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Meet the “Emerging Market” Superstars of Global Economic Governance, Part I
By: Andrew Gavin Marshall
25 January 2016
One is Mexican, described by the Financial Times for his “Wall Street-sized reputation for financial wizardry”; the other is Indian hailed by India’s Economic Times as “the Poster Boy of Banking” whose “chiselled features are as sharp as his brain.” Meet Agustin Carstens and Raghuram Rajan. As the world’s economic elite gathers this week to meet in Davos, they are a perfect example of what has been called the “Davos class” – what Samuel Huntingdon described as a class who “see national governments as residues from the past whose only useful function is to facilitate the elite’s global operations.” U.S.-educated central bankers in two emerging market economies, their stories focused on their activities in one year, 2015, reveal how global power has both shifted and yet ultimately reinforced a global economic empire. Carstens entered the inner circle of financial elites, via his role as Mexico’s finance minister from 2006 to 2009, during which time he was responsible for managing the country’s response to the global financial crisis. In that capacity, Carstens turned to the IMF in April of 2009 for a $47 billion credit line to help Mexico weather the financial fallout from the crisis. During this time, he was appointed Chairman of the Joint Development Committee (JDC) of the World Bank, and after being appointed Governor of the Central Bank of Mexico in 2010, he became a member of the steering committee of the Financial Stability Board (FSB), set up to help coordinate response to the financial crisis, and was also appointed to the board of directors of the Bank for International Settlements (BIS) in Basel, Switzerland, which coordinates between 60 major central banks around the world. This impressive career resumé led to him being considered in 2011 as a contender for the top spot at the International Monetary Fund (IMF).
Raghuram Rajan’s rise to Governor of the Reserve Bank of India (RBI) followed a reverse trajectory to that of Carsten – not building his career first at a national level, but rather by gaining financial market legitimacy for his work at the IMF making himself a highly-sought after candidate within India’s elite circles. However, like Carstens, he started off in the U.S. education system, obtaining a PhD in economics from MIT in the United States in 1991, then became a professor at the University of Chicago before, in 2003, becoming the first non-Westerner and youngest person ever to fill the post of Chief Economist at the IMF, a position he held until 2007. His predictions in 2005 that “financial innovations” of the previous years and decades could make financial markets increasingly fragile, vulnerable and prone to crisis may have been questioned at the time, but after the global financial crisis hit in 2008 and proved Rajan correct, they led to him becoming well respected.
But this independence of thinking didn’t dim his belief in central tenets of neoliberalism, necessary to receive the support from financial markets to stand for office. In August of 2012, Rajan was appointed as the chief economic adviser to India’s finance ministry, praised by the Wall Street Journal as “a strong believer in liberalization and privatization,” who felt that India should continue with many of the market reforms it began implementing in the early 1990s. And the following August, in 2013, he was appointed to head the central bank by Indian Prime Minister Manmohan Singh. Immediately upon becoming Governor of the Reserve Bank of India, Rajan told the Financial Times that he planned to turn India into “a more continental and open economy” within a globalized world. Such a task is not easy, and comes with a great many risks. “I have to be careful,” he concluded.
Fostering a common vision in support of private financial capital
As central bankers in a globalized financial order, Carstens and Rajan have plenty of opportunities to meet up. They both sit on important committees of the Bank for International Settlements that meets every two months. Rajan is Vice Chairman of the BIS Board of Directors while Carstens is Chairman of BIS’s Economic Consultative Committee (ECC) and Chairman of the Global Economy Meeting (GEM). The latter has been described by its former chairman and President of the European Central Bank, Jean-Claude Trichet, “as the prime group for the governance of central bank cooperation.” The Spring and Annual Meetings of the World Bank and International Monetary Fund (IMF), taking place in April and September (or October), are also another regular stop in their calendars, especially for Carstens who has been appointed Chairman of the International Monetary and Financial Committee (IMFC), a secretive steering committee for the Fund. In addition, both Rajan and Carstens attend the private gatherings of the Group of 20 (G-20) nations that take place four times a year.
Beyond the world of inter-state financial cooperation, both Carstens and Rajan are frequent guests at meetings of private financiers – and thus all too easily pulled into the vision and interests of the private financial world – through gatherings of groupings such as the Institute of International Finance (IIF), the world’s largest and most important association of global financial institutions. IIF brings together the top executives of nearly 500 major banks, asset management firms, insurance companies, sovereign wealth funds, credit ratings agencies, hedge funds and other investment institutions.
During the IMF’s Spring Meeting in Washington in 2015, D.C., Carstens along with the Chinese Central Banker Zhou Xiaochuan, spoke at a forum on the subject of “International Capital Markets and Emerging Markets.” Carstens also sits as a member of an IIF exclusive advisory working group dedicated to supporting capital flows to emerging market countries, called the “Group of Trustees of the Principles,” sitting alongside other current and former central bankers, finance ministry officials and private bankers and financiers.
In 2013, shortly after his appointment as Governor of the RBI, Rajan spoke to an audience of the IIF outlining his objectives for reforming India’s economy over the coming years, which included further “liberalization” of India’s various financial and debt markets and to transform his own institution into a modern central bank with strict Western standards and credentials. Governor Rajan is also a member of the very exclusive Group of Thirty (G30), a private research and advocacy group of roughly 30 individuals, including current and former central bankers.
Among these meetings, the annual meeting in Davos in January, which Carstens attended in 2015, is a key forum to meet other elites outside financial circles including dozens of heads of state and hundreds of ministers and other high-ranking government officials, business and financial leaders, media and academic figures, and the chiefs of every major international organization.
