"Through constant change, the blending together of economies, people, laws, politics, monies and social ethics into one. The convergence or harmonization, i.e. homogenization of the world from individual nation-states to one world, 'a world without borders.'"
--Definition of Globalization by Joan Veon
"We see oneness as the end result of homogenization when we add chocolate syrup to milk. Once we stir, can we separate the chocolate syrup from the milk?" March, 1996 VFSI newsletter
There is a blending taking place in our world which has been going on for quite some time. Fifty years ago, the United Nations came together and determined that peace in the world would come through a harmonization of people, social and spiritual values, education, law, and commerce. The harmonization they talked about, in short, is globalism.
The writer found, in attending her first Group of Seven meeting in Lyon, France in June, that the leaders of the top seven most industrialized countries (the US, France, Canada, Italy, Germany, Britain, Japan plus Russia) appear to direct the globalization process. Since 1975, when they first met, the Group of Seven leaders have been orchestrating--much like a "Global Board of Directors"---the economic, political, industrial, technological and social changes in the world. They have set in motion all of the forces, plans, strategies and global institutions to accomplish the Herculean task of taking autonomous countries as well as business-- banking, finance, manufacturing, communications, travel, consumer products, computers, technology, etc. and blending them into one---the ultimate goal of globalization. In 1988, the G-7 stated, "Over the past fourteen years, the world economy and economic policy have undergone profound changes. In particular, the information technology revolution and the globalization of markets have increased economic interdependence, making it essential that governments consider fully the international dimensions of their deliberations." (emphasis added)
Three key areas are mentioned in the above quote. With regards to the Information Technology Revolution, in a series of papers prepared for The Bank for International Settlements , March, 1987, they wrote, "Advances in data-processing and communications technology, making transactions faster and cheaper, have paved the way for new types of [financial] instrument(s)..." Then in an article in The European, March 14-20, 1996, p.10 discussing computer networks, "The changes driving this transformation (computer networking) should be familiar to bosses: rising competition, deregulation, the globalization of markets, the down sizing and flattening of organizational structures...."
With regard to the globalization of markets, the Group of Seven Finance Ministers said in their recent report, "The dramatic increase in trade and capital flows in the world has deepened economic and financial integration among all countries...."
Globalization---encompasses and affects all as it will change our frame of reference. For corporations and businesses alike, globalization is Darwinism---survival of the fittest--the strongest--the biggest. The "yellow brick road" for this evolutionary process is paved with the cement of GATT-World Trade Organization (see the November, 1994 newsletter), de-regulation, mergers and acquisitions and standardization. Standardization is the process of bringing the various laws of all of the countries of the world into conformity with the process that is to be achieved. In other words, national laws will be obsolete once the globalization process is finished because they will have been superseded by new laws.
In 1995, there was an unprecedented $502B in US merger and acquisitions among corporations. Merger volume surged to a record $280B in the first half of 1996 compared with $192B in the first half of 1995 according to Securities Data Co. Globally, merger volume surpassed $492B in the first half--a 25% jump from the $393B in the year earlier. Driven by deregulation, megadeals surged in telephone and radio. (Wall Street Journal, 5/8/96, C1)
The end result of globalization will be the biggest and most dominate companies in every industry
--- airlines, automobile manufacturers, banks, computer, drugs, electric, food, insurance companies, manufacturing, stock exchanges, etc. ---who have "run the race" according to the rules of the end game. These firms will literally "rule the world"-- as Britannia once did (or maybe still does)-- and you and I will have no choice as to who we deal with because all of the competition will have been eliminated.
At this point, the necessary infrastructure has and is coming into being through the standardized rules for: accounting, banking, stock exchanges, delivery and settlement of investments, manufacturing, etc. When this process is completed, the respective industries worldwide, will adhere to the same rules on a global basis. The changes in country laws can be seen by the activity worldwide to "blend, homogenize and harmonize" (merger and acquisition--flow of monies across borders, etc.) the people and businesses of the world. Let us take a look at some of the activity in the last year or so.
Airlines
For some time, airlines have been looking to expand their routes--much like Marco Polo did--in an effort to open up trade with the world. China is the hottest port of entry. Currently there are a number of European airline carriers such as British Air, Lufthansa, Swissair and KLM who fly directly there.
