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U.S./Canada Chosen G-20 vs. Objective G-20 (w/ chart)

by fairleft Tue Jun 29th, 2010 at 04:22:15 PM EST

The G-20 meeting of finance ministers in Canada was its expected police provocateur marred on the outside, Hooverville economics on the inside event, but what about the G-20 itself? Why that particular 20 in an organization that may now become very important (European Central Bank president Jean-Claude Trichet "views the G-20 as being the main forum for steering the global economy")? And why so many Western European representatives when the EU and its central bank appear to determine economic (especially financial) policy for Eurozone countries?

Well, apparently the G-20 was chosen by the G-7 (in particular the 1999 U.S. and Canadian finance ministers), and that's anti-democratic, of course, and as you'd expect 'The West'-centric. Is it possible, instead, to choose the G-20 transparently and objectively? Well, maybe. Going along with the ostensible, official purpose of the G-20, to gather together finance ministers representing power over the largest chunk possible of the world economy, why not simply call together the finance ministers representing the largest chunk possible of the world economy (sorry, but minus Taiwan)?

Using the CIA list of countries ranked by GDP as measured by purchasing power parity (PPP), here's how that would look:


Photobucket

Not so many changes, nothing too scary (other than IRAN!?) for 'The West', really. And so much fairer and more transparent than the present good ol' boys arrangement.

[Update: Sorry for the big mistake of including the entire European Union economy in the lists above. That double counts the UK and so on. Should just say Eurozone, and I should've manually gathered those nations' GDP PPP numbers together for the total.]

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By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Tue Jun 29th, 2010 at 05:36:52 PM EST
Why do you not consider Poland as already represented by the EU?

Is the EU represented at the G20 by the ECB, the EU Commission or the EU Council?

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Tue Jun 29th, 2010 at 05:41:41 PM EST
Because Poland is not in the Eurozone, unless Wikipedia is wrong (and it could be). So, unlike France, Italy, and Germany it has not ceded control of its currency to the ECB and the EU.

fairleft
by fairleft (fairleftatyahoodotcom) on Tue Jun 29th, 2010 at 05:49:23 PM EST
[ Parent ]
The EU is represented not by the ECB (Eurozone) but by the Commission and Council (EU as a whole). See, for instance, Statement by European Commission President Barroso and European Council President Van Rompuy following the G20 Summit in Toronto (26-27 June 2010). Trichet did not attend as the G20 is a political summit.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Tue Jun 29th, 2010 at 05:57:13 PM EST
[ Parent ]
As I said below, it would be more sensible from a representation of the Eurozone perspective to have the ECB President as G-20 representative. Obviously the Eurozone members have not ceded all control of their economies to the central European authorities, but they have probably ceded more than they've kept. BTW . . .

What is the G-20

The Group of Twenty (G-20) Finance Ministers and Central Bank Governors was established in 1999 to bring together systemically important industrialized and developing economies to discuss key issues in the global economy. . . .

Mandate

The G-20 is the premier forum for our international economic development that promotes open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability. By contributing to the strengthening of the international financial architecture and providing opportunities for dialogue on national policies, international co-operation, and international financial institutions, the G-20 helps to support growth and development across the globe.

http://www.g20.org/about_what_is_g20.aspx

fairleft

by fairleft (fairleftatyahoodotcom) on Tue Jun 29th, 2010 at 06:05:05 PM EST
[ Parent ]
Only if the US is represented by Federal Reserve. Which would of course make a kind of sense.

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by A swedish kind of death on Wed Jun 30th, 2010 at 06:28:31 AM EST
[ Parent ]
Yup, but the former NY Fed Chief, Geithner, will just have to do.

If the ECB President were to be the Eurozone representative at the G-20, then perhaps that should mean that he/she needs to be democratically elected in some manner.

Democratizing the ECB and the Federal Reserve, just an impossible dream I guess.

fairleft

by fairleft (fairleftatyahoodotcom) on Wed Jun 30th, 2010 at 12:20:35 PM EST
[ Parent ]
the way Geithner was?

