Surrendering U.S. Sovereignty at G-20 Summit

While all eyes were on the rantings of Mahmoud Ahmadinejad at the United Nations, the United States -- under President Obama -- was surrendering its economic sovereignty at the G-20 summit.

The result of this conclave, which France's president Nicolas Sarkozy hailed as "revolutionary," was that all the nations agreed to coordinate their economic policies and programs and to submit them to the International Monetary Fund (IMF) for comment and approval. While the G-20 nations and the IMF are, for now, only going to use "moral suasion" on those nations found not to be in compliance, talk of sanctions looms on the horizon.

While the specific policies to which the U.S. committed itself (reducing the deficit and strengthening regulatory oversight of financial institutions) are laudable in themselves, the process and the precedent are frightening.

We are to subject our most basic national economic policies to the review of a group of nations that includes autocratic Russia, China and Saudi Arabia. Even though our gross domestic product is three times bigger than the second-largest economy (Japan) and equal to that of 13 of the G-20 nations combined, we are to sit politely by with our one vote and submit to the global consensus. Europe has five votes (Britain, France, Germany, Italy and the EU), while we have but one.

And the process will be administered by the IMF, whose counsel to less-developed nations over the past two decades has consistently called for social pain and economic austerity. The IMF's misguided policies have been responsible for more revolutions than Marx, Engels, and Lenin combined. Its bureaucrats' arrogance is legendary, and its search for appropriate punishments to fit the crime of spending too much on the poor smacks of colonialism and imperialism. They are our new overseers.

This combination of the IMF and the G-20 will not only work to structure national economic policies but to limit executive compensation at financial institutions. The watchful, wise leaders of such nations as Turkey, Saudi Arabia and Indonesia -- among others -- will monitor Wall Street to assure themselves that their compensation is not out of line. One particularly looks forward to the views of the Saudi monarchy on this question of excessive personal enrichment.

Perhaps as part of his public spasm of apology, President Obama also strove successfully to increase the voting strength of the debtor nations on the IMF from the current 43 percent to 48 percent. This is the economic equivalent of giving deadbeat debtors more votes on their bank's governing board of directors.

Thus, the world's most successful economy, ours -- which is the only one that has produced reliable economic growth for three decades and has lifted real personal incomes almost every year -- is going to subject itself to the burden of justifying its own economic policies in front of a global community of 20 nations, some of which do not even embrace free-market economies in the first place.

Indeed, it is only through access to our markets that nations have been able to escape poverty. Japan, Germany, South Korea, Taiwan, Singapore, China and India have sequentially trod this path into prosperity.

Obviously, we live in a global economy. But the United States is 24 percent of it. We are entitled to more than one-twentieth of a voice, and it is the world that should be following our policies -- not the other way around.

Much of the damage of the Obama administration can be undone at the next election. But such grants of sovereignty to autocratic, backward, bureaucratic and even communist nations will be hard to undo.

The world is recovering from its leftist obsession -- e.g., the Angela Merkel victory in Germany. But by the time the voters discover how phony, failed and fraudulent these policies are, we may have given it all away already. Irrevocably.

Much of the damage of the Obama administration can be undone at the next election. But such grants of sovereignty to autocratic, backward, bureaucratic and even communist nations will be hard to undo.

Many thinks that Bambi is putting into place so rapidly will be permanent, unfortunately. I don't think we're even going to be able to undo the domestic damage he's causing at the next election, let alone the grave harm he is causing us on the international level.

These are serious times and one feels completely powerless. I get the feeling that neither Congress nor anyone else who is really elected or appointed under our constitutional system has any power to control him or his insane henchpersons.

Sarkozy said Obama was stunningly naive, but so massively egotistical that he won't listen to anybody telling him the truth; personally, I think it's more that he knows perfectly well what he's doing, and is pretending to be naive because that prevents people from really becoming enraged. And he is massively egotistical, which means that to him, the opinions and knowledge of others don't matter anyway, unless they agree with him.

It is starting to bother me that we act like all these things are new news. It is not and they are just taking another step down the predestined path they told us about.

I guess that’s what ultimately bothers the living daylights out of me. They are not telling us anything new. We should have been well aware of this and yet...we sleep.

G20 draft communiqué
Published: March 29 2009 19:43 | Last updated: March 29 2009 19:43
http://www.ft.com/cms/s/0/f6f30eaa-1c88-11de-977c-00144feabdc0.html?nclick_check=1

Reforming financial systems for the future

15. We recognise the importance of ensuring our domestic regulatory systems are strong. But a globalised financial system also requires much greater consistency and systematic cooperation between countries, based on high and internationally agreed standards. Future regulation and supervision must promote transparency, guard against systemic risk, dampen rather than amplify the financial and economic cycle, reduce reliance on risky sources of financing, and discourage excessive risk-taking.

Regulators must ensure that their actions support market discipline, avoid adverse impacts on other countries, including regulatory arbitrage, and support competition, dynamism, and innovation in the marketplace.

16. To this end, we have taken forward the Washington Action Plan. We set out the detailed reforms in our attached statement, “Strengthening the Financial System”, and the updated action plan. In particular, we have agreed:

• to expand the Financial Stability Forum to include all G20 countries and to reestablish it with a stronger mandate as the [Financial Stability Board]. It will drive the development of common principles and standards of regulation, strengthen international co-operation between regulators and policymakers, and, together with the IMF, identify and report on the build up of macroeconomic and financial risks;

• to work closely and systematically, in accordance with the Financial Stability Forum framework, to supervise cross-border institutions and to complete the establishment of colleges of supervisors for all significant cross-border financial firms;...

...17. We instruct our Finance Ministers to complete the implementation of these decisions in line with the timetable set out in the action plan. We have asked the [Financial Stability Board] and the IMF to monitor progress, working with the FATF and the Global Forum, and to provide a report to the next meeting of our Finance Ministers.

Reforming the International Financial Institutions for the future

18. Inclusive and sustainable globalisation requires relevant, effective, and legitimate international financial institutions. These should provide strengthened and independent surveillance of the world economy and of the interaction of countries’ economic policies, prevent and resolve crises, and promote growth and poverty reduction. We are agreed that their mandates and governance must be reformed to reflect changes in the world economy. Emerging and developing economies, including the poorest, must have greater voice and representation. This must be accompanied by action to increase the credibility and accountability of the institutions through better strategic oversight and decision making. To this end:

• we commit to implementing the package of IMF quota and voice reforms agreed in April 2008. In addition, we call on the IMF to launch the next review of quotas at the 2009 Annual Meetings and commit to complete the process of quota reform by January 2011;

• we agree that as part of the future mandate and governance reforms a Ministerial Council should be established to provide strategic direction to the IMF and to increase its accountability;

• each of us commits to candid, even-handed, and independent IMF surveillance of our economies and financial sectors, of the impact of our policies on others, and of risks facing the global economy;

• we commit to implementing the package of World Bank voice reforms agreed in October 2008. We call on the World Bank to make concrete recommendations by the Annual Meetings on shareholding, voting, voice, and internal governance, taking account of the development mandate of the Bank, and guided by the principles of shared and common responsibility. These reforms should be completed by the Spring Meetings in 2010;

• the heads and senior staff of the IFIs should be appointed through open, meritbased selection processes.

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