Meanwhile on the European continent, in order to integrate the airlines who fly to Europe, a number of "open sky" treaties have been signed or are in the process of being signed. "Open skies" are landing rights treaties which would allow air carriers to fly between two different countries without restrictions. The recently completed alliance between American Airlines and British Air will become reality once the US and Great Britain sign a new landing rights treaty.
In the deal, American would be able to use British Air's routes beyond London to Europe, Africa, the Middle East and Asia. (Washington Times, 6/1/96, B1) Earlier this year, in February, the US and Germany reached a preliminary agreement on an "open skies" aviation deal which will lift restrictions on the number of flights between the U.S. and Germany. It will allow German carriers to fly directly into all US airports instead of the 25 they have been allowed to land at so far. In a similar deal, United has linked up with Lufthansa of Germany and SAS of Sweden. In 1995, the US negotiated open skies agreement with nine other European countries.
With regard to the aerospace industry, Boeing Corporation withdraw its opposition to a $1B US loan to the Russian aviation industry when they agreed to open their aerospace market to U.S. companies. As part of negotiated concessions for the loan, Russia will suspend a 30% tariff on jetliner imports and enact other reforms to encourage lending on aircraft deals which will allow Western lenders to repossess planes in the event the Russians default. The loan, which will be financed through the Export-Import Bank of the US (which means the taxpayer guarantees the loan), will be used to finance Pratt & Whitney engines and Rockwell International avionics. (Washington Post, 2/2/96, F1)
Automobiles
For a number of years now, American auto manufacturers have been erecting plants in foreign countries in an effort to increase profits by not having to pay American type wages. The US has a number of plants--not only for automobiles but for trucks all over the world. As well, the Japanese have a number of auto plants in the US.
The integration of automobile manufactures continues. Ford Motor Corporation and the government of Belarus have formed a $20M joint venture to produce cars and vans in Belarus for sale throughout the former Soviet Union. General Motors has announced plans to build there as well as Volkswagen's Czech subsidiary, Skoda who is studying a kit-assembly project in Russia. Daewoo Motor Corp, an expensive South Korean auto maker, is already there. Ford's first step in the former Soviet Union is "just the first step" as they already have a kit assembly plant in Poland and components-manufacturing operations in Hungary and the Czech Republic.
It is steel which holds all manufacturing together. According to the Financial Times, March 22, 1996, "The world's top steelmakers were yesterday urged to follow their customers in the motor industry and step up investment in developing countries." According to Ronald Schuster, director of steel purchasing for GM in the US, the biggest US vehicle manufacturer, "As we expand globally, we need to work together to make sure people around the world can purchase the vehicles we want to build for them. We need our global steel suppliers to go forward and invest in developing countries." Inland Steel, the 6th largest US steelmaker, is opening a $20B steel service and distribution center in Shanghai in a joint venture with Chinese partners. He said the industry needed more such alliances and urged the steel industry to adopt common standards and technical specifications so that customers could order the same grade in different countries and be sure of receiving the same product. Inland is not exporting metal but building networks of stockholding centers in foreign countries, using local producers for supplies.
Banking, Brokerage Firms and Mutual Funds
Banks
Due to the liberalization process of national laws, a number of foreign banks have been buying American banks, investment firms and insurance companies. In March, the Federal Reserve approved Mitsubishi Bank's plan to buy the U.S. units of the Bank of Tokyo in a merger that will create the world's largest bank with assets of $826B.(WT, 3/9/96, A11) In April, CS Holding AG, the parent company of Credit Suisse Bank and CS First Boston Inc., proposed a merger with Union Bank of Switzerland that would create the largest bank in Europe and one of the largest in the world. (WSJ, 4/10/96, A3) Swiss Bank Corp. is looking for a U.S. investment bank and has sent letters to three small U.S. securities firms. Swiss Bank is ranked 50th in US stock and bond underwriting. CS First Boston is owned by Switzerland's CS Holding AG which also owns Swiss banking giant Credit Suisse. (WSJ, 6/4/96, C1)