Carsten and Rajan’s interactions and meetings at least ten times a year alongside other top financial diplomats help to foster shared experiences, understanding and objectives, encourage cooperation at the supranational level, and further align their ideological positions relative to one another. Similarly, their extensive interactions and affiliation with private financial market participants helps to create a community of shared interests between central bankers and financiers. Ultimately, these groupings and exchanges allow the central bankers to come face to face with their main constituents, for it is the interests of financial markets that central banks protect above all else, whether through the promotion of liberalization and other “structural reforms,” including austerity measures that are frequently demanded by markets.
Central banks also serve financial markets through the implementation of bailout programs designed to save banks and financial institutions when markets fail, as well as through the management of monetary policy with its primary objectives of achieving ‘price stability’ (low and stable inflation), which generally favours creditors at the expense of debtors. The prevailing orthodoxy of central bankers is closely aligned with the interests and objectives of private financial institutions, and Governors Carstens and Rajan are no exceptions.
Andrew Gavin Marshall is a freelance researcher and writer based in Toronto, Canada.
When the IMF Meets: Here’s What Happened At the Global Plutocracy’s Pow Wow in Peru
By: Andrew Gavin Marshall
26 October 2015
Originally posted at Occupy.com
On October 6, the finance ministers, central bankers and development ministers from 188 countries convened for the Annual Meeting of the World Bank and International Monetary Fund in Lima, Peru. The yearly gathering is one of the top scheduled events on the calendar of economic diplomats, bringing them together for private discussions, seminars and press conferences with journalists. And of course it’s a big deal for the thousands of private bankers and financiers who are there to cut deals with the chief financial policymakers in those 188 IMF-member nations.
It was ironic that this year’s meeting took place in Peru at a time when emerging market economies are experiencing increased economic problems: the result of a combined slow-down in economic growth in China, a collapse in commodity prices, and threats by the U.S. Federal Reserve to hike interest rates in the near future. Indeed, talk of China, interest rate hikes and emerging market crisis was plentiful in Peru. Central bankers, unsurprisingly, came out generally in favor of raising rates, with top monetary officials from emerging markets saying they more feared the uncertainty about when rates would rise than the rise itself, and urged the Fed to simply get on with it.
Global Pow Wow
The annual meetings bring together the Board of Governors of the IMF, made up of the central bankers or finance ministers from the Fund’s 188 member nations. But the Governors are given their marching orders from the 24-member International Monetary and Financial Committee (IMFC), made up of ministers and central bank governors from the 24 major constituencies represented on the IMF’s Executive Board, and whose membership largely reflects that of the Group of Twenty (G20).
The IMFC held their meeting in Lima on Oct. 9, presided over by the committee’s chairman, Agustin Carstens, the Governor of the Central Bank of Mexico, and the IMF Managing Director Christine Lagarde. In attendance were the finance ministers of Japan (Taro Aso), India (Arun Jaitley), Argentina (Axel Kicillof), Brazil (Joaquim Levy), France (Michel Sapin), Italy (Pier Carlo Padoan), Germany (Wolfgang Schauble), Singapore (Tharman Shanmugaratnam), Great Britain (George Osborne) and the United States (Jack Lew), along with top-level central bankers from Saudi Arabia, Nigeria, Norway, Algeria, Colombia, Belgium and China.
Also participating in the IMFC meeting were Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board (FSB); Jaime Caruana, General Manager of the Bank for International Settlements (BIS); Valdis Dombrovskis, Vice President of the European Commission; Angel Gurria, Secretary-General of the Organization for Economic Cooperation and Development; Mario Draghi, President of the European Central Bank (ECB), and other top representatives from OPEC, the World Bank and the World Trade Organization (WTO).
These various financial diplomats met and made prepared statements, but the real work and decision-making took place in the IMFC’s off-the-record discussions. These discussions also included, as usual, a joint meeting between the IMFC and the G20, after which the G20 held a press conference discussing recent agreements made by the world’s top economic diplomats collectively representing roughly 85% of global GDP.
The meetings followed the consistent hierarchy of operations among the world’s most powerful economies, starting with a private gathering of the finance ministers and central bankers from the Group of Seven (G7) nations, including the U.S., Germany, Japan, UK, France, Italy and Canada. This was followed by a gathering of ministers and monetary chiefs from the G20 nations (consisting of the G7 plus China, Brazil, Russia, India, South Africa, Argentina, Australia, Turkey, Saudi Arabia, Mexico, South Korea, Indonesia and the European Union). The heads of the world’s major international organizations also attended these meetings, functioning effectively as a steering committee for the global economy. The G20 then held a joint session with the IMFC, which functions as the steering committee of the IMF.
The IMFC’s communiqué following its meeting warned that global economic growth was “modest and uneven” with increased “uncertainty and financial market volatility.” Risks to the global economy “have increased,” it noted, in particular for emerging markets.
Apart from the IMFC and G20, a number of other important meetings took place on the sidelines of the annual gathering, many of which prominently featured bankers. One of the most important gatherings of global financiers was the Annual Membership Meeting of the Institute of International Finance (IIF), a consortium of roughly 500 global financial institutions including banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks, credit ratings agencies and development banks.
From Oct. 9-10, the world’s top bankers and financiers then held luncheons and private meetings with the world’s top economic policy-makers, who were also invited to attend or speak at the conference proceedings. The IIF’s opening ceremony was addressed by Peru’s President Ollanta Humala Tasso, and included guest speakers like the finance minister of Indonesia and central bankers from Thailand and Malaysia, as well as the top Swedish central banker, Stefan Ingves, who serves as chairman of the Basel Committee on Banking Supervision (BCBS) which is responsible for shaping and implementing global banking regulations known as Basel III.
On the second day of the IIF’s meeting, guest speakers included top officials from Brazil’s finance ministry, the World Bank, and a keynote address was delivered by the governor of Canada’s central bank, Stephen S. Poloz. The rest of the day included talks by finance ministers and central bankers from Colombia, Chile and Peru; a top official from the central bank of France; and an official from the Financial Stability Board (FSB), which is a group of global central banks, finance ministries and regulators responsible for managing stability of financial markets.
