly from Korea, the chair of the November G20 summit.
More than 170 countries are not members of the G20 but I think their views should be reflected. We may call those 170 countries an important majority and the sound of the silence is and should be the loudest of all to all of us. Thank you Mr Chairman.
Professor Igor Yurgens, Chairman of the Board, Bank Renaissance Capital; Executive Board Chairman, Institute of Contemporary Development; IISS Council Member
I have two comments and one question. Comment number one is about your idea of regionalisation versus globalisation governance. If we are democratic societies and a democratic world, when you ask a Basque person, ‘What is your interest in life?’, the Basque person would say, ‘My interest, together with the interests of Spaniards and Moroccans, is to live in peace and to trade here and I do not care what is going on in Strasbourg’ and if you talk to the Biarritz French citizen, he would say the same thing. If you go to St. Petersburg and you ask people there, ‘What is your life like?, they would say, ‘I do not care what happens in Vladivostok but I do care to put my family in the car and drive them to Finland for Christmas’, if you know what I mean. In terms of this first observation, if we are focused on people’s wishes and wills then it is regionalisation, rather than globalisation but regionalisation should definitely take care of global issues.
Observation number two is that during the month of April, Russia did two historic things. Firstly, for the first time in 250 years, it apologised to Poland for happened in Katyn and the Russian Empire, the Soviet Union or new Russian has never apologised for anything. It was not only the apologies but a very serious historical gesture vis-à-vis Poland. Secondly, for the first time in 40 years, President Medvedev signed the limitation of the shelf with Norway which I know for sure was a very difficult gesture for the President because of the resistance of many interesting circles in Moscow.
From this point of view my question to Carl Bildt is given these two gestures, a definitely improved atmosphere in the Nordic area and the fact that I agree with him 100% that regionalisation of this area which is the eighth largest GDP as well as Russia which is the seventh largest GDP on purchasing power parity, PPP, can we make a gesture in the interregional corporation of the northwest of Russia, Nordic countries and Baltic countries now or would that still require another step from the Russian side? Can we definitely start involving, whether in the Nordic dimension programme or any of the other programmes, those nascent regions of Russia into this orbit because on intellectual and personality levels, new governors in the regions of St. Petersburg, Pskov, Novgorod and Kaliningrad are interesting people who are willing to do that?
Lord Skidelsky, Chairman, Centre for Global Studies; Member, House of Lords, UK; Emeritus Professor of Political Economy, University of Warwick
This is a comment and a question, addressed to Dr Baru. At the end of the general theory, Keynes wrote that ideas are much more important than vested interest and he talked about practical men being slaves of dead economists but world economics is a western invention; economics is a western invention. It has been dominated by the west and since the Second World War it has been dominated particularly by the US. Europe has declined as a centre for economic thinking; where is the once famous Swedish school and all Austrian economists are in the US. My question really is what signs of intellectual revival are going on in these new centres of power? Is there genuine new growth, both in economic thinking and in philosophy and politics or will the new centres have to continue to take their intellectual resources from the west?
Alison Smale, Executive Editor, International Herald Tribune; IISS Council Member
The question is to Carl Bildt. You spoke very eloquently on a number of scores but I was a little surprised that the mention of the vast population growth that we can expect in Sub-Saharan Africa was not accompanied by any consideration of what might happen to pressures on immigration into Europe. This was briefly touched upon in our discussions yesterday and do you see and chance that the EU might finally arrive at a fairly uniform approach to immigration which is one of the thorniest social issues faced in most European countries? Thank you.
Dr John Chipman
We are going to have a second round but I am going to ask Carl Bildt, Sanjaya Baru and Geoffrey Allen in that order and give them time proportionate to the amount of questions I think were directed to each of them so three minutes to Carl Bildt, two minutes to Sanjaya Baru and one and half to Geoffrey.