This intermingling of banks is not just between American and foreign. Two large Spanish banks are considering a purchase of several banks in Mexico to expand to expand presence there. Recently JP Morgan has committed up to $350M to help Mexico's Grupo Financier Serif. In addition, the Bank of Montreal signed a letter of intent to purchase 16% of Group Financiero Bancomer SA which is valued at $425 to $475 million. Their rival, Bank of Nova Scotia, agreed to invest as much as $225M over a four year period for a 55% stake in Grupo Financiero Inveriat. (WSJ, 2/16/96, b2)
Brokerage Firms
On another front, Merrill Lynch acquired British brokerage firm Smith New Court. This acquisition has allowed them to handle more foreign stocks as they now trade about 4,000 foreign stocks (up from 600 a few years ago) that aren't listed in the US for retail clients. (WSJ 123/96, C1) In addition, National Westminister Bank PLC of Britain purchased U.S. broker-dealer Greenwich Capital, providing them with a foot into the American securities market, (WT, 6/12/96, B7) In other news, newly formed BZW Barclays Global Investors (a subsidiary of Britain's Barclays Bank), the world's largest institutional investment manager, will concentrate on further expansion in Europe and Japan where the pension markets are set to balloon. The value of stock and bonds traded is so high that in 1994, it would have put them in the top ten of the world's stock exchanges. Last year they purchased Wells Fargo Nikko Investment Advisors in San Francisco. (The European, 1/25-31/96, p21)
Mutual Funds
There have been numerous mergers in the mutual fund industry. One of the largest mutual fund companies, GT Global which manages $9B, is owned by LGT Asset Management, a unit of the Lichtenstein Global Trust which is principally owned by the Prince of Lichenstein Foundation. Chancellor Capital Management, New York, which manages $32B in pension funds, may be acquired by LGT. On the other side of the coin, US- based Goldman, Sachs & Co., is in serious talks to buy CIN Management, a British pension-fund manager.
Consumer Products and Food
Five years ago Whirlpool purchased Phillips Electronics NV's appliance operations and has now become one of Europe's top suppliers of washers, dryers, dishwashers and refrigerators. Now they are looking to do the same thing in Asia. Having purchased controlling interests in four competitors in China and India, Whirlpool now has a "corner on the appliance market" in Asia.
Sara Lee, on the other hand, purchased the French meat processor, Aoste. They also acquired BP Nutritions consumer foods group and Belgian Imperial Meats Group. Here in the US., several European retailers have started to acquire US food chains. Dutch company Royal Ahold NV is buying Boston's Stop & Shop Company and its 176 superstores and supermarkets. Belgian retailer, Delhaize "Le Lion" SA is owner of the Food Lion and Food Giant and in the Washington, D. C. area, Giant Foods is 50% owned by a British company.
Multinational corporations are spending vast sums to create "consumption networks" in fast- growing economies. The consumption networks are being used by corporations like Frito-Lay, Pepsi and other consumer product manufacturers. Citicorp. has Captured 40% of Thailand's credit-card market relying on a sales force of 600 part-timers who are paid a fee for each applicant approved. In China, Anhauser-Busch bought the largest brewer in Central China and began selling it in major Chinese cities. Last year, Frito-Lay sold 100 million bags of Cheetos in one single Chinese province. (WSJ, 5/13/95, A1)
Crime
Not one area will be left untouched by the process of globalization. Recently the FBI and Drug Enforcement officials with State Department assistance revealed have been working quietly in China for the last four year, hunting down both smugglers of Chinese aliens into the US and US bound heroine traffickers. "Over the years, Washington and Beijing have been expanding behind-the scenes-cooperation against what both see as the growing Post-Cold War threat of global crime. With White House support, it has aggressively proposed spreading its training and investigative activities, not just to China but to Russia and other former communist countries such as Hungary. (WP, 3/23/96, A18) Several years ago, the CIA and the KGB announced that they would be working together. In October, 1995, President Clinton announced that the U.S. has established an international law enforcement academy in Budapest and would consider a network of centers all around the world to share the latest crime-fighting techniques and technology. At the Group of Seven meeting in Lyon, it was recommended that states should "develop mutual legal assistance arrangements or treaties, as well as mutual education, training courses, joint seminars and information exchange sessions...on a bilateral, regional and world-wide basis."
Energy--oil/gas, utilities
Not one area is exempt from mergers or acquisitions...the survival of the fittest can be seen in every field. American utilities are buying not only other American utilities but also foreign utilities. Most recently Britain's Midlands Electricity agreed to a takeover by two General Public Utilities and Cincinnati-based Cinergy. Midlands will be Britain's third regional electric company to be bought out by American firms. General Public Utilities has holdings in Australia, Canada, Bolivia and Columbia and is positioning itself as a global U.S. electric company. (WT, 5/8/96, B10)
With regard to mergers and acquisitions in the oil and gas industry. Tenneco sold its pipeline business to El Paso Natural Gas. Sonat Offshore Drilling in Houston is to acquire Transocean AS. Also, Mobile Corp. and British Petroleum are planning a $5B merger of their "downstream" refining and marketing operations. Delmarva Power and Light and Houston Industries announced acquisitions totaling nearly $5B saying they must get bigger to weather the changes that deregulation will bring to the utility industry. According to Debbi P. Poppiti, a spokeswoman for Delmarva Electric, "The utility world is changing. The energy business is going to get very competitive."
In other mergers, Texas Utilities Company, one of the largest US electric utilities said it would purchase Enserch Corporation, owner of Texas's largest gas utility. In addition, eight oil companies have tentatively agreed to finance a 900-mile pipeline designed to ship crude from landlocked Kazakstan to an export Terminal on the Russian Black Sea. The Virginia based AES Corporation has acquired a 70% stake in Kazakhstan's largest electricity plant along with an Israeli power company, Suntree Ltd. AES sells or markets electricity in more than 35 countries.
Global Financial Products
American Depository Receipts
The New York Stock Exchange plans to trade shares of foreign stocks through American Depository Receipts. ADRs are negotiable certificates which enable an investor to purchase a specific stock within a specific foreign country. They are issued by a major U.S. bank, known as a depositary and are quoted in U.S. dollars and trade like ordinary U.S. stock. Today over 1000 ADRs trade publicly and represent over 50 countries. Trading volume in ADRs jumped to a record in the first six months of 1996 and has doubled since 1990. Bank of New York, the leading manager of ADRs, said 62 non-US companies and 11 governments raised about $6.7B through ADRs in the first half of 1996, an increase of 75% from a year ago. There are now 116 new public and privately sponsored depositary programs in 40 countries including Russia and Hong Kong. Technology and telecommunications, reflecting the world-wide drive to improve infrastructures and communications, comprise many of the ADRs. (WSJ, 6/28/96, B5A) Most recently the French insurance group, Axa, announced that they were going to offer their shares on the New York Stock Exchange as ADRs. According to Axa, "Our listing will enable us to broaden our international shareholder base, to raise our profile in international capital markets and to gain access to the world's largest and most advanced financial markets." The investment banks advising on the offering were Goldman, Sachs and Donaldson, Luftkin, Jenrette Securities which is majority-owned by Axa.
Foreign Initial Public Offerings (IPOs)
According to the Wall Street Journal, new foreign stocks are striking it rich on American exchanges. Companies from Australia to Finland to Taiwan are flocking to the US to get a higher price for their stock than they could on their own exchange. More foreign companies have launched IPOs in the US so far this year than in any other year to this point. Up to June 7, 36 foreign companies have offered shares for the first time, raising $3.6B. That surpasses the previous record of 16 IPOs worth $2.2B for the same period in 1994. The total for 1994 was $6.9B. Some of the foreign offerings are for new common shares, while others are for American Depositary Receipts. Those purchasing the ADRs/IPOs are domestic mutual funds looking for higher returns.
Global stock exchanges/brokerage firms
There has been a restructuring of stock exchanges around the world as they prepare for final entry into the globalized marketplace. The "survival of the fittest" is yet to be seen in Europe as they count down from fourteen countries to one. Recently the German stock and futures market, Deutsche Boerse AG, recently opened a screen-trading access point that will allow members to trade on its electronic trading system directly from London. Germany is also in the process of deregulating their financial markets in order to keep them competitive amid the increasing globalization and integration of Europe. (WSJ, 7/22/96, B9A) The Amsterdam Stock Exchange is looking to court British brokerage firms and the Stockholm Stock Exchange is trying to lure business in order to be the primary Nordic exchange. In January, the Paris Bourse announced plans to trade shares in companies from Switzerland, Britain, Italy, Sweden, the Netherlands and Spain. Many of the smaller stock exchanges--Zurich, Geneva, Basel--are trying to develop an electronic bourse to combine forces and woo the business back home from the very advanced London Stock Exchange. Meanwhile the Easdaq, which hopes to be an European electronic dealer market similar to the US Nasdaq, plans a launch in the fall. (WSJ, 4/18/96, C1) In June wit was announced that Ukraine will begin electronic stock trading based on the Nasdaq system as well. The system will open trading links to the Russian Trading System, the main OTC market in Russia. It is the World Bank's, International Financial Corporation, which is helping to establish stock exchanges in developing countries.