Another important gathering in Lima was the Group of Thirty (G30), presided over by its Chairman Jean-Claude Trichet, the former President of the European Central Bank. The G30 was established in 1978 as a nonprofit group of roughly 30 sitting and former central bankers, finance ministers, economists and private bankers, with the aim “to deepen understanding of international economic and financial issues” and “to examine the choices available to market practitioners and policymakers.”
Among the G30’s current members are former Federal Reserve Chair Paul Volcker; Mark Carney of the Bank of England and Financial Stability Board; Jaime Caruana of the BIS; Mario Draghi of the ECB; William C. Dudley of the Federal Reserve Bank of New York; former U.S. Treasury Secretary Timothy Geithner; former Bank of England Governor Mervyn King; economist Paul Krugman; Bank of Japan Governor Haruhiko Kuroda; Bank of France Governor and BIS Chairman Christian Noyer; Reserve Bank of India Governor Raghuram Rajan; Tharman Shanmugaratnam of Singapore; former U.S. Treasury Secretary Lawrence Summers; Chinese central banker Zhou Xiaochuan; and top bankers from UBS, JPMorgan Chase, BlackRock and Goldman Sachs.
This year, the G30 held its annual International Banking Seminar in Peru, “an invitation-only, off-the-record forum that allows for frank discussion and debate of the thorniest issues confronting the central banking community,” bringing together “over fifty percent of the world’s central bank governors, the Chairmen and CEOs of the financial sector, and a select few academics to debate financial and systemic issues of global import.”
The meeting included a short speech by Federal Reserve Vice Chairman Stanley Fischer, who told the audience that the Fed’s interest rate rise was “an expectation, not a commitment.” Fischer acknowledged that “shifting expectations concerning U.S. interest rates could lead to more volatility in financial markets and the value of the dollar, intensifying spillovers to other economies, including emerging market economies.” He reassured his audience, however, that the Fed will “remain committed to communicating our intentions as clearly as possible… to assist market participants, be they in the private or the public sector, in understanding our intentions as they make their investment decisions.”
Behind Closed Doors
But the true importance of the annual IMF meetings is not what happens in formal proceedings and seminars, but the various secret meetings of finance ministers, central bankers and private financiers that take place on the sidelines of the official conference. In these closed-door events, a select group of government and monetary officials, primarily those from the G7 and G20 nations, were invited to wine and dine with bankers at decadent dinners and lavish parties, and speak to private gatherings of the world’s top investors and money managers. It’s here, in these various meetings, where the world’s chief financial diplomats were able to meet, greet and receive praise or criticism from their true constituents: the global financial elite.
As usual, the annual pow wow of the global plutocracy came and went with little comment outside the financial press. But as always, the annual IMF meetings – and the more secretive, simultaneous gatherings of global economic diplomats and financiers on the sidelines – represented the core of global economic governance, manifest in the various ad-hoc committees that in essence rule the world.
These individuals’ main interactions were not with the populations in their home nations – the people who suffer under austerity, who have to “adjust” to the restructuring of their societies into “market economies” – but rather with those from whom they have the most to gain: bankers, billionaires and financiers. And rest assured, when the officials retire from their central bank and finance ministry positions, they will be stepping out of their membership in the G7, G20 and IMFC, and into the boardrooms of JPMorgan Chase, Goldman Sachs, BlackRock, Barclays and Deutsche Bank. They will be well rewarded, with large salaries and bonuses for a job well done while in public office. And the revolving door of global economic governance will keep turning.
Global Power Project: Bilderberg and the Global Financial Mafia
By: Andrew Gavin Marshall
11 December 2014
Originally posted at Occupy.com
In the previous Bilderberg article, I wrote that financial markets were “a type of global parasite with unprecedented power capable of determining the fate of nations and peoples.” In truth, the “super-entity” known as financial market power functions like a cartel, or an organized criminal network: a Mafia. This installment examines some of the members of the global financial mafia who are present at Bilderberg meetings and thus are given unparalleled access to political leaders behind closed doors.
At Bilderberg meetings, participants frequently include leading officials and advisers to banks like JPMorgan Chase, Goldman Sachs, Barclays, Deutsche Bank, HSBC and AXA, among others. The participation of leaders and advisers to these and other large financial institutions provides world leaders with direct, “private” access to some of the leading voices at the core of global financial markets. The interests and actions of financial markets can thus be articulated to the leaders of powerful political, media, military, intelligence and technocratic institutions. The “invisible hand” may voice where and when it might smack.
Through Bilderberg, leaders in financial markets are given an inside look at, and access to, those who shape and wield foreign and economic policy in the world’s most powerful nations. Their interests become a part of that process, just as geopolitical interests are integrated into the actions of financial markets. While financial markets command no armies, they determine the flow and functions of money upon which all armies are dependent, and to which nations are obedient. Bilderberg brings these institutions and individuals together for an off-the-record, private chat about global affairs and policy.
Martin Feldstein, who serves on the International Council of JPMorgan Chase, attended all but one Bilderberg meeting between 2010 and 2014. Feldstein is one of the most influential American economists over the past several decades, serving as a professor at Harvard, a member of the Group of Thirty, the Trilateral Commission, the International Advisory Board of the National Bank of Kuwait, and the Council on Foreign Relations. He advised President George W. Bush as a member of the Foreign Intelligence Advisory Board between 2007 and 2009, a position in which he was given access to top-secret intelligence information. He had previously served as one of Ronald Reagan’s chief economic advisers, and President Obama appointed him in 2009 to serve on the Economic Recovery Advisory Board, advising on how to manage the “recovery” following the financial crisis.
