Volume 44, Number 175,
October-December 2013
The G20 in Los Cabos:
A Lost Opportunity for Much-Needed Change
Carlos Rozo and Aleida Azamar

Starting at the London summit, a pathway with long-term and short-term objectives was established. The latter included providing greater liquidity to the global economy and more support for national fiscal stimulus plans to help accelerate economic recovery. Long-term goals included efforts to give the global economy a financial system with greater regulation and oversight and move towards the removal of protectionist barriers to trade that threatened to prolong the crisis.

However, the preamble to the final declaration at Los Cabos recognizes that the global economy has not recovered the strength it ought to have, and rather continues vulnerable to the high levels of financial tensions and the persistence of national fiscal instability. In particular, the United States has been very dynamic and rather vulnerable in the area of creating jobs. The panorama was further complicated in 2012 with the loss of growth that has affected emerging economies and further weakens decisions from China and Japan to prioritize growth of their domestic markets. Undoubtedly, this problematic situation has contributed to the strengthening of the protectionist environment, contraction of foreign direct investment and monetary policies that lead to speculative financial flows.

The United Nations Conference on Trade and Development (unctad) has stated that over the time period from April 2009 to mid-2012, 802 protectionist and anti-investment measures appeared, such as customs duties, import licenses, anti-dumping investigations, subsidies, purchases of national content and other customs controls. All of this came in spite of rhetoric and agreements to facilitate the free flow of goods and capital. The oecd and the unctad have denounced government interventions to support nearly 30,000 companies with government subsidies.

Recognition that recovery has not progressed as everyone might like led to the need for the “Los Cabos Growth and Jobs Action Plan,” which emphasized the premise that growth would be achieved through the market and greater investment and increasing free trade would generate employment. This plan laid out a path to medium and long-term sustainable development, in the understanding that the Europeans would commit to the necessary measures to safeguard the integrity and stability of their region in the short-term to achieve a pact of shared fiscal responsibility and banking consolidation. Congruently, the EU heads of state summit held at the end of June, following Los Cabos, announced a package of 120 billion euros for economic stimulus.

What this action plan failed to recognize is that these proposals are more of the same, which has not worked. The speculative and even fraudulent behavior of companies and banks that led to the crisis has not changed, and little has been done to modify their proceedings. As long as this behavior remains out of control, it will be impossible to achieve the stability that would lead to solid and lasting recovery. Nor will it be possible to achieve growth and stability while disregarding the dilemma of global governance, which describes the quality of the actions and decisions of government as measured by their effect on the welfare of families, rather than merely the capacity to save corporations and banks with the reasoning that this will have positive repercussions on the welfare of families.

The great debate of the G20 and national governments should be how to prevent speculative bubbles that have become the fundamental cause of price increases and volatility. Even more relevant is deepening inequality, as the oecd warns (2008; also see Parker and Vissing-Joegensen, 2010). Recognizing the serious nature of the situation, the G20 has acknowledged and called upon the world to act with multilateral cooperation to address the climate of uncertainty and resolve the difficulties afflicting the global economy. It would therefore be necessary to intensify efforts to foster an environment conducive to economic and social development by implementing programs to invest in infrastructure and promote growth, which would trickle down to reducing poverty levels all over the world. What remains to be explained is from where the resources for these efforts would come, when the final declaration of the summit emphasizes that its long-term priority is to achieve an acceptable level of fiscal restriction.

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 195 October-December 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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