Lastly, the European Monetary Union is expected to boost the role of Paris as a European center for trading financial securities. French authorities are moving to sign cooperation deals with other European exchanges and to complete the modernization of the Paris Bourse. (The European, 25 April-May 1, 1996, p.24)
All of this activity is not just confined to Europe but around the world, foreign stock exchanges are looking to deregulate and come into conformance with recommendations by the Bank for International Settlements (the BIS) and the International Organization for Security Commissions (IOSCO). This semi-private organization, comprised of 122 security commissions from around the world (including the US Security and Exchange Commission) are looking to harmonize rules, regulations, procedures and stock exchanges on world-wide basis.
Communications--Telephone/TV/print/satellites
Telecommunications
Most recently the Senate passed a very far reaching bill to deregulate the telecommunications industry in America. In Europe the telecom sector will be thrown open to competition by 1998. (FinTimes 3/22/96, p.2) In the United States, the Baby Bells are merging, leaving three to shift for themselves. SBC Communications will merger with PacTel and Bell Atlantic with Nynex. On "Line Two" is South Korea, the winner of an auction for 493 wireless communications licenses that have been reserved for US "small businesses." (WP, 4/4/96, D9)
In South America, Peru successfully completed a $1.1B international stock offering, the biggest equity sale in Latin America in three years. The underwriters, JP Morgan and Merrill-Lynch, hope Telefonica del Peru will be as popular as Telephones de Mexicanos. (WSJ, 7/2/96, A10)
Satellites
According to an article in The Washington Times, (5/ 8/96), 22,000 miles about the Earth, there are 156 commercial satellites perched above the globe and "terrestrial barriers are standing in the way of competition. The US and Mexico reached an agreement to allow each other's satellites to broadcast across the border. This unprecedented treaty could mark the beginning of global direct broadcast service (DBS) competition. In the US, the FCC denied an application from a US cable TV station to beam programming to American viewers from satellites in orbits sanctions by Canada as international agreements would need to be modified before a Canadian satellite could beam TV shows into the U.S. (WT, 7/16/96, B9)
TV
Murdoch's Fox Television is now the largest owner of television stations in the U.S. After Fox comes Westinghouse/CBS. Meanwhile, New World Communications Group, Inc. said that it has agreed to be acquired by News Corp. This deal will make News Corporation, which is owned by Australian Rupert Murdoch the biggest owner of television stations in the country. (NYT, 7/18/96, D6) In Germany, Leo Kirch, a media magnate is looking to complete a deal with Viacom (which owns MTV), the US media giant, which will put him further ahead in his race with fellow German, Bertelsmann, in launching a digital TV service there.
With regard to control of financial data, J. P. Morgan and Reuters, the international news and financial information organization, have agreed to collaborate in the development of Morgan's Risk Metrics risk management database. RiskMetrics provides current and historical price information for the world's biggest stock, bond and currency markets. They will develop customized risk management systems. It will allow users to track the value of complex financial instruments such as derivatives and options. (Financial Tmes, 5/16/96)
In summary, globalization is indeed a powerful process---one that will change all we know. With every dollar invested globally, the stirring of the chocolate syrup in the milk progresses...in 1995, US investors purchased $51.2B of foreign stocks and $46.8B of foreign bonds, the second highest since 1993. Over half of the equity purchases were in Asia with Japan accounting for $19.8B, then Britain at $10B, Sweden at $2.8B and Hong Kong at $2.2B. (WSJ 5/8/96, C1) Of the amount invested overseas, 17% was allocated to emerging stock markets.
There is no doubt that there is money and profits to be made as a result of globalization. It IS here to stay as is evident from the above. Milk is rich in proteins and Vitamin D however, when you mix it with milk, the sugar and chocolate negate the minerals but are pleasing to the palate.
The same is true for globalization....
ge in bank capitalization standards--many small banks will not be able to meet the requirement and will only be able to stay afloat by being acquired by the big banks....
WHO ARE THE GROUP OF SEVEN?