Feldstein’s views are well known. Relating to Europe’s debt crisis, for which Bilderberg meetings hold a great deal of significance, Feldstein wrote in the Financial Times in July of 2013 that governments that bowed to “popular political pressure” to lessen the brutal austerity measures widely seen as the cause of mass unemployment, poverty and social unrest, were at risk of facing rising interest rates and “a new fiscal crisis.”
In other words, if governments bend to the will of the people, financial markets will seek to bend them back. A “fiscal crisis” only takes place when creditors (financial markets) decide to stop funding the government. In Europe, nations are largely dependent upon banks to provide them with credit to function. Thus, if the heads of financial markets don’t like the policies of nations, they can cut off their funding, creating a major crisis and even collapsing the government. This leverage forces nations to follow policies favored by financial markets, such as austerity and various other “structural reforms.” Meanwhile, the policies combine to impoverish the population, enrich the elite, allow for mass exploitation of resources and labor, and consolidate control of the economy into the hands of relatively few, large global banks and corporations.
Another key Bilderberg member and leading figure in financial markets is Josef Ackermann, whom I have written about previously. Ackermann has been one of Europe’s most powerful bankers over the past decade, as the CEO of Deutsche Bank and a major power player throughout the debt crisis holding key leadership positions in large industry associations such as the Institute for International Finance (IIF).
The current chairman of the Bilderberg Group, Henri de Castries, is chairman and CEO of the French insurance giant, AXA, one of the top companies on the Swiss study’s list of the “super-entity” of banks and insurance giants. De Castries is also a member of the European Financial Services Round Table (EFR), a lobby group made up of the chairmen and CEOs of Europe’s largest financial institutions.
In 2012, the Financial Times referred to Henri de Castries as one of France’s “best known captains of industry,” having served as an unofficial adviser to former French President Nicolas Sarkozy, and been school classmates with the current President Francois Hollande. De Castries is considered “as establishment as you can get in France.”
In the wake of the European debt crisis, Henri de Castries supported the policies of austerity and structural reform, warning in 2012 that the crisis would continue for some time. He suggested that governments needed to learn how to “spend less” and the only way to “win back our competitiveness” was “through business investment and not by public spending,” adding: “What we need is a profound cultural change.”
Marcus Agius, a member of Bilderberg’s steering committee, is the chairman of PA Consulting, having previously served as the chairman of Barclays, the bank listed in the number one spot on the list compiled by the Swiss study. As chair of Barclays between 2007 and 2012, Agius also served as chairman of the British Bankers Association, was a director of the BBC from 2006 to 2013, and served as a Business Ambassador of the Trade and Investment Ministry of the British government. Agius also married the daughter of Edmund de Rothschild, bringing him into the family of one of the most prestigious and influential financial dynasties in the world.
Agius resigned from Barclays in 2012 as a result of the massive global financial fraud revealed by the Libor rate scandal, whereby some of the world’s largest banks – including Barclays – formed a cartel at the British Bankers Association to manipulate the interest rate at which banks lend to each other, influencing prices throughout the global economy. Despite the resulting scandal for Agius and others, which forced resignations in 2012, he stayed on the bank’s payroll as an adviser until March of 2014, a full 20 months following his official resignation.
Douglas J. Flint, who is chairman of HSBC, has attended every Bilderberg meeting since 2011. He is also chairman of the Institute of International Finance (IIF), and is a member of the European Financial Services Round Table (EFR), the Financial Services Forum, the International Monetary Conference (IMC), and serves on advisory boards to the Mayors of Shanghai and Beijing.
W. Edmund Clark, the chair of one of Canada’s largest banks, TD Bank, has attended every Bilderberg meeting since 2010.
Peter Sutherland has been a long-time Bilderberg participant, and serves as the chairman of Goldman Sachs International.
Robert Zoellick, former World Bank president and Bilderberg participant at every meeting between 2010 and 2014, now serves as the chairman of the Board of International Advisers of Goldman Sachs.
Peter R. Orszag, a Vice Chairman at Citigroup, attended Bilderberg meetings between 2010 and 2012.
The Vice Chairman of Goldman Sachs, J. Michael Evans, attended Bilderberg meetings in 2012 and 2013.
This is but a small sampling of some of the names of the leaders of financial institutions represented at Bilderberg meetings over the past few years. Apart from leading individual banks and financial institutions, many of the financiers who attend Bilderberg meetings simultaneously hold leadership positions within other large banking lobby groups, industry associations, and major international conferences.
For example, Bilderberg members and participants frequently hold simultaneous leadership positions at the Institute of International Finance (IIF), the International Monetary Conference (IMC), and the Group of Thirty (G30), all of which have been the focus of previous installments of the Global Power Project, as they have been profoundly influential organizations in their own right. The fact that so many leading figures in those organizations are leaders and participants in Bilderberg meetings lends extra weight to the importance of the meetings.
Roger Altman, a Bilderberg steering committee member and head of a large investment bank, wrote in a May 2013 article in the Financial Times that financial markets in the 21st century were “much more powerful than any government leader,” noting that the spread of austerity across Europe was not driven by Angela Merkel of Germany or other political leaders, but rather, by “private lenders… who declined to finance further borrowing by those countries,” and thus, “markets triggered the Eurozone crisis, not politicians.”
The views and the desires of bankers and financiers are important – and influential – precisely because if these individuals don’t get what they want, they wield the power in numbers on screens that can force the hands of even the most powerful governments and politicians. As such, the favored policies of bankers frequently become the implemented policies of states.
Andrew Gavin Marshall is a freelance writer and researcher based in Montreal, Canada.
Global Power Project: The Group of Thirty, Financial Crisis Kingpins
By: Andrew Gavin Marshall
25 February 2014
The following article was originally posted on 18 December 2013 at Occupy.com
Following parts one, two and three of the Global Power Project’s Group of Thirty series, this fourth and final instalment focuses on a few of the G30 members who have played outsized roles both in creating and managing various financial crises, providing a window on to the ideas, institutions and individuals who help steer this powerful global group.
The Assassin of Argentina
Prior to 2008, one of the most notable examples of a highly destructive financial crisis took place in Argentina which, heavily in debt, faced a large default and was brutally punished by financial markets and the speculative assault of global finance, otherwise known as “capital flight.” Less known in the story of Argentina’s 1998 to 2002 economic catastrophe was the significant role played by just one man: Domingo Cavallo.
A longtime member of the Group of Thirty, Cavallo formerly served both as Governor of the Central Bank and Minister of Economy in Argentina. He has been referred to by Pulitzer Prize-winning economic researcher Daniel Yergin as “one of the most influential figures in recasting the relationship of state and marketplace in Latin America.”
Between 1976 and 1983, Argentina, ruled by a ruthless military dictatorship, was marred by excessive human rights abuses and persecution of intellectuals and dissidents during the so-called “Dirty War” in which as many as 30,000 people were killed or disappeared . The terror was reminiscent of nearby Chile, where a coup that brought dictator Augusto Pinochet to power in 1973, with the help of the CIA, provided a petri-dish experiment in the implementation of neoliberal “reforms.” It was Chile’s dictatorship that set the example, and Argentina’s soon followed.
In a 2002 interview, Domingo Cavallo noted that, “The experience of Chile during the ’80s was very instructive, I think, for most Latin American economies, and many politicians in Latin America, because Chile was successful by opening up and trying to expand their exports and in general their foreign trade and getting more integrated into the world economy… And of course we used, particularly here in Argentina, the experience of Chile to go ahead with our own reforms.”
Asked about the association between economic “reforms” in Chile and the ruthless dictatorship that implemented them, Cavallo explained, “There were discussions on the feasibility of implementing market reforms in a democracy. But in 1990… the first democratic president after Pinochet maintained the reforms and also tried to improve on them [and] it was demonstrated that itwould be possible to implement similar reforms under a democratic regime.”
What specific reforms was Cavallo referring to? Under Argentina’s military dictatorship, Cavallo served for one year as Governor of the Central Bank in 1982, where he was responsible for implementing a state bailout of corporations and banks. After, Cavallo returned to academic life. But all that changed with the election of Carlos Menem in 1989, who served as president until 1999. In 1991, Menem appointed Cavallo as Minister for Economy, a position he held until 1996.
Cavallo led the neoliberal restructuring of Argentina: pegging the Argentine peso to the U.S. dollar, trying to reduce inflation, undertaking massive privatizations while opening up the economy to “free trade,” and deregulating financial markets. The New York Times in 1996 heaped praise on Cavallo for his “constructive” role in leading the economy “back to vitality and international respectability,” despite the fact that his reforms “brought high unemployment and painful reductions in social programs.”
Another NYT article credited Cavallo for the “stability” brought to Argentina through his “economic miracle,” while noting, without irony, that Cavallo’s miracle had “left million of Argentines… without a safety net” and with record-high unemployment, the emergence of urban slums, abandoned street children, over-crowded food banks, homeless shelters in churches, and even some people who were forced to eat cats in desperation. The “miracle” was so great, in fact, that despite all of the so-called stability it facilitated, President Menem ultimately dismissed Cavallo to the jubilation of tens of thousands of protesters in the streets. Though the people were pleased, financial markets expressed their disapproval .
With multiple economic and financial crises erupting around the world and in neighboring nations, Argentina, which pegged its currency to the U.S. dollar, found it could no longer compete. The touted neoliberal reforms were taking a toll as the country plunged into recession. Menem was replaced in 1999 by President Fernando De la Rua, who quickly sought support from the IMF to help repay the country’s debts owed to foreign – largely American – banks.
But Cavallo wasn’t out. In 2001, he was re-appointed as the country’s Minister of Economy just in time to receive emergency powers enabling him handle the country’s ongoing financial crisis that he helped to create . At that point, financial markets felt Argentina could not be trusted to repay its debt and the IMF refused to provide further loans, on the basis that the country had not implemented enough neoliberal reforms to meet its demands. The economy crashed and the “much-hated” Cavallo had to resign, as did the President, who fled by helicopter from the Casa Rosada as Argentines protested en masse .
Even the Federal Reserve Bank of San Francisco noted in 2002 that there was “some truth” to the view that “Argentina’s debt position would have been sustainable if only market uncertainty had not triggered a crisis.” But, it added, had Argentina made the effort asked of it to reduce its debt, it could have avoided “potentially destabilizing shifts in market sentiment.”
The role played by former Federal Reserve Chairman Alan Greenspan in creating the conditions that led to the 2008 global financial meltdown is known to many. What is less known is that Greenspan, too, is a former member of the Group of Thirty. Greenspan did not work alone, of course, in his efforts to deregulate the financial system and spur the growth of the derivatives markets, which laid the groundwork for the worst financial crisis in modern times. Larry Summers, who then served as deputy secretary and later Secretary of Treasury under Bill Clinton, was also very helpful in this regard. Summers, too, is a current member of the Group of Thirty.
Currently serving as President Emeritus and as a professor at Harvard University, Summers was the former director of President Obama’s National Economic Council from 2009 to 2011. Previously, he was President of Harvard (2001 to 2009) and, prior to his positions during the Clinton administration he was Chief Economist at the World Bank (1991 to 1993). Currently, Summers is a member not only of the G30 but of the Council on Foreign Relations, the Trilateral Commission, and he was also a member of the Steering Committee of the Bilderberg Group.
While Chief Economist at the World Bank, Summers signed an infamous 1991 memo in which it was suggested that rich countries should dump their toxic waste and pollutants in the poorest African nations — because by the time the toxins spurred the growth of cancer in the local population, they would already statistically be dead due to already high mortality rates. The memo noted : “I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.”