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin
by Crazy Horse on Wed Jun 30th, 2010 at 03:54:48 PM EST
[ Parent ]
but including the Fed, ok.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin
by Crazy Horse on Wed Jun 30th, 2010 at 03:56:28 PM EST
[ Parent ]
It actually would make more sense if the G-20 included a representative of the Eurozone (the ECB President?) rather than a representative of the EU as a whole.

fairleft
by fairleft (fairleftatyahoodotcom) on Tue Jun 29th, 2010 at 05:55:51 PM EST
[ Parent ]
I don't buy the "Eurozone represents its members" argument because its members have not ceded much economic and political authority to the Eurozone - just most monetary and perhaps increasingly some fiscal authority.  The G20, too, is more a political and economic forum with little formal power or structure and represents the real poltique of world political power at the time of its formation.  As such Spain, Iran and Poland have the biggest legitimate gripes at their non-inclusion, and presumably South Africa is included ahead of Thailand in order to include at least one rep from the African continent.

The bigger question is why such informal rich countries clubs exist at all  - the UN is the forum where all global issues should be decided.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 30th, 2010 at 06:33:43 AM EST
I basically agree with your take.

But for the sake of argument, taking as real the ostensible purpose: a yearly effort to gather as much world GDP firepower into one room as possible, to make nimble decisions about the world's economy. If that's what they want, then there is a more or less objective way to measure national GDP, and you can more or less legitimately say that Eurozone 'financial politics' could be represented by a single person. Who that would be, I'm not exactly sure. Maybe a new position needs to be created.

If it is just another somewhat pointless, pretend democratic, ritualistic political gathering, then why finance ministers only? Not that they don't represent the true power behind most thrones . . .

fairleft

by fairleft (fairleftatyahoodotcom) on Wed Jun 30th, 2010 at 12:27:17 PM EST
[ Parent ]
The G20 is essentially the US dominated "West" which unfortunately had to be expanded somewhat to include some of the emerging major economies plus a token presence from Africa. As such it represents a snapshot of who were regarded as the serious players at a point in time.  Thus it excludes Iran (at US insistence) and Taiwan (at China insistence).  

There is no need for the EU to create a permanent new post to fit into what is essentially a temporary ad hoc structure of dubious legitimacy.  The major players - Germany/France/Italy would not want to give up their prerogatives in any case.  There is no reason why the EU couldn't nominate relevant Commissioners to represent "the rest of the EU" not directly represented which collectively has a GDP much greater than many who are already directly represented in any case.

Insofar as the Euro is now a major global reserve currency it is appropriate that it is directly represented in discussions related to monetary policy.  I doubt most Eurozone members would feel comfortable being represented by the ECB on anything else - it simply does not have a political/financial mandate equivalent to a national Finance Minister.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 30th, 2010 at 12:47:46 PM EST
[ Parent ]
But despite your wishes this, what I linked to in paragraph one, could be the real world:

European Central Bank president Jean-Claude Trichet "views the G-20 as being the main forum for steering the global economy"

If that is so, then how should the members be chosen? By the great powers or by objective criteria.

I have to admit, by the way, that one reason I excluded Taiwan, besides realism about China, is that if it were included the only African country would be dropped from the list. Actually, that indicates to me the list probably should be expanded from 20 to the top 25 economies. Chosen objectively, based on the ostensible purpose of the G-20.

fairleft

by fairleft (fairleftatyahoodotcom) on Wed Jun 30th, 2010 at 01:17:07 PM EST
[ Parent ]
I do not see where ppp enters. The G-7 was always about power, as reflected in GDP.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Wed Jun 30th, 2010 at 06:40:23 AM EST
PPP is also about power, the power to purchase goods in the local currency. In any case, it eliminates currncy manipulation as an easy way to 'get large', and allows for a still objective but more diverse and inclusive sweep of the world's economies to be in the G-20.

fairleft
by fairleft (fairleftatyahoodotcom) on Wed Jun 30th, 2010 at 12:29:45 PM EST
[ Parent ]
But power on a world scale depends largely on the imbalance, which makes sure that it is much cheaper to buy capital or bribe an official in a poor country then in a rich. For a multinational corporation at least.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Thu Jul 1st, 2010 at 06:50:15 AM EST
[ Parent ]
Given what's going on in the EU right now, this seems pretty stupid.

And why is Iran scary?

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Wed Jun 30th, 2010 at 06:41:42 AM EST
That's a pretty stupid comment, since you don't explain what you mean. If you're too lazy to do so, don't say anything, especially not something insulting.

Lots of things are going on in the Eu right now, and most of the financial ones seem to fit right in with the notion that policy-wise the EUROZONE is more a single economy than a bunch of separate ones. In general, is that what you're referring to?

And, you didn't pick up that I was using the word 'scary' sarcastically: that's also pretty stupid.

fairleft

by fairleft (fairleftatyahoodotcom) on Wed Jun 30th, 2010 at 12:33:23 PM EST
[ Parent ]
I rather think my comment was fairly straight and to the point:

Lots of things are going on in the Eu right now, and most of the financial ones seem to fit right in with the notion that policy-wise the EUROZONE is more a single economy than a bunch of separate ones.

Except no.  Which is why we have the conflicts within the EU that we have right now.

And, you didn't pick up that I was using the word 'scary' sarcastically: that's also pretty stupid.

If so, fair enough, but I kinda doubt it.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Wed Jun 30th, 2010 at 12:59:43 PM EST
[ Parent ]
I'm happy I've drawn you out beyond 'pretty stupid' into explaining yourself:

Except no.  Which is why we have the conflicts within the EU that we have right now.

To me, the conflicts seem to involve the Eurozone countries' inability to control a vital part of their economies, their currencies. It seems the conflict additionally involves immediate plans for sever punishment of Eurozone 'countries' budget deficits. The G-20 ostensibly involves 20 national decision-makers on financial matters. Without control over their currencies, and strict parameters on their budgets, the Greek or Italian finance ministers work for entities in a grey area between 'state/province' and 'nation'. It's therefore reasonable to suggest leaning toward the 'state' designation and letting the Eurozone ECB Bank president or someone similar represent the Eurozone at the G-20 meetings.

fairleft

by fairleft (fairleftatyahoodotcom) on Wed Jun 30th, 2010 at 01:11:14 PM EST
[ Parent ]
Except that the ECB Bundesbank has fuck all political legitimacy, the ECB Bundesbank really isn't qualified to dabble in geopolitics, and there's no good reason to encourage them to develop such capabilities.

The Chairman of the Commission or the High Representative would be a more appropriate position to represent, although s/he would have to represent the entire EU, not just the €-zone. Which means that the UK and Poland go out the door (and good riddance). Something that would, incidentally, allow for both Taiwan and South Africa to get in at the same time. Or you could pick one of the several economics portfolios in the Commission.

Or if you really want a giggle, you could send the audit and anti-corruption Commissioner...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jun 30th, 2010 at 03:26:51 PM EST
[ Parent ]
The difficulty there is that for better or worse Britain and Poland have the usual economic policy-making power of any nation state, which they haven't ceded to the EU, and they're objectively in the top 20. Taiwan is a minor problem, and could 'legitimately' be excluded by requiring UN membership (or UN membership by all nations in your multinational union, i.e., the Eurozone).

If your purpose is to gather together the finance ministers or equivalent of the top 20 economic entities with real power (or a direct line to the prime minister or equivalent), not just advisory group power like ASEAN and similar have, you should democratize selection of whoever is central banker of the Eurozone and let that powerful person attend the conference.

Anyway, I agree that if they're gonna have this type of group, and it's going to be as powerful as the ECB head says it will be, it should have 25 nations (or the economic equivalent) rather than just 20.

fairleft

by fairleft (fairleftatyahoodotcom) on Wed Jun 30th, 2010 at 04:25:47 PM EST
[ Parent ]
The difficulty there is that for better or worse Britain and Poland have the usual economic policy-making power of any nation state, which they haven't ceded to the EU,

False.

They have ceded external and internal customs and the broad outlines of their sales tax system to the EU, as well as a number of regulatory functions pertaining to industry standards and the common market.

European integration is a continuum that does not permit of such simple bright lines between those who have ceded economic sovereignty and those who have not. For that matter, even within the EMU, there is a continuum between those who are completely outside the EMU and those who are wholly inside the €-zone (EMU I through III, with only EMU III countries being full €-zone members).

you should democratize selection of whoever is central banker of the Eurozone and let that powerful person attend the conference.