"The interdependence of our destinies makes it necessary for us to approach common economic problems with a sense of common purpose and to work toward mutually consistent economic strategies through better cooperation..." (emphasis added)
Group of Seven 1976 Joint Declaration from San Juan, Puerto Rico
"Over the past fourteen years, the world economy and economic policy have undergone profound changes. In particular, the information technology revolution and the globalization of markets have increased economic interdependence, making it essential that governments consider fully the international dimensions of their deliberations." (emphasis added)
Group of Seven 1988 Economic Declaration, Toronto
"We the Participants in the Lyon Summit....discussed how we could build a better international system to secure security and stability...In an increasingly inter-dependent and inter-active world with rapid globalization in progress, we renewed our determination to work together amongst us and in partnership with leaders of other countries..." (emphasis added)
Group of Seven 1996 Joint Declaration from Lyon, France
For most people, the phrase "Group of Seven" has no meaning because of the lack of understanding as to the part they play in international affairs. However, since 1975, the leaders of the most industrialized worlds have met throughout the years to discuss global problems and how the world should approach the 21st century. While the conventional thinking of most Americans is that each country is responsible for their own fate--economic, social, political and environmental-- according to the Group of Seven, the "interdependence of our destinies makes it necessary...to work toward mutually consistent economies strategies through better cooperation..."
Who are the Group of Seven? How long have they met? What have they done? Who appointed them to build a "better international system"?
Background
The Group of Seven first met in 1973, two years after President Nixon severed the last attachment the dollar had to the gold standard when he suspended the rights of foreign countries to convert their paper-dollars to gold in August, 1971. The world monetary system since that time has been based on a faith in paper currencies which float against each other, according to good or bad economic and political news. Between 1971 and 1973, the world monetary leaders tried to keep the world's system glued together by agreeing on the parameters that the dollar float against the yen and Deutsche mark. By February, 1973 that accord, known as the "Smithsonian Agreement," fell apart when the dollar dropped below those parameters. (Although The New York Times states the reason for the drop in the dollar is due to multinational companies, banks, Middle East oil countries and private investors selling dollars, they did not establish any controls to curb "speculative trading.") By 1973, the world monetary markets were closed on two occasions, Valentine Weekend in February and the beginning of March for three weeks while Central bank governors met at the Bank for International Settlements to determine the new value of the dollar. At the time, Arthur Burns, chairman of the Federal Reserve Board said there was a "collapse of confidence" and told congress that "the task of overhauling the international monetary system must be done in a matter of months rather than years." (NYT 3/2/73)
Due to the monetary instability caused by taking the world's monetary system off of the gold standard in August, 1971 and the fact that various groups of people, called "speculative investors" could now buy and sell large amounts of any countries' currency on a whim to make a profit, President Nixon in May, 1973, called together U.S., French, British and German finance ministers to meet informally in the White House library while he, French President Georges Pompidou, Prime Minister Edward Heath and German Chancellor Willy Brandt met in the Oval office. As reported in the June 23-29, 1995 edition of The European, who quoted a German participant, "We agreed there was a need for someone to be in control again on an international scale. We hardly knew each other prior to the meeting. But mutual appreciation and sympathy developed as we talked, laying the ground for successful cooperation." Hence the idea of a group of world leaders meeting to "monitor" the world's currencies markets was born.
The first official meeting of the then-Group of Five, met in Rambouillet, France in 1975. The participants of that first meeting were the United States, France, Germany and England who invited as well, Japan and Italy. In 1976 Canada was invited, thus making it the "Group of Seven." In 1978, the President of the European Community was invited to join. Then in 1991, President Mikhail Gorbachev was invited to participate in the economic side of the G-7. Gorbachev called his unofficial presence the "Group of Seven plus one." Russia has participated since then and for the last several years participates, we are told, only on the political level as they are considered a key political power by the other G-7 countries, however, their ministers meet when the G7 ministers meet.
The European in June, 1995, described the power and position of the Group of Seven as being the top industrialized countries of the world. The article stated that they dominate "the global financial and banking system and their currencies have reserve status in the rest of the world." In addition, they work with a number of international bodies including the Organization for Economic Co-Operation and Development (OECD) in Europe, "hold close to 40% of the votes at the IMF and the World Bank and from a "diplomatic point of view, are all permanent members of the United Nations' Security Council."