Carl Bildt
Starting with the first question concerning European representation in the G20. I counted and I think I am correct but I am not quite certain, there are now two EU representatives; the president of the European Council as well as the president of the European Commission. There is a German, a French, an Italian and then we have two gatecrashers, the Spaniards and the Dutch and that adds up to seven. That is pretty bizarre and I am indicating that is bizarre when I ask where the Nordics are. The ideal solution is obviously not to add everyone else from Europe but to go in the direction that we indicated. I would be perfectly comfortable with the constituency that is relevant being the EU and us being represented through that. I am somewhat uncomfortable with being represented by the EU and then some others being represented individually alongside the EU, it is a rather bizarre arrangement and I hope that history will pass it on to the place it deserves to be.
On Igor’s question about incorporation in the north with Russia, I am deeply in favour but you know better than me that the trend that we have seen in Russian in the last 10 years for example has been of centralisation. The governors were previously independent, they were elected, they were individuals; to take Pskov as an example, we had good cooperation with them, now to say that their purpose in Moscow is to carry it is somewhat too far but not too far and we find with regional cooperation that there has been a Moscow tendency to control it so it tends to be less regional and more centralised. We would certainly like to develop that cooperation, be that with Kaliningrad, Pskov, St. Petersburg or with Murmansk as there was a change of governor in Murmansk very recently that we alluded to.
In terms of Alison’s question regarding immigration which is a huge topic and we touched upon it yesterday, we need immigration. The Gonzales report that was out last week indicated that if we do not do anything else, in terms of demography, we would need 100 million immigrants into the European economy. That is not going to happen and that is not going to be necessary because what it also going to happen is that we are going to adjust our pension system so that people are going to work far longer and that is going to take this number down quite substantially.
That being said, there is the need for it and we do struggle with the transformation of our societies and European societies are being transformed into far more multicultural entities than was the case before. If you look at Sweden, it is a different place and we have roughly 1% of our population coming from Iraq. We have another 1% coming from Iran and this was unthinkable 15 years ago but it is now a reality and most of this integration goes fairly well, not everything but that applies to most things in social affairs. On the margins we do have significant problems but overall, it is a story of something that is working. We cannot have a situation where all of the world moves to Europe for obvious reasons and equally we do have an interest in what happens on the southern shore of the Mediterranean, the Middle East, in Iran and Iraq for these reasons to make certain that these are societies and economies that develop. The billion people south of the Sahara are often neglected; we need to engage more with them and you can say a lot of negative things about the Bush administration but they were very pro-active concerning Africa. Otherwise it tends to be us Europeans that are engaging there, together with the UN but there is no doubt that we need to be engaged. To take Somalia as an example, we have probably 40 or 50,000 Somalians in Sweden so we have a stake in the stability of Somalia.
We talked about forces; we have the Swedish Navy deployed in the Indian Ocean at the moment in order to combat piracy which is an outflow of the fact that we have an interest in Somalia which in turn is an outflow of the immigration issue. There is a huge issue that is transforming our domestic environment and our foreign policies over the years to come but where we need to be intellectually, politically and economically engaged. That is why I stress that when you discuss the economic and political future of Europe, we cannot just focus on Europe and what is within the present boundaries of the EU, you need to look at the far wider region where we have a profound interest. I am used to saying that the Muslim world is our number one neighbour, not only on the map but increasingly across the street back at home and accordingly that sort of engagement is an absolute necessity when we look ahead.
Sanjaya Baru
In regards to the first question from Mr Lehmann on the look east and look west policy, the engagement with India’s neighbours is within the framework of the South Asian free trade agreement and it is a separate process from the wider look east and look west policies. In a sense, in the South Asian region, India is a net supplier of growth to its neighbours by opening markets, by giving duty free access to the less developed countries like Nepal, Maldives etc, and also by negotiating this after with Bangladesh and Pakistan. India will always be a net supplier of opportunities to its smaller neighbours but in the look east and look west policy, we are dealing with much larger nations where we are wither equals or in some senses even demanders. We demand markets, we demand energy and therefore these are the larger neighbours with which India has been traditionally engaged for 2,000 years. Our engagement with southeast Asian goes back more than 1,000 years and as it does with the Arab world.
These larger neighbours have been neglected in the past which is what these two policies aim to re-establish but as far our own neighbours are concerned, we now have a fairly active SAFTA process moving forwards. If you see the last three SAARC summits, the SAFTA process has moved very much forward. There are some bilateral issues as many of you know between Indian and Pakistan but these are no longer problems with other neighbours and increasingly we have trade deficits with most of these neighbours so we are net suppliers of growth to these neighbourhoods.
I have actually read the 2,000 pages of Professor Skidelsky’s biography of Keynes and therefore I am honoured to answer a question from you sir. You are involved with the Institute for New Economic thinking in Cambridge and the two Indians in that process are Amartya Sen and Dr Yaga Venugopal Reddy, former governor of the central bank. I am certainly not familiar with the new thinking in China, but the new thinking in India is coming from Indians who are not necessarily based in India, Amartya Sen is based in Harvard but there are a lot of Indians who were questioning, even in the past, many of the principles on which the International Monetary Fund, the WTO and the global system was based, except that their views were either not heard, certainly not in west, but even in India, many of their views did not find a market. Increasingly, these economists and thinkers are finding a market for their views and I think their views must find a global market. I am glad that the Institute for New Economic Thinking is providing a platform for some of this thinking to find a global market.
However, at the moment, we are at the beginning of this process, I think there is supply and demand in intellectual ideas as well; when the demand emerges, the supply will come. A lot of the supply is stifled simply by the fact that there is no demand. In Korea, academic economists shape their thinking on the Korea prospects. If there is no Korea in the thinking on the kind of issues that we are today finding a market for, you would not have created those economists but I do believe that as G20 process goes forward, you will see a lot of new thinking coming forward.
Geoffrey Allen
It is really instructive that the issue of membership and inclusion and links to those who are not included was an important theme in all of our talks as we attempted to address the basic question. Critically, the issues go to two very important questions; one is manageability of a forum, not unimportant when you look at what has happened in other forums and their limits of influence, and also legitimacy which is absolutely critical. This also depends significantly on what nature the G20 ultimately takes and I think that is still a very open question. Does it have a very broad agenda? Does it have a secretariat with significant influence? Is it a forum for negotiation or just simply for coordinating conversations? Also, what are its linkages to other groups? For instance ASEAN was invited to the last meeting as an observer. We ought to note that there is very significant diversity within regions, so the prospect of regions being represented through a single voice is in itself problematic. There is also the question of other interests. Of coalitions I have mentioned the BRIC, and there is also the G77, the lesser developed economies that go beyond regional borders, but are coalitions of interest. How do they develop their agendas, how might they be represented and how does affect manageability and legitimacy?
I am sorry that I have got questions and not answers, but I believe these are all important things that need to be addressed as we proceed.
Participant
I have two quick questions – one for Minister Carl Bildt: if the Euro survives the current debt crisis that is plaguing the Mediterranean members of the EU, without a large contribution from the major economies of Germany and France, how likely is it that Sweden will join the Euro. My second question is to Minister Bildt and Dr Baru. I noticed that in your excellent presentations, both of you mentioned Iran in negative terms. While we here generally agree with your conclusions that Iran has committed human rights violations and possibly a nuclear weapons agenda, I am surprised that both of you would take the time to mention Iran without mentioning another country in the region that we are all aware of: the elephant in the room, Israel. Israel has not only pursued and acquired nuclear weapons, but also violates human rights every single day – far more than Iran. In this region, we can generally understand why Americans take the stand that they do with regard to Israel – because of domestic and political reasons – but what is inexplicable is how the Europeans have become so accepting of the gross crimes such as the collective punishment of the people of Gaza or the almost weekly death of a Palestinian somewhere in Israel/Palestine during non-violent demonstrations. Thank you.
Siddharth Vardarajan, Bureau Chief, The Hindu
A first question to Dr Baru. I am glad that you flagged the importance of the idea, because I believe that one of the problems as the World grapples with, and emerges from, the financial crisis, is the rather simplistic notion that what we have seen and experienced is simply because of absence of regulation. Regulations existed earlier, but they went away for a reason. The reason was that they were an outcome of a political economic system in which economic elites had a much greater say in decisions. Nothing that has occurred over the last year and a half - in terms of thinking about solving the crisis – has begun to grapple with questions of political power or the connection of economic and political power in the countries that produced the crisis. It is also that you raise this question because at the last IBPSA summit, and really coming from something that the Brazilians have been actively pushing, the idea that India, Brazil and South Africa – apart from being regional leaders or major developing countries – also share a certain approach towards economic systems and social responsibility. The Brazilians were keen to learn from the Indian Employment Guarantee scheme and there was much interest in Bolsa Familia. I think that this is an interesting direction in which the rising powers need to take the global discussion of economy. My last question is how we jumped from G7 to G20? Why was G13 never considered?
Professor Wang Yong, Director, Center for International Political Economy, Peking University
Thanks to the panellists for their stimulating remarks. I share the view of a sustainable globalisation and sharing leadership of the World economy. I believe we are one single global economy. We need to restructure international governance institutions and give more incentives to the G20 and other mechanisms. However I believe that two key things are needed to consolidate the political foundations of the global economy. One is to build a consensus. We need to work more on striking a proper balance between idealism and pragmatism. Between a sense of fairness and the need for efficiency. Between the regulation of state and market dynamism. The other key is a strategic understanding and trust between the developed world and the developing world – particularly between the USA and China. That is what this forum is discussing. By the end of this month the USA and China will launch a new round of strategic and economic dialogue. I hope that the two countries can walk together, better and more along these two lines. These ideas are my question and I ask the panellists to comment on them.
Daniel Price, Partner, Sidley Austin LLP; former Assistant to the President and Deputy National Security Advisor for International Economic Affairs, US
Putting this together in November of 2008, we were not dealing with a clean sheet of paper. The intention was to organise a summit of World leaders that was broadly representative and would enjoy legitimacy beyond the G8 while understanding that the financial crisis was affecting many countries other than the developed countries. Essentially, President Bush took the decision to elevate an existing finance ministers' forum to a leaders' forum. As the Foreign Minister noted, notwithstanding the attempt to keep it to that list, others appeared. I completely agree that it would be good to rework the composition of that group, but there being no constitutional documents, it falls to the leaders of the summits to decide who to invite. We know the direction it has gone: it has not shrunk, it has grown. Unless the group itself or subsequent leaders take the decision to change it, I fear it will only grow. Second on mission. The biggest threat to the G20 in my view is mission creep. That is, that the agenda broadens and it departs from the principle focus of financial regulatory reform and either macroeconomic rebalancing or the addressing of rebalances. I very much agree with Montek who we heard in the keynote. It would be wonderful if leaders could gather and say we had an interesting discussion and we made progress. However, every host and summit leader wants to have “deliverables.” Therefore two of the challenges to both composition and to mission are sadly going to be driven by the political imperatives of the host. Thank you
Geoffrey Allen
I will be very brief – I think Dan Price has given the answer to the question of the G20s evolution. It is inevitable that the G20 will grow and its nature will change. I think it will expand in its significance and importance, and I do not think we will be able to contain the agenda creep as has been suggested. However, as it grows and becomes more unwieldy, I think there will be a new perhaps informal power group and structure. As this happens, the dynamics of leadership - that will not necessarily be so transparent – will emerge with inner power groups and subtle negotiations. We have already seen that within the WTO, where small groups get together and become friends on agenda items and push issues. However I think the majors will assert themselves simply because of the realpolitik if indeed it does grow and become more complex.
Dr Sanjaya Baru
First of all, I never mentioned Israel. I mentioned Iran in the context of the Goldman Sachs N11 (Next Eleven) of which Iran is one. I merely observed that Iran becoming a member of the G20 would require some normalisation of relations with the West. Whether good or bad, that is a statement of fact. Finally why did we get from G7 to G20? I think Mr Price has answered that question. The G20 was an elevation of the finance ministers’ summit to the leaders’ summit. The problem with the G13 is that it didn’t have a fixed membership. The G13 varied from summit to summit depending on the host and that is the reason there was no G13. It was an evolving concept while the G20 was fixed group – which is why I believe it became a leaders’ summit.
Carl Bildt
On the Iranian/Israeli question I mentioned Iran in the context of a model for the development of the Middle East. I think that Israel has never had that aspiration nor been seen in that light. However, the Iranian regime from 1979 was a revolutionary one that aimed to establish model for others. My point is that this has gone. That was a remark that had nothing to do the Middle East peace process. As for the peace process, I think that the European side has a very good track record. If you look want to know more about the true support we give to the Palestinians talk to Prime Minister Salam Fayyad, and he will tell you that the Europeans provide far more money to the Palestinians on a daily basis than the entire Arab world combined.
On the architecture it is obvious from this discussion that the house is still being built and perhaps the architect was not entirely awake when it was originally set up. These things do happen and you can rebuild and modify. I think that purely intellectually there were a lot of arguments in favour of G13, but politics quashed it. In the meantime the G20 has become the G22 – or possibly evolved into the G26 in the last few days – but clearly this does require some modification as we move along.
My wish and ideal would be to have the UN Security Council – which needs reforming – to deal with issues of peace and security. To bring issues of economy and development into that is bound to fail. We do need a forum for economic and financial issues and I think it has to be broad. It was the financial regulatory issues at that particular period of time, but we need it for many issues whether it be climate or whatever. We also have difficulties with the composition of the governing bodies of the World Bank and IMF with their quotas and reform. Why do we not make a uniform solution? We have a constituency system and we have the same for the IMF, World Bank and the G20 – as effectively, the global economic council which meets in different configurations. Within that, there will still be different fora. The G8 is still continuing to meet – there will be a summit in Halifax – although I do not know if there will be 40nations invited. I was at a G8 meeting in Italy last year where there were countless number of nations represented. In addition to this we have the G7 finance ministers, which as we saw just a week ago, is still a fairly operational body. However I think that today’s discussion has clearly indicated that there is a need for further discussion.
Conclusion
Dr John Chipman
That is almost the perfect point to conclude almost two and quarter days of incredibly intense discussion. Before we thank our panellists, let me say that what we at the IISS and the Kingdom of Bahrain have attempted to do with this pilot Bahrain Global Forum is to see if there is a market for simultaneously analysing economic issues and their strategic impact. In academic life it is often noted that there is a division between the humanities and the social sciences. In political life I think there is sometimes a great division between economic thinking and what is sometimes narrowly thought of as strategic thinking. We tried to combine this here and I think that the spirit of our discussions have demonstrated a need for this type of geoeconomic thinking that we will strive to continue this at the IISS. The participation at this forum suggests that a dialogue between people representing, though their personalities and thinking so to speak, the G20 and other countries, it is very important that we do not become too insular in our thinking as to which countries or regions that should be given formal voice in the discussion of economic and wider governance issues. The mix of participants has not only been important in terms of their national representation, but also in bringing together economists, finance professionals, business people and members of governments in various ways. We have listened carefully to some of the suggestions for themes for next year’s forum and we have taken note and will carry forward. Suggestions include looking more carefully at the prospects for venture capital in the region, examining more forensically what the prospects are for a single currency in the GCC in light of single currency experiences elsewhere, and also examining again – and perhaps in more detail – the relationship between free trade and regionalism.
We hope very much that we will establish the dates for the Bahrain Global Forum 2011 in the next month and communicate them not only to everybody here, but also to the many people who were keen to be here this year only to be prevented by their diaries but for whom 2011 is clear.
As I announced on Friday, our intention remains to work together to ensure that this Bahrain Global Forum becomes an essential part of the economic financial business and broader strategic calendar. We wish to thank very deeply the Economic Development Board of the Kingdom of Bahrain for their support and interest in establishing this forum and to ensure that it becomes an important and vital annual and genuinely global event attracting the very top leaders from around the world.
I want to thank His Royal Highness the Crown Prince for his presence at the opening of this forum and for his patronage of this effort and think in general the Kingdom of Bahrain and all the agencies of government and the individuals who have made this initial pilot Bahrain Global Forum such a great success. Please thank yourselves for the extraordinary contributions you have made and our panellists from this concluding session. I wish you an excellent lunch and a safe and happy trip home. Thank you very much indeed.
