Anarchists Engage with G20 Issues

A great deal of attention has been paid recently to the preparation for the G20 summit next weekend in Toronto. But while the event has been a boon for the troubled artificial lake industry, not everyone will be so pleased with the assembled world leaders. From labour unions to environmentalists to indigenous rights groups, protestors are expected in the thousands. The greatest security concern however, remains the kind of anti-capitalism and anarchist groups which made the Seattle WTO summit of 1999 so memorable. The same kind will be in attendance during the Toronto summit; the Southern Ontario Anarchist Resistance (SOAR) and FFFC Ottawa, which was responsible for the firebombing of an Ottawa bank after hours on May 18^th, have both announced they’ll be at the event.

Yet Mike Bakunin, who recently left SOAR to establish a sister branch in Rivière Ouest (Manitoba) with a more awesome acronym, claims that these groups don’t just advocate violence. “For those who think that anarchists are just about chaos and firebombing, that’s not the case. Groups like FFFC Ottawa give the rest of us a bad name – we can actually engage with the issues as well as anyone. Now obviously the summit will be focusing on economic and financial matters, so we think that we can best get our message across if we zero in on those issues as well. It’s hard to convey complex messages like that with firebombs…not impossible though.”

As an example, Mike points to the debate over a proposed international bank tax. Although countries including Britain and the U.S. were initially pushing for a tax on banks to pay for bailouts when they became necessary, countries whose banks never needed to be bailed out such as Australia, Brazil, and Japan – with Canada leading the way – opposed the idea. Now as an alternative the Canadian government is proposing an idea called “embedded contingent capital” (ECC); essentially bonds issued by banks which would automatically convert into shares in times of crisis, providing instant extra capital. Finance Minister Jim Flaherty and Julie Dickson, the head of the Office of the Superintendent of Financial Institutions (OSFI), have recently been touting the merits of ECC. “The problem,” Mike says, “is that because there’s so much uncertainty about what would trigger the conversion, buyers of the bonds will demand a hefty risk premium which may end up costing the banks more than the tax would have. Plus, in a time of crisis, the conversion of the bonds might scare away other investors and exacerbate capital flight. So I think we have to fight ‘the man’ on this – even if ‘the man’ is Julie Dickson.”

It’s clear that ECC won’t be the only financial reform discussed at the summit. Reform of the Basel Accords – international banking regulations – will be a major focus. The Basel Committee on Banking Supervision (BCBS), based at the headquarters of the Bank for International Settlements in Basel, Switzerland, is composed of representatives of the central banks of developed and emerging market countries. It was created in 1974 in an effort to harmonize banking regulations across borders. Agreements among BCBS member states – called the Basel Accords – were negotiated by national leaders, finance ministers, and central bank governors. These agreements do not operate like treaties in the normal sense, with each country signing and ratifying them, but rather are intended as an international standard that national bank regulators can use when creating their domestic regulations. Implementation is left to each country’s discretion, but most regulators do in fact implement the accords (95 national regulators have committed to implementing the most recent accord by 2015). They aren’t applied uniformly however, since national regulators may include local variations on the rules.

The first agreement, now called Basel I, was agreed in 1988. It was designed around the concept of minimum capital requirements: the minimum amount of cash banks have to keep on hand relative to their total assets (loans they are owed). Basel I created 5 categories of assets based on risk level, and required banks to keep capital equal to 8% of the assets, weighted according to risk. It was implemented by BCBS member states by 1992. The second accord, Basel II, was agreed in 2004, and served to “upgrade” the original accord, creating a three-pillar structure. The first added nuance to the capital requirements of Basel I, distinguishing between three different categories of risk. The second gave new tools to regulators to better review compliance with capital requirements. The third pillar promoted market discipline in order to foster stability and predictability. Negotiations for Basel III were undertaken in response to the recent global financial crisis, and the G20 summits are a key part of the process. Proposed changes to Basel II include: revising the categories of capital (tiers) to improve transparency, strengthening risk coverage requirements, introducing a leverage ratio to supplement the risk rules, requiring the creation of capital buffers to promote counter-cyclicality, and a minimum liquidity standard for international banks. G20 finance ministers see the eventual implementation of Basel III as inevitable.

Mike believes it’s crucial for the protestors to have their voice heard while the Basel negotiations proceed in Toronto. “In pushing for a stateless society, we have to make the most of times when the different parts of the machine – government and big corporations and banks – turn on one another. First they’ll fight about international regulations, and then the next step is complete mutual annihilation. Basically what I’m saying is that we want the most stringent risk coverage and capitalization rules possible.”

The challenge for the collectivist anarchists is ensuring that they have a clear position on every financial reform issue, lest they appear to the public as an incoherent rabble. “Right now at our meetings we’re trying to hammer out what stance we’ll take on phase 2 of the International Accounting Standards Board’s new Financial Reporting Standards, and their impact on the life insurance industry.” Finance Minister Flaherty has supported Canadian life insurers in their appeal to the board for an exemption from the new rule. “On the one hand, big corporations shouldn’t be exempt from accounting best practices, but on the other hand these new rules would definitely create a lot of volatility for insurers– particularly with regard to long-term products. So I guess we’re not sure if this is a step forwards or backwards in the march to the destruction of the state. We hope to have decided by next week.”

Despite the complexity of the negotiations, Mike is confident his group’s nuanced message will get across to the public and to world leaders. “I’m optimistic. We’ll print out our arguments in an executive summary, and see if we can submit if for consideration by the delegates.”

Asked if there was a backup plan for conveying their opinions, Mike considers: “…probably firebombs.”

THE FIRE REPRESENTS EMBEDDED CONTINGENT CAPITAL

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