When Summers later went to work for the Clinton administration under Treasury Secretary Robert Rubin, he along with Rubin and Fed Chairman Greenspan formed the “Three Marketeers,” as Time referred to them, dedicated to “inventing a 21st century financial system” where they placed their “faith [in] financial markets.”
In the final two years of the Clinton presidency, Summers served as the Treasury Secretary alongside his deputy and protégé, Timothy Geithner, another member of the G30 who would go on to make a mark on the financial crisis — largely by convincing President Obama to bail out the Wall Street banks that crashed the economy, with zero penalty to them. Under the Obama administration, Summers served for nearly two years as Chair of the National Economic Council and was a highly influential policymaker . In 2009, he had spoken at the highly influential ultra-conservative think tank, the Peterson Institute for International Economics, where he explained the administration’s approach to the economic recovery, noting that , “Our approach sought to go as much as possible with the grain of the market” as opposed to regulating markets.
When Summers left the Obama administration in late 2010, he returned to Wall Street and made a fortune working for the hedge fund D. E. Shaw & Co. and Citigroup. This past summer, he was considered Obama’s favorite pick to replace Ben Bernanke as Fed Chairman, but faced such stiff opposition within the Democratic Party that he withdrew his name, leaving Janet Yellen – the Vice Chair of the Fed and herself a former member of the Group of Thirty – to step in .
What we see, in this analysis of the Group of Thirty, are the connections between those in positions of power to respond to and manage economic and financial crises, and those in positions of power who created such crises. Naturally, as well, the G30’s membership includes numerous bankers who, as fortune had it, shared handsomely in the profits of those crises. Put simply, the G30 can be thought above all as an exclusive club of financial crisis kingpins. And it is a club, no doubt, that will continue to play a significant and not altogether helpful role in global financial management for years to come — or until something is done to stop them.
Andrew Gavin Marshall is a 26-year-old researcher and writer based in Montreal, Canada. He is project manager of The People’s Book Project , chair of the geopolitics division of The Hampton Institute, research director for Occupy.com’s Global Power Project and the World of Resistance (WoR) Report, and hosts a weekly podcast show with BoilingFrogsPost .
Global Power Project: The Group of Thirty and Its Methods of Financial Governance
By: Andrew Gavin Marshall
Originally posted at Occupy.com
In the first part of this exposé, I examined the origins and recent history of the Group of Thirty as a highly influential institution in the arena of global financial governance, bringing together top central bankers, financiers, policymakers and academics in the world of economic and monetary affairs.
More than three decades since it was founded in 1978, the Group of Thirty has maintained its reputation as a prominent institution in the financial world, continuing to produce influential reports and advocate for policies which are largely accepted and implemented across the globe.
The G30, as it is often referred to, describes itself as “a private, nonprofit, international body composed of very senior representatives of the private and public sectors and academia” which “aims to deepen understanding of international economic and financial issues, to explore the international repercussions of decisions taken in the public and private sectors, and to examine the choices available to market practitioners and policymakers.”
In her dissertation on global financial governance, Eleni Tsingou, Assistant Professor at the Department of Business and Politics at the Copenhagen Business School, focused on the role of the Group of Thirty in shaping the global financial system, noting that the G-30 “has had an important impact on financial regulatory and supervisory practices both at the national and global levels…in a way that was consistent with private sector interests.”
She noted, “the G-30 has contributed to the emergence of a mix of public and private authority in global finance and has considerably strengthened the role of private interests in the functions of regulation and supervision.”
By the late 1990s, the G30 had played a central role in the governance of the global financial system – with a very direct role in managing the clearance and settlement of securities and over-the-counter (OTC) derivatives – ultimately directing the course of the debate and the resulting policies of regulation (or lack thereof). The Group of Thirty had thus “found itself in a privileged position at the centre of the financial policy arena.”
The Group went on to have a significant influence on the type of banking regulation set forth through the Basel II process of the Basel Committee on Banking Supervision, run out of the Bank for International Settlements. More specifically, the G-30 was a strong promoter of “self-regulation” and “self-supervision” of the financial markets, or, in other words, granting the banks the authority to “regulate” themselves, which obviously led to disastrous consequences.
G30 Report: Long-Term Finance and Economic Growth
In 2012, the G30 published a report compiled by the Working Group on Long-term Finance, which was composed of nearly two-thirds of the membership of the G30 and which set out their concerns about “the efficient provision of a level of long-term finance sufficient to support expected sustainable economic growth in advanced and emerging economies.” The report aimed to estimate “future financing needs” and to “identify the barriers” which would get in the way of supporting “long-term growth” for the economy.
The report noted directly that it was not an “abstract exercise,” but was “operational,” complete with “practical recommendations for global and national actors and policy makers that would…help create a system of long-term finance.” In other words, for the Group of Thirty, they don’t produce mere “recommendations,” but rather “instructions” which they expect to be followed. It is of significance that many of those who produced the report and who are members of the G30 conveniently hold an official position so as to be able to dutifully implement those instructions.
The report noted some “ideal candidates” to manage long-term financing, such as pension funds, sovereign wealth funds, insurance companies, endowments and foundations. By the end of 2010, these institutions had roughly $57 trillion in assets, a number which the G30 predicted would increase by $3 trillion per year until 2020.
Noting that the world’s major economies would be continuing to undergo austerity measures – or “fiscal consolidation” programs – over the “medium-term,” the ability of governments to make investments would be heavily restrained. Thus, “the private sector will need to be mobilized to fill the gap.” In other words, so-called “public-private partnerships” become the route to go, to ensure that corporations and banks reap massive profits, subsidized by governments.
The G30 report made the claim that “open markets help support sustainable economic growth,” and then recommended that emerging market economies follow the major industrial nations down the same path that helped create the global financial crisis by suggesting that they “gradually move toward liberalization of capital accounts,” to allow money to flow in (and out) of countries with more ease and less regulation (if any).
What makes the G30, and its recommendations, so important is not only the fact that they are taken seriously by policymakers and market “participants” – but that the very individuals making the recommendations are in positions of power to directly implement or support those same recommendations. Here are a few of those individuals worth noting:
Mark Carney is a member of the Group of Thirty, while also sitting as the Governor of the Bank of England (a position he took up in 2013), prior to which he was the Governor of the Bank of Canada from 2008 to 2013. Since 2011, Carney is Chairman of the Financial Stability Board (FSB), run out of the Bank for International Settlements (BIS). He is the former Chairman of the Committee on the Global Financial System at the BIS from 2010 to 2012; the first Vice Chair of the European Systemic Risk Board; a member of the board of directors for the BIS; a member of the Foundation Board of the World Economic Forum, and a participant at Bilderberg Meetings. Previously Carney was a former Deputy Finance Minister in Canada from 2004 to 2008, and a deputy governor of the Bank of Canada from 2003 to 2004, prior to which he worked for Goldman Sachs as an executive for several years.
Jaime Caruana is also a member of the Group of Thirty while sitting as the General Manager of the Bank for International Settlements (BIS) from 2009 to the present. A member of the Financial Stability Board (FSB) from 2009 to the present, Caruana is also a member of the Group of Trustees of the Principles for the international banking lobby group, the Institute of International Finance (IIF). Previously, Caurana served as the Financial Counselor to the Managing Director of the IMF and as the Governor of the Bank of Spain from 2000 to 2006, where he helped create the Spanish housing bubble that led to Spain’s current crisis. He also sat on the Governing Council of the European Central bank from 2000 to 2006 and was a member of the Financial Stability Forum (FSF) from 2003 to 2009 (at which time it was formed into the FSB), in addition to being former Chairman of the Basel Committee on Banking Supervision from 2003 to 2006.
Mario Draghi is a member of the Group of Thirty while acting as current President of the European Central Bank from 2011 to the present, as well as being on the board of the BIS from 2006 to the present and serving as Chairman of the Group of Governors and Heads of Supervision (GHOS) at the BIS from 2013 to the present. Draghi was formerly the Governor of the Bank of Italy, from 2006 to 2011, where he helped put in place the conditions that led to Italy’s current economic and financial crisis. He was a former chairman of the Financial Stability Board from 2009 to 2011; former chairman of the Financial Stability Forum from 2006 to 2009; and a former member of the board of governors of the International Bank for Reconstruction and Development (IBRD) and the Asian Development Bank (ADB). Draghi was additionally a former Honorary Trustee at the Brookings Institution from 2003 to 2013; a former Director General at the Italian Treasury from 1991 to 2001; chairman of the Italian Committee for Privatizations from 1993 to 2001; former Executive Director at the World Bank from 1984 to 1990; and he served as Vice Chairman and Managing Director for Goldman Sachs International from 2002 to 2005.
A European non-profit organization that documents – and opposes – the influence of corporations on E.U. policy, the Corporate Europe Observatory had filed a complaint with the E.U. that Mario Draghi’s membership in the Group of Thirty represented a conflict of interest as it brought him into an institutional relationship with several representatives of large banks, many of which received financial support from the ECB. In early 2013, the E.U. stated that Draghi’s membership in the G30 did not undermine his “independence” as head of the European Central Bank, since the G30 “should be characterized as a discussion forum, rather than an interest group or lobby seeking to promote private interests.”
Paul Krugman of the New York Times came to the defense of Draghi, while noting that he himself was a member of the Group of Thirty. Krugman wrote on his blog, “It’s a talk shop; I value it because I get a chance to hear what people like Trichet and Draghi have to say in an informal setting.”
These are, of course, not the only major officials who are members of the Group of Thirty within the central banking world, but three among several members. The next part in this series will examine some of the other members of the Group of Thirty and the contributions they have made in the past to creating the global economic and financial crisis, and the current roles they play as members of the G30.
Andrew Gavin Marshall is a 26-year old researcher and writer based in Montreal, Canada. He is Project Manager of The People’s Book Project, chair of the Geopolitics Division of The Hampton Institute, research director for Occupy.com’s Global Power Project and the World of Resistance (WoR) Report, and hosts a weekly podcast show with BoilingFrogsPost.
Global Power Project: The Group of Thirty and the “Good Discussion” They’re Still Having
By: Andrew Gavin Marshall
Originally posted at Occupy.com
The Group of Thirty (or G-30) describes itself as “a private, nonprofit, international body composed of very senior representatives of the private and public sectors and academia,” which “aims to deepen understanding of international economic and financial issues, to explore the international repercussions of decisions taken in the public and private sectors, and to examine the choices available to market practitioners and policymakers.”
Its membership consists of roughly thirty major figures in the global financial world, from central banks, academia, international institutions and major private financial institutions. These figures hold regular meetings, conduct research and produce highly-influential reports through various “working groups,” providing a forum for top policy makers and private sector market “actors” to meet and hold discussions, while helping shape consensus and give recommendations to policy makers on issues of finance and governance.
This institution, though not widely discussed, is enormously influential. And here’s why.
The history of the Group of Thirty goes back to the Rockefeller Foundation, which provided the organization’s initial funding. In its 1978 annual report, the Rockefeller Foundation – which represents the interests of highly centralized corporate and financial power – recalled that it was created in 1913 as a response to “the Populist assault on the massive concentration of wealth in the hands of few.” (Annual Report, 1978, Rockefeller Foundation.)
The 1978 report noted that a former managing director of the IMF, Johannes Witteveen, “agreed to assume the chairmanship of a Consultative Group on International Economic and Monetary Affairs made up of leading bankers, officials, economists, and businessmen from the developed and developing world.” The objective of this group was, the report stated, was “to help analyze, through scholarly inquiry and international consultations, some of the vexing economic and monetary problems facing the world today, and to make their findings widely known.”
The Rockefeller Foundation expressed a keen interest in structuring the global economic and monetary issues of the day, noting that: “The international economic system is not functioning well – as evidenced by slow economic growth, persistent unemployment, and high inflation in many countries, growing skepticism about the capacity of floating exchange rates to correct imbalances of payments, increasing fears of protectionism, and relatively little progress in meeting the needs of developing countries and the quarter of the world’s population that is very poor.”
Thus, the Foundation laid the groundwork for what would come next, by continuing “to concentrate on international economic policy and made plans to bring together a group of experts who will explore the functioning of the international economic system. Beginning with the subject of international monetary problems, the group intends to clarify the issues, identify policy choices for governments, and assess the consequences of alternative policies and institutional arrangements.”
What emerged was the Group of Thirty, originally named the “Consultative Group on International Economic and Monetary Affairs,” which was to function as a think tank, lobby/industry group and, ultimately, a consensus-building institution for the global elites – to ensure that they stayed that way.
The 1979 annual report of the Rockefeller Foundation noted that the Group of Thirty “began an ambitious program of research, study group analyses, and plenary meetings for the purpose of seeking ways to improve the functioning of the international monetary system.” (Annual Report, 1979, Rockefeller Foundation.)
Fast forward more than three decades and the Group of Thirty remains a highly influential organization in matters of global financial governance. Members of the G-30 have included notable figures such as Josef Ackermann, Pedro Aspe, Alan Greenspan, Andrew Crockett, and the newly-anointed Chair of the Federal Reserve System, Janet Yellen.
The Association for Financial Professionals wrote in 2005 that, “over nearly the past three decades, one thing that has remained continuous in the hurly-burly changing landscape of international economics has been the influence of the Group of Thirty,” which it described as “something of a high-powered global economic think tank.”
Gerd Hausler, an official at the IMF and former Governor of the German Bundesbank, stated: “What makes the G30 unique is that it has very senior people there… It recruits members from the central banks and private companies [to get them] sitting together and mulling ideas at a high level.”
Geoffrey L Bell, who founded the organization at the invitation – and with the money – of the Rockefeller Foundation, commented, “The idea of ‘30’ was to have a good cross-section of people from around the world… but not so many that you couldn’t have a good discussion.”
In March of 2009, the Financial Times published a list of “the 50 people likely to be the most influential in shaping the world debate” on “tackling the many problems” of the global financial and economic crisis, “and charting a course through them to a new world order.”
The article noted that, “networks and institutions will matter as much as individuals,” and in particular it referenced the Group of Thirty as “one interesting connection between these players,” with 11 of the 50 individuals selected on the list being members of the G-30. Four years after the list was published, the number of its individuals who were also members of the G-30 increased to 14.
One of those is Jean-Claude Trichet, the former President of the European Central Bank and current Chairman of the Group of Thirty. Upon assuming his role as chairman in 2011, Trichet stated: “This is a time of exceptional challenges to the global economic and financial system, and the G30 will continue to make significant contributions to the policy debate and enhance understanding of the critical paths to stability and to economic growth.”
As Chairman of the G-30, Trichet also sits as the Honorary Governor of the Banque de France (the French central bank), which he used to direct from 1993 until 2003, when he became President of the European Central Bank (ECB), a position he held through 2011. Trichet was also previously a director of the French Treasury and the former chairman of the Paris Club, from 1985 to 1993. While he was President of the ECB, he also served as a member of the board of directors of the Bank for International Settlements (BIS) and as president of the Global Economy Meeting of Central Bank Governors at the BIS from 2002 to 2011.
Today, Trichet holds a number of other highly influential positions. Apart from being Chairman of the G-30, he sits on the board of directors of the Peter G. Peterson Institute for International Economics, he is on the board of the European military contractor EADS, and he is chairman of the board for the influential European think tank BRUEGEL. Trichet is also, importantly, a member of the Group of Trustees in the global bank industry lobby known as the Institute of International Finance (IIF). He is additionally the European Chairman of the Trilateral Commission and is a member of the Steering Committee of the Bilderberg Meetings.
Jacob A. Frenkel, the Chairman of the Board of Trustees of the Group of Thirty, is also a member of the Executive Committee of JPMorgan Chase, and Chairman of JPMorgan Chase International, while also sitting as a member on the International Council of the bank. Frenkel was the Vice Chairman of American International Group (AIG) from 2004 to 2009, during which time it received its mega-bailout from the Federal Government. He is also a past Chairman of Merrill Lynch International from 2000 to 2004.
Prior, Frenkel was the Governor of the Bank of Israel from 1991 to 2000; Economic Counselor and Director of Research at the International Monetary Fund (IMF) from 1987 to 1991; David Rockefeller Professor of International Economics at the University of Chicago from 1973 to 1987; former editor of the Journal of Political Economy; and previously a member of the International Advisory Board for the Council on Foreign Relations.
Currently, Frenkel is a member of the board of directors on the National Bureau of Economic Research (NBER), as well as a member of the Trilateral Commission and the International Advisory Council of the China Development Bank. He too sits on the board of the Peter G. Peterson Institute for International Economics, and is a member of the Economic Advisory Panel of the Federal Reserve Bank of New York, as well as the Investment Advisory Council to the Prime Minister of Turkey. Frenkel is also on the board of directors for Loews Corporation.
This is but a brief introduction to the Group of Thirty, its members, and its influence, which will be elaborated upon in future installments of the Global Power Project. Stay tuned for the second part in the series next week.
Andrew Gavin Marshall is a 26-year old researcher and writer based in Montreal, Canada. He is Project Manager of The People’s Book Project, chair of the Geopolitics Division of The Hampton Institute, research director for Occupy.com’s Global Power Project and the World of Resistance (WoR) Report, and hosts a weekly podcast show with BoilingFrogsPost.