G-20 Meeting: Recognizing the New World Order
The meeting of the leaders of the G-20 nations last month in Washington is in many ways a world-historical moment.
The first ever meeting of this kