Why are people raging about the G-20?

Pittsburgh, beautiful city that it is, is about to host the G-20. No one – protestor, policymaker, nor politician – seems able to provide a clear articulation of what this meeting is about and why it matters so much. I’m going to work to clear it up here.

First, the G-20 says (and news agencies frequently repeat directly) that it is a group of twenty “systemically important industrialized and developing economies” that “promotes open and constructive discussion” in an effort to “strengthen international financial architecture,” and thereby enhance global economic stability. Translation: Especially rich countries that were part of the G-7 noticed that their largest corporations took some hits during the financial meltdown of the late 90s, so they invited thirteen newbies to the table and said ‘we’ll let you roll with the big kids if you put some safeguards in place, because we all know that the best form of capitalism is the form that socializes risk and privatizes profit.’  

In fairness though, there are many other positive things that may come along with government measures that enhance global economic stability. Things like ensuring financial transactions are transparent and therefore traceable (this helps combat things like terrorism and tax evasion, and therefore supports the possibility of public goods).   We have a globalized economy. There’s no doubt about that. What we don’t have are safeguards to prevent abuses with the money and resources flowing rapidly around the world. Any smart business person wants as much clarity on their investments as is possible, hence the G-20.

The protestors come for a whole set of perfectly logical reasons. First, the most powerful people in the world are gathered together. Really, it doesn’t get any more knights-of-the-round-table than this. And if you are advocating for peace, supporting environmental protections, or fighting for the rights of workers, you want to remind the most powerful people in the world that you exist.

Second, and related, history suggests that economic agreements precede agreements on human rights and environmental protections. It takes people a long time to realize that their capitalistic self-interests often lie with cooperation with a broader community, but they tend to come around to it (Check out the Olson book at right, Power and Prosperity). In the United States we were agreeing to drop tariffs between states long before we were agreeing to recognize real nationwide equality; Europe had the European Coal and Steel Community a half century before it got into labor and environmental agreements with the European Union; and if you check out T.H. Marshall’s review of rights developments in Britain, you see three centuries of steady march from civil (e.g. right to work), to political (e.g. right to voice in governance), then social rights (e.g. a right to an education). This history makes me believe that as our economic linkages become clearer we pave the way for addressing important social and environmental issues. And many of the protestors believe it to, and they have to be in Pittsburgh to speed that process as much as they can. (Side note: Yes, some protesters are just anarchists who aren't looking for cooperative solutions - and unfortunately, they tend to get a wildly disproportionate amount of the press - but for the most part these are smart and civil people with good ideas).   

Protest matters because it does have a strong history. Its history includes ending slavery in the British Empire (again, economic incentives were important first, with a boycott of slave-grown sugar), advancing civil rights, and advancing environmental protections and labor rights.

I’m writing this on my Amizade blog for two primary reasons. First, we work directly with the people who see no immediate benefits of enhanced global economic stability. Benefit may – and I even suspect will – come over the long term. But children in developing countries who have no access to clean water or education today will not be helped during their youths by sound G-20 fiscal policy. Protestors call attention to the 1.1 billion people in the world who are mired in destitute poverty (Check out Collier's Bottom Billion). Some of those people are my friends (See "African Innovation and Entrepreneurialism" on my Amizade blog). They are innovative, smart, independent, and they would have staggeringly better possibilities for human flourishing if basic government structures existed to stabilize markets, reduce corruption, and provide basic public goods.

The photo above is from a town in Bolivia, a beautiful place with incredible people that also happens to be the second poorest country in the Western Hemisphere.

The second clear connection to Amizade is that all too often economists (and, by extension, finance ministers) are functionally clueless to the real world, as Paul Krugman recently argued in the New York Times Magazine. The extent to which this is true is astonishing and staggering. Protestors call attention to real world issues. I’d like to take the finance ministers out of their air-conditioned offices and invite them to join me on a course on community and international development, where they not only recite the meaning of informal economy, but also bargain for business with me on what are frequently the wildly capitalistic dirt roads of Africa. In some ways, there are few freer markets than the markets in developing countries.

Of course, corruption by government is a huge problem in many of those countries, and government alone is no solution to many of the issues above, but these big fish will be fried in later blogs. For now, future finance ministers ought to take advantage of the kinds of courses that deepen their understanding by putting them in contact with the places and people our concepts and policies affect.