A them-and-us summit: Anver Versi reviews the G20 Summit in London and analyses what the global economic-stimulus package actually delivers.

The G20 Summit in London last month was touted as perhaps the most important global meeting since the end of World War II. Leaders of 20 of the world's most 'significant' countries, including our own South Africa, we were told would come together to, basically, save the world. In the process, they would shake up the entire system that has lead to this economic disaster.

Gordon Brown, the British Prime Minister, was depicted in cartoons as Superman leading the 'Magnificent 20' on their noble quest. 'Africa' in the person of the Ethiopian President Meles Zenawi, had also been invited, perhaps as a symbol of the 'innocent victims' of the economic tsunami.

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The British public and most of the press, while anxious that something should be done to revive the flagging global economy, were sceptical that this collection of leaders, who (with the exception of Barack Obama) had overseen the greatest financial shipwreck since records began, could now deliver salvation to a battered and bruised world economy.

Early augers were not promising. The world leaders swept into town as if they were attending a great celebratory party. With the world's media concentrated in London, there was immediate grandstanding and unseemly elbowing to bask in the limelight. In the absence of any real statement of purpose, the media concentrated on what the spouses of the leaders were wearing.

Even Barack Obama, on whose judgment so much hope was pinned, seemed like a freshman on his first public outing.

While the leaders attended their luncheons and dinners, thousands of demonstrators, representing the common person in all nations, staged peaceful protests over a variety of urgent issues, but were met with naked hostility by the paramilitary police. Cases of brutal treatment of members of the public, one of whom died, allegedly as a result of being attacked by the UK police, are now under investigation. But the message was clear and disquieting - the public did not belong in these high-level discussions.

There was a clear distinction between the leaders, isolated behind thick walls of police officers, and the concerns of the public. It was this same isolation of big business from the realities of life and economics that had led to the crisis in the first place.

You would have expected that given the seriousness of the issues confronting the entire world, the leaders would literally roll up their sleeves and reach out to the people - listen to their concerns and work out solutions that would be acceptable to all.

Instead, it was the same old 'them and us' situation - a small coterie of the rich and powerful at one end and the masses, who have to pick up the pieces of lost homes, lost jobs, lost hope, at the other.

Set of villains

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The G20 needed a set of villains to demonise and divert attention from their own lack of purpose. Initially, the villains were the greedy bankers; then it was irresponsible regulators, who blamed the legislature for passing the wrong laws; the legislators in turn blamed the elected officials for pandering to vested interests; and the elected officials blamed the voters for electing the wrong individuals. So, in the end, it was the voters, the ordinary people, who were to blame for the global economic crisis!

The other set of villains - who, we were promised, would be named and shamed - were those mysterious financial bolt holes also known as tax havens. These are the conduits through which billions, if not trillions, of dollars regularly disappear down company and individual black holes, swelling the bank balances of those already rich, but picking the pockets of the middle and working classes who, contrary to popular opinion, had not received their just dues from the global boom they had created before the bubble had burst.

One need hardly add that Africa, among other developing regions, is estimated to have lost over $600bn to tax-haven manipulation.

There was no shortage of the usual 'visionary' rhetoric - reforms would sweep the world, we were told. Brown, furiously chewing on an imaginary piece of gum, said the "Washington consensus was over" - i.e. the US would not continue to lay the law in all spheres all over the world and the Bretton Woods institutions (the World Bank and the IMF) would be force fed large dollops of logic-notably, being compelled to place developing-world experts in charge of developing-world problems and actually giving them the power and resources to solve those problems.

More for the haves

But as we have come to expect from these huge jamborees, there is a vast gap between rhetoric and reality. When the global economic-stimulus package was finally revealed, all the good intentions had leaked away like water in a sieve; what was left behind was a package for the rich to remain rich and the poor to stay poor.

There was a pledge to sink a little over one trillion dollars to shore up economies - money that would go to banks and, perhaps, industries that were considered strategic--mostly in the West.

The campaign against tax havens - which would have removed a major corrupting cancer in dealing with the developing world-was quietly allowed to wither away. Instead of automatic reporting of money transactions as was demanded by the developing world, banks involved would only be obliged to provide information 'if requested' and on a case-by-case basis. Which really meant 'business as usual'.

The greatest surprise, not least one would imagine, to the IMF itself, was that this institution, which has single-handedly wrecked more developing country economies than all the corrupt tyrants and dictators put together, was brought out of intensive care - where it had been relegated - and given a huge hormone injection.

For an institution whose crisis-fighting abilities have been as successful as the act of pouring petrol on a conflagration is in putting out fires, the addition of some $75obn to its coffers was truly staggering.

Most of this new money will be available through Special Drawing Rights (SDR) - a mechanism that, in effect, provides countries with virtually free loans. The drawback is that SDRs are allocated in tune with national quotas or contributions to IMF funds.

This means that countries that will desperately need SDRs to stabilise economies will not be able to access them, and countries that have already pumped billions into buying up their industries will be able to enjoy access to even more capital.

As a sop, it was announced that the custom of always appointing a European or an American to head the Bretton Woods institutions was likely to be changed 'to reflect the reality of the world and the relevance of the institutions'.

In hindsight, it seems obvious that this accommodation was made to allow China to be in a position to head one of these institutions. China is, so far, the only country to have pledged $40bn to the IMF's new resources and it unlikely to have done so without a quid pro quo.

The irony is that while the IMF dealt exclusively with the developing world, all its leaders came from the West; now that it might have a Chinese or Indian at the head, it is more likely to be dealing with advanced, rather than developing, economies!