In comparing the depth, breadth and width of the activities covered by the G-7, their first communiqué, which is considered their final statement of the meeting and actions they will take, was one and a half pages long. In Lyon, the final communiqué, called "Chairman's Statement,"
issued by French President Jacques Chirac, was 22 pages in addition to a six page statement by the "P8 - Senior Experts Group" listing 40 recommendations on how to combat transnational organized crime, and a seven page statements by the G7 Finance Ministers on "International Monetary Stability." From overseeing the stability of the monetary system, the G7 plus one are now are concerned with both the macro as well as the micro-economic problems, as well as the environment, crimes/terrorism and the political.
It appears that the Group of Seven operates in "cycles." According to Professor John Kirton from the University of Toronto, the first was from 1975 to 1981 and consisted of annual meetings with the leaders, accompanied by their ministers of foreign affairs and finance. From 1982 to 1988, they added regular stand-alone meetings of ministers of trade in 1982 and foreign affairs in 1984 and finance in 1986 as well as an inter-sessional special Summit in 1985. In the third cycle, from 1989 to 1995, saw the birth in 1991 of the "annual G7 post-Summit meeting with the USSR and then Russia, the emergence of environment ministers in 1992 and a flurry of ad hoc ministerial meetings from 1993 onward, dealing with assistance to Russia and Ukraine to the micro economic issues of jobs and the information highway."
On the ministerial level, for example, the finance minister of the United States, as well as our trade and Secretary of State appear to function not only in his/her appointed duties for the United States but also in a "global framework" for the Group of Seven . They then meet throughout the year with their counter-parts from the other G7 countries. Over the years, these various ministers, have also met with the directors of the United Nations agencies, the IMF/World Bank, the OECD, and the Central Bank Governors. Due to the escalating importance and power of the G7, some have called them a "global board of directors" to the United Nations while others have termed them a "global economic commission." Professor Kirton likens them to "the global equivalent of the concert of Europe" (between 1818 and 1914, it is felt that these European powers helped keep peace in Europe).
He also writes that "in 1977, when Carter became President, he appointed a trusted advisor, with cabinet rank to work on summit preparations on a full-time, year-round basis. Since that time all countries have employed specially designated personal representatives or 'Sherpas' who normally serve on a continuing basis for several years. These Sherpas meet formally on at least four occasions throughout the year preceding the summit, as well as at the opening of, and throughout the summit itself. They are supported by an elaborately layered network of 'sous-Sherpas' (either from foreign or finance) and 'sous-sous-Sherpas.'"
Facts about the G7
One of the most amazing things for the writer is that while she has read a fair amount of UN Programmes of Action in the last several years, it was her impression that all of the "recommendations" made came from the United Nations, however, in reading the Group of Seven documents, it appears that these recommendations originate from the Group of Seven who direct the United Nations, (that's us) where they need to go and what they need to do in order to come into compliance with the wishes of this global body.
The writer asked by Canadian Prime Minister Paul Cretien and European Commission President Jacques Santer "Who does the Group of Seven report to? The United Nations? Or does the United Nations report to the G7?" Both of these men basically said that no one reports to anyone, that the G7 come out of the UN and that they both have the same global concerns. The better question should have been, "Who does the G7 report to?"
Most interestingly
According to Professor Kirton, It was due to an agreement between the G7 leaders that they all make a combined effort to be at the 1992 UN Conference on Environment and Development to show their full support. Interestingly enough, no mention of the environment is made between their first meeting in 1975 and 1988.
, dubbed the "Rio Earth Summit." While many people thought the environmental agenda was a "passing phase", it is not. All of the programs of the UN, the World Bank, and IMF now incorporate the environment as part of their goals and operating procedures. Whenever the World Bank now makes a loan, the terms have been "enviromentalized" meaning every country in order to get the monies must now do certain things environmentally in order to qualify. In addition, whenever the UN holds a conference, they appoint a follow-up committee to monitor the progress of each country's progress as they comply with the terms of the conference.
It appears, without going into all of the last 22 meetings which the G7 have held that they have been bringing the economies of the world into "harmonization." This is being accomplished through a number of steps and laws, both national and international and between numerous supra-national organizations like the Bank for International Settlements (BIS), the International Organization for Securities Commissions (IOSCO), the International Insurance Association, and others.
In the last five years, in addition to economics, they have discussed a number of topics such as, aid to Russia, the changing role of NATO and the Conference on Security and Cooperation in Europe--CSCE, farm subsidies, jobs/unemployment, trade and the environment.