No. Democratisation of the ECB or not, it simply is not the correct institution to conduct foreign policy or global economic coordination. Foreign policy competence is vested in the office of the High Representative, and a hypothetical unified European economic policy would be properly vested in the Commission, under the supervision of the Parliament.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jun 30th, 2010 at 04:50:49 PM EST
[ Parent ]
That's a good point, except for the definitive "False." Other nations have ceded similar but not quite as much: the U.S., Canada, and Mexico to NAFTA, for example. Economic sovereignty/non-sovereignty is a continuum, but giving up your power to print your own money is a leap toward the non-sovereignty side, I think we can agree. So, yes, whether Eurozone EU members should not be allowed, and non-Eurozoners allowed, to be in the G-20 admittedly is a judgment call, based on whether you think ceding your currency to the EU pushes you far enough toward non-sovereignty to make your presence at the G-20 redundant to the presence of the Eurozone and/or EU representative. Eurozone members are more redundant, non-Eurozoners are less redundant.

Foreign policy competence is vested in the office of the High Representative, and a hypothetical unified European economic policy would be properly vested in the Commission, under the supervision of the Parliament.

So, with that EU context you suggest the European Commission send its chair or something, to this 'supposed to be a meeting of finance ministers or the equivalent'? Or, wait, you say that's hypothetical, so that is not a suggestion. Who do you suggest is the most powerful and best representative of EU (and/or Eurozone) 'finance minister-ness' to the G-20?

From what I can understand, those within the Eurozone need a coordinated economic and financial policy, but apparently haven't gotten it, at least not officially. The ad hoc but unofficial mover and shaker seems to be the Bundesbank/ECB more or less. Maybe thinking about who might represent the Eurozone at the G-20 reinforces the importance of transforming the shadowy bankers' Eurozone rule into something transparent and democratic.

Anyway, the ECB President is one person with a great deal of power (and direct connection to 'higher powers') over European abilities to financially coordinate and regulate globally. And it wouldn't be unusual for central bankers to be a country/entity's representative at the EU. But I agree it's complicated.

Here's another possible name/position:

Herman Van Rompuy, President of the European Council, will also discuss the forthcoming G 20 summit, economic governance and post-Copenhagen climate strategy. . . .  The European Council is to set the Union's position for the G 20 summit in Toronto on 26 and 27 June 2010, with focus on financial regulation and supervision.

http://www.europarl.europa.eu/eng-internet-publisher/eplive/expert/shotlist/20100615SHL37550

By the way,

Britain wins opt-out from EU 'economic government'
Published: 18 June 2010

UK Prime Minister David Cameron secured an opt-out on closer economic integration, claiming a victory at his first EU summit in Brussels yesterday (17 June).

Cameron said he had secured "a clear agreement" that London's economic sovereignty would not be affected by any changes agreed at the next EU summit.

"This meeting has ensured that UK opt-outs are safeguarded," said the new prime minister. The bottom line for the UK is that "the euro zone needs to sort out its problems," he added.

Cameron also stressed that the UK would always present its budget to Westminster before Brussels, in response to proposals from the European Commission to have national budgets pre-examined at EU level.

The Van Rompuy Task Force will look at whether withholding EU funds might be an option for punishing errant governments, while an earlier Franco-German proposal to suspend countries' voting rights has met with a cold response from other member states.

http://www.euractiv.com/en/priorities/Britain-wins-opt-out-on-economic-government-news-495370

fairleft

by fairleft (fairleftatyahoodotcom) on Wed Jun 30th, 2010 at 06:33:44 PM EST
[ Parent ]
Who do you suggest is the most powerful and best representative of EU (and/or Eurozone) 'finance minister-ness' to the G-20?

Neither the European Union nor the Eurozone in their present configuration has a unified fiscal or economic policy. So there is no finance minister to send.

If and when the European Union develops a unified fiscal and economic policy, a Commission portfolio will be established to handle it, or it will be added to one or more of the existing Commission portfolios.

If the G20 wants to be an economic coordination forum, it should treat the 27 European member states as individual sovereigns, because to for all important purposes they still are. If the G20 wants to be a geopolitical forum, it has the choice between treating the 27 European members as individual states or treating the European Union as a confederation.

Since I have a hard time seeing the justification for the G20 (except as an American sock puppet), I don't really care which of the two it picks.

The ad hoc but unofficial mover and shaker seems to be the Bundesbank/ECB more or less.

  1. That's a remarkably simplistic view of a fairly opaque and complicated power play.

  2. That's still not a good reason to vest the power to conduct foreign and/or fiscal policy with the Bundesbank.

Herman Van Rompuy, President of the European Council

Represents the inter-governmental side of the European Union, not the federalist side. Bad choice.

Oh, and he doesn't have any foreign policy prerogatives - those are vested in the High Representative, and there is a number of unusually excellent reasons to want to keep it that way (starting with Tory Bliar, Sarko and the remaining crazy Polish twin).

Britain wins opt-out from EU 'economic government'
Published: 18 June 2010

UK Prime Minister David Cameron secured an opt-out on closer economic integration, claiming a victory at his first EU summit in Brussels yesterday (17 June). [bold mine]

Note the tense.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 1st, 2010 at 04:57:09 AM EST
[ Parent ]
So, you have no suggestions. Well, the implied one is eliminate the EU representative if the G-20 is an economic coordination summit, because he/she appears to be redundant, considering the still sovereign powers of the nation states that form the EU.

About 1. and 2.:

  1. It's not remarkable, it's commonplace. I did not pretend it was not -- noting the "more or less" -- simplistic, and you haven't disputed its rough accuracy.

  2. A democratically chosen ECB President was my actual suggestion, if the ECB were to be decided as the logical representative of the Eurozone.


fairleft
by fairleft (fairleftatyahoodotcom) on Thu Jul 1st, 2010 at 12:44:38 PM EST
[ Parent ]
So, you have no suggestions.

Which part of

If and when the European Union develops a unified fiscal and economic policy, a Commission portfolio will be established to handle it, or it will be added to one or more of the existing Commission portfolios.

did you find it hard to understand?

A democratically chosen ECB President was my actual suggestion, if the ECB were to be decided as the logical representative of the Eurozone.

But you've still not made any case for that, apart from the view (in the English-speaking press?) that the independent(?) Bundesbank is in charge at the moment, sort of by default.

As for democratising the Bundesbank, a key part of any viable democratisation is to tie it into a unified fiscal and economic framework under the Commission, so it can't do the sort of solo runs without reference to broader policy objectives than price stability it is presently so fond of. That, like a proper federal economic policy, requires a treaty change.

Any configuration where the ECB is the de facto leading institution for formulating European economic policy will not be democratic, and any democratic organisation of unified European economic policy will not be headed by the ECB.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 1st, 2010 at 01:00:10 PM EST
[ Parent ]
You have no suggestions for who might represent the Eurozone.

I think democratic selection of the ECB President indicates a lack of "solo runs" based on the blinkered perspective of banks and the financial elite. If those would still happen with democratic representation, then there's very likely something seriously non-democratic about the selection process.

The following just shows a lack of imagination, maybe specifically a restricted notion of what 'a democratically chosen ECB President' means:

Any configuration where the ECB is the de facto leading institution for formulating European economic policy will not be democratic . . .


fairleft
by fairleft (fairleftatyahoodotcom) on Thu Jul 1st, 2010 at 01:25:22 PM EST
[ Parent ]
You have no suggestions for who might represent the Eurozone.

Yes I did.

The Commission represents the European Union, including the €-zone, on matters of unified economic and foreign policy.

You are the one who insists on demanding a separate representation for the EMU-III area and for the EU ex the EMU-III area, without positing any good reason for such a separation.

The following just shows a lack of imagination, maybe specifically a restricted notion of what 'a democratically chosen ECB President' means

No, it is a recognition of the fact that the monetary authority is institutionally unsuited to conducting economic policy. The monetary authority's primary policy instruments - the discount window and open market operations in sovereign debt - act on the rest of the economy mainly through the financial sector, which means that it will always be more attuned to the attitudes, views and folkviews of the financial sector than to the service, industrial or agricultural sectors of the economy. Just as the war department will always be more attuned to the shipbuilding, oil and armaments industry than to the railways and telegraph services.

The proper place to vest overall economic planning is therefore in the fiscal authority, whose primary policy instruments - taxation and spending - can target all sectors of the economy directly.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 1st, 2010 at 05:37:35 PM EST
[ Parent ]
You have no suggestions for who might represent the Eurozone in the present tense. I don't either actually . . .

Let's remember that the G-20 is a gathering of finance ministers and also allows central bank presidents, in fact the official name is apparently "G20 Finance Ministers and Central Bank Governors' Meeting." So, it wouldn't be a shocking and unfathomable thing to find the ECB President there, representing. Also, the G-20 doesn't seem intended as a meeting place of those responsible for 'overall economic planning'; on the other, we have that statement by the ECB president that implies it is now intended as that.

http://www.g20.org/

The monetary authority's primary policy instruments - the discount window and open market operations in sovereign debt - act on the rest of the economy mainly through the financial sector, which means that it will always be more attuned to the attitudes, views and folkviews of the financial sector than to the service, industrial or agricultural sectors of the economy.

Are you sure about that "always"? Could the industrial sector, could banking customers, be represented on the inside, on 'the monetary authority' board of directors? Maybe.

In any case, the ECB is charged with monitoring the banking system, rescuing it when necessary, implementing the monetary policy for the Eurozone, and is commanded to keep inflation low while doing so. So it is a political institution, and it needs of course to be democratically controlled and dependent. You probably agree. If that were the case, well, it might be a decent representative at the G-20. On the other hand, the Eurozone may simply need a clearly defined and democratically selected finance minister.

fairleft

by fairleft (fairleftatyahoodotcom) on Thu Jul 1st, 2010 at 06:12:21 PM EST
[ Parent ]
Let's remember that the G-20 is a gathering of finance ministers and also allows central bank presidents

Point you seem to be missing is that I don't care nearly as much about what your suggestion will do to the G20 as I do about what your suggestion will do to the European Union. And your suggestion will consolidate power over general economic planning and aspects of foreign policy in the ECB. Which is a bad place to vest power over overall economic planning and foreign policy.

I also (still) don't think you've made any particularly compelling case for why the EMU-III is sufficiently different from the EU27 ex EMU-III to justify treating them differently.

Are you sure about that "always"?

Yes. In policymaking, function follows form. An institution that manipulates discount windows and money markets will think in terms of interest rates, arbitrage pricing and money market operations. Having them do economic planning is a bad idea for the same reason that letting the military do police work is a bad idea: They do things that look kinda sorta similar if you squint a bit, but is actually quite different.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 1st, 2010 at 06:33:59 PM EST
[ Parent ]
What central banks do is an aspect of economic planning, that can't be avoided. Since they're already doing it, and it impacts all of us when they do it with bias toward financial sector elites, 'we' need to aggressively insert popular representation into their decision making. That being done, an ECB President might be a decent representative to the G20 of the financial side of economic planning.

Form and function can be changed.

fairleft

by fairleft (fairleftatyahoodotcom) on Thu Jul 1st, 2010 at 08:39:23 PM EST
[ Parent ]
You are talking about revoking the ECB's independence, substantially altering its charter and/or giving it a fiscal policy portfolio.

That will require a constitutional change. And if we're going to amend the European constitution anyway, we might as well do it right and make a proper finance portfolio for the Commission, with full power of the purse and oversight from Parliament. That's certainly less of a pipe dream than somehow "democratising" a central bank and making it responsive to the needs of industrial planning (when has that ever actually happened in the real world?).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jul 2nd, 2010 at 04:20:56 AM EST
[ Parent ]
Yes, I'm talking about revoking ECB 'independence' from democratic control (I don't think it's independent of financial elite).

Central banks (or the equivalent, entities with control over the money supply) being responsive to the needs of industrial planning was the norm from 1945 till the '70s, so it happened all the time for several decades in the real world, and that was a very successful economic era btw. Here's Japan (emphasis added):

In the 1930s and 1940s, Japan's bureaucrats took up industrial planning to boost output for the war years. They then lucked out again, during the postwar U.S. occupation, as America sought to set up Japan as a bulwark against the Soviets.

By the 1960s, the Japan Inc. system was in place: an economy dominated by keiretsu, groups of companies financed by big banks, guided by officials at the Finance Ministry and the Ministry of International Trade and Industry, and stabilized by such perquisites for workers as jobs for life. . . .

The following source mentions the 'neo-corporatism' of most of western and northern Europe after WWII, and specifically mentions Germany and the role its central bank plays in that:

Germany, for instance, has a long-established system whereby industrial planning of the type mentioned [industrial investment and incomes policies] is carried out by consultation and agreement between the peak associations representing industry and labour and the national banks (which in Germany control a great deal of industrial investment).

p. 253
The concepts and theories of modern democracy
Anthony Harold Birch
http://books.google.com/books?id=aYYDMkcPg84C&dq=Germany+%22industrial+planning%22+banks+1940s&a mp;source=gbs_navlinks_s

fairleft

by fairleft (fairleftatyahoodotcom) on Fri Jul 2nd, 2010 at 12:55:43 PM EST
[ Parent ]
But your quotes don't say anything about the role of central banks.
I don't see why one could go to the trouble of democratizing the ECB when revoking its independence would do the trick.
by generic on Sat Jul 3rd, 2010 at 09:03:08 AM EST
[ Parent ]
Revoking its independence would be democratizing it, so democratizing a central bank is not much trouble.

If a central bank controls money supply it controls a very important aspect of a nation's (or the Eurozone's) economic policy. That being the case, subordination of central banks to a nation's (democratically elected leaders') economic policy is not unusual historically.

fairleft

by fairleft (fairleftatyahoodotcom) on Sat Jul 3rd, 2010 at 05:18:38 PM EST
[ Parent ]
But in that case, wouldn't it be more natural to send Trichet's boss rather than Trichet to that meeting? That is to say, the finance Commissioner.

Except we don't have one, and both establishing a Finance Commissioner with real powers and making the ECB subservient to the Commission finance portfolio requires a constitutional change.

And there is no substantive constitutional change on the horizon for the EU within this decade.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 5th, 2010 at 04:30:11 AM EST
[ Parent ]
JakeS:
there is no substantive constitutional change on the horizon for the EU within this decade
I'm afraid there may be some wrangling on fiscal punishment and debt guillotines on the occasion of Croatia's accession treaty, it it goes on schedule.

Any constitutional change they introduce into that accession treaty will be in the wrong direction, given who's in charge...

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Mon Jul 5th, 2010 at 04:44:16 AM EST
[ Parent ]
Since we're talking theoretical, it would be unfair and mischief-making guaranteed if all the EU member reps choose the 'finance commissioner' and financial/money policy while not having to suffer its consequences for their money supplies (and, consequently, for their economies). In other words, monetary policy within the Eurozone should be decided democratically by representatives of Eurozone states only.

It's an odd situation when, from what I gather from the comments above, no one can point to an actual entities or people who determine Eurozone currency/monetary policy, or to the policymakers or policy-making entities whose will is directly carried out by those mysterious entities/people. Probly exactly the way the real rulers of financial and monetary policy like things.

fairleft

by fairleft (fairleftatyahoodotcom) on Mon Jul 5th, 2010 at 06:49:46 PM EST
[ Parent ]
Since we're talking theoretical, it would be unfair and mischief-making guaranteed if all the EU member reps choose the 'finance commissioner' and financial/money policy while not having to suffer its consequences for their money supplies (and, consequently, for their economies).

Since we're talking theoretical, monetary policy should be wholly subservient to fiscal and industrial policy in a well-governed industrial state. So in the purely theoretical case, central banks should not be making policy at all. They should be implementing policy made elsewhere with the fairly narrow set of tools that they have at their disposal.

You don't let generals decide who you want to invade - you shouldn't let central bankers decide how your country should invest.

It's an odd situation when, from what I gather from the comments above, no one can point to an actual entities or people who determine Eurozone currency/monetary policy,

Oh, it's quite clear who runs Eurozone monetary policy. Deutche Bank does.

But that doesn't strike me as a very good reason to formalise that relationship...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 5th, 2010 at 06:56:34 PM EST
[ Parent ]
As is evident in my comments, we're in agreement.

fairleft
by fairleft (fairleftatyahoodotcom) on Mon Jul 5th, 2010 at 09:14:24 PM EST
[ Parent ]
just makes me go "yawn"

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Jul 4th, 2010 at 06:06:07 AM EST
[ Parent ]


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