Missed opportunities

While this was going on, I was crossing swords with Daniel Hertzberg, the international editor of the Wall Street Journal on a BBC radio programme. His opinion was that 'no harm had been done' at the summit and that as soon as the global economy was fixed, it would be business as usual, albeit with tighter regulations. His argument was that free-market principles had ushered in unprecedented growth and it would not be wise to tinker too much with a formula that had worked.

I argued that a huge opportunity had been missed and that economic growth was only sustainable if large numbers of people saw an improvement in their lives. One extra pair of shoes for four billion people would generate more growth than an additional yacht for a millionaire. "There is nothing wrong with capitalism," I said in my defence, when accused of being anti-capitalist, "but there is everything wrong with the abuse of capitalism. When capital that is not used to provide goods and services to the majority of people, but to indulge the rich in their whims, it is capital abused. Sooner or later, the edifice will crumble."

Here was an opportunity to start with an almost fresh slate and rewrite the entire economic blueprint so that everybody in the world would be better off.

This was the point that was made repeatedly by some of Africa's finest economists. Donald Kaberuka, president of the African Development Bank, said it was nonsense to suggest that the effects of the global crisis would somehow bypass Africa.

"There are 900m Africans who have been doing mainly the right things and now they are being hit by a crisis that is not of their own making," he said. He gave the example of Ghana, which had been weaning itself off the development aid by tapping into international markets but "which now faces another IO years of aid dependency".

Kaberuka pointed out that, for the first time since independence, Africa was making solid growth gains and warned that there was a real danger of these gains being reversed unless Africa received support in the same measure as developed economies.

"Iceland," he said, "was able to access emergency financing from the IMF in a matter of days after the collapse of its banks," but African countries appealing for far smaller amounts face long and catastrophic delays, he added.

Meles Zenawi said "We are seeking a much smaller stimulus package than is being spent bailing out the small and medium-sized banks in the West." But while billions are available to pour into badly managed banks, there is no such urgency to stabilise very promising African economies.

Trevor Manuel, South Africa's Minister of Finance, was scathing in an article he wrote for the Financial Times. "The enormity of this hubris is staggering. We have grown accustomed to the idea that savings generated in the industrious poor quarter of the world should continue to finance the excessive consumption of the richest nations," he wrote. "Poor countries have been deceived by expensive service exports wrapped up as aid. Subsidies have gone to industries with influence, tariffs protect the powerful," he continued.

Manuel demanded: "Can we construct a model that balances innovation and responsibility? Such an order will need to recognise that the financial crisis cannot be unwound without addressing global trade imbalances." One would have thought the above observation was so obvious that there could be no objection to it, but the G20 package makes no mention whatsoever of trade imbalances - the key factor in unlocking Africa's potential wealth and generating renewed global economic growth.

Jeffrey Sachs, the special economic adviser to Ban Ki-moon, the UN Secretary - General, did not mince his words: "The odd situation is that we have trillions of dollars directed at banks and bail - outs but we're told there's nothing for the poor. Meanwhile, we are teetering on the brink of collapse and violence in parts of the world where people have been pushed to the brink."

Whatever is on paper, the reality is that the IMF has been provided with a chunk of money that can, and must be, used by those most in need - and African countries top the list here. We must collectively demand stimulus packages, trade support to the hilt, the freedom to subsidise key industries and pay for it from the collective global pot, the lowering of both tariff and non - tariff barriers to stimulate exports and a rejection of conditionalities that do not suit individual African countries.

The great Chinese leader Deng Xiaoping's advice, "Cross the river by feeling for the stones underfoot", seems apposite.

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What the G20 agreed on

* The trebling of lendable resources available to the International Monetary Fund (IMF) to $750bn. An expanded funding ($500bn in total) will constitute a new Flexible Credit line (FCL) with fewer strings attached aimed at providing insurance against future currency crises, in. In the past, the IMF has mostly directed its lending to members with "very strong fundamentals, policies, and track records of policy implementation". Now more countries can seek help from FCL, which should offer some relief for Africa. The IMF is effectively becoming the world's Central Bank - a lender of last resort to troubled economies.

* Supporting a new IMF 'overdraft' facility that 186 member states can tap into according to their voting shares (i.e. quotas). The money will derive from extra $250bn Special Drawing Rights - the Fund's reserve currency - representing a basket of major units (dollars, euros, yen and sterling). But 60% of the new money will go to wealthy advanced nations that hardly need it, whilst sub - Saharan Africa's 47 states will share a paltry 7% of the total, or $l7.5bn.

* Boosting the lending capacities of Multilateral Development Banks by $100bn and ensuring they 'have the appropriate capital' to undertake new ventures. Tapping global capital markets will finance the bulk of additional lending.

* A special $6bn soft lending facility for 50 least-developed countries (LDCs) - 34 of which are in Africa - to be funded by the sale of gold held by the IMF. But the G20 ignored the World Bank's plea for developed countries to pledge 0.7% of their stimulus packages into a Vulnerability Fund to help the poorest nations that cannot afford bail - outs and deficits. This innovative fund would have focused on three priorities: safety - net projects, infrastructure and support for small and medium-sized enterprises.

* A pledge to make $ 250bn available until 2011 in trade finance or guarantees through official export credit and investment agencies. There was a vague pledge to complete the Doha Round but without reference to any timetable. Its successful conclusion could boost the world economy by $150bn a year and help integrate Africa into the global trading system. Less trade would harm all countries - rich and poor alike.

* Tougher global regulation of credit rating agencies and hedge funds, as well as sanctions against secretive tax havens. British aid charity Oxfam said: "Tax havens bleed money from rich and poor countries alike, but particularly African countries." Capital flight is estimated at $600bn equal to one third of Africa's total GDP. That huge amount should be reinvested in home markets.