Recently, the annual figures of the national gross domestic products (GDPs) of various countries of
the European Union (EU) were published. Most of them are not very favorable compared to those for
Asian countries. Most of them show a negative growth. Many Western industrialized countries not
only are dealing with the aftermath of the financial crisis, but also with the long-term flattening
growth of their economies.
Group Of 30
Now, some financial newspapers have published the message that the Group of Thirty (G30), an
association of leading representatives of the global financial industry, warns urgently of the risk
that insufficient long-term investment will occur worldwide in the coming years. They claim that
this could weaken the growth sensitively. The G30 is a secretive panel of private bankers. Mario
Draghi, president of the European Central Bank (ECB), and Bank of England Governor Mervyn King are
among its members — but why is that so? The EU now wants some clarification: What is this group,
and what do they want?
From 2006 to 2011, Draghi, an Italian bank manager and economist, was governor of the Bank
of Italy, and since Nov. 1, 2011, has served as president of the ECB. He was also former vice
chairman of Goldman Sachs International, and is currently also a board member of the Bank for
International Settlements in Basel, Switzerland.
Who’s Who Of Global Finance
In 1978, Geoffrey Bell, an American banker and economist, founded the G30 on the initiative
of the Rockefeller Foundation. Bell is an extremely important and powerful advisor to private and
central banks. Johan Witteveen, former managing director of the International Monetary Fund, served
as the group’s first chairman. According to its website, the G30 currently has 32 active members,
which reflects a real Who’s Who in the banking sector: In addition to Draghi and King, other
members include JPMorgan Chase International Chairman Jacob A. Frenkel, chairman of the G30’s Board
of Trustees; and U.S. economist and Nobel Laureate Paul Krugman. Former ECB President Jean Claude
Trichet is the group’s chairman.
Conflicts Of Interest
Now, the Corporate Europe Observatory, an organization that fights against corruption, is
blaming Draghi for a conflict of interest: The organization raises questions about Draghi’s
independence as a member of the G30, which is mostly entangled with large bankers. The cornerstones
of the EU should be “impartiality, independence and objectivity” — factors that are obviously in
strong conflict with practices at the G30.
Lobbying
In a self-declaration, the Group of Thirty states that “it is dedicated to the study of
economic and financial phenomena.” For this, the members meet twice a year to gain “a deeper
understanding of international business and finance” and to understand “the impact of decisions in
the public and private sectors.” In it unclear to what extent the G30 is influencing the world
economy. Having these confidential gatherings and the composition of the group — that is, its
exclusive members — in mind, critics suspect unwritten and clandestine agreements.
According to a G30-commissioned study titled “Manufacturing the future: The next era of
global growth and innovation,” prepared by the consulting firm McKinsey Global Institute, the group
claims that the investment needs of the nine largest countries — which together are responsible for
60 percent of the GDP — will grow from 30 percent of the GDP in 2010 to 34 percent in 2020. This
would represent a real investment needs growth of US$7.1 trillion to US$18.8 trillion.
The authors believe that the global financial system will struggle to provide the necessary
capital to provide for the expected surge in investment. The main sources of investment, subject to
national differences, include self-financing by households and companies, which represents
approximately one-third; governments, which represent 25 to 30 percent; and bank loans and
mortgages, representing approximately one-third. The study claims that banks and governments, as a
result of the financial crisis, are not able to do their job. That’s why the “non-banking sector
and the capital market should step much more into the breach,” they state.
New Regulations (?)
Now, the G30 proposes to remedy “an array of especially regulatory measures to strengthen
the capacity and willingness to long-term investments.” That is strange.
On the other side, 11 EU countries — out of 27 member states — decided that from 2014, a
uniform minimum tax would apply to bank and stock market transactions. The fact that not all EU
member states want to participate should leave one wondering. The EU Taxation Commissioner in
Brussels has presented parts of a proposal to introduce a financial transaction tax. The tax is
expected to provide the Commission with annual revenues of 30 billion to 35 billion euros from the
11 countries. Financial experts say that this seems to be a fair and technically sound control,
which would strengthen the internal market and bridle irresponsible trade.
With this tax, banks and other institutions should contribute to the costs of the financial
crisis, which have been paid mostly by taxpayers. Liability for taxation should be placed only on
financial institutions. Ordinary banking activities, credit and savings services, and insurance are
not included.
The G30 says that portfolio managers of pensions and sovereign wealth funds should be more
powerful, and, for example, might receive bonus incentives (!). But also, the group supports
implementing accounting rules that “give the short-term market volatility of long-term investments
less weight.” And there is no limit -the “cooperation between the public and private investors
could be developed.”
The Purpose Of The Group Of Thirty
What is this Group of Thirty really doing, and what do they want? Board Chairman Frenkel
said in January 2012 that “the effectiveness of the G30 is directly related to the quality and the
status of its group members.” What is the effectiveness of a private lobbying organization
dedicated to directly influencing the world economy?
Many personalities from politics and business complain that bodies such as the G30 can
hardly distinguish between public duties and private interests; and also that all that relates to
politically relevant content and discussions and decisions can hardly be private. What do these
people really discuss and negotiate? No one knows. Social networks are already on call to stop the
G30. Now the European Ombudsman is trying to resolve the Draghi case and the question of whether
the G30 will have some influence on the fortunes of Europe. One thing is clear: The top leaders of
the financial world do not give up so quickly.
February 19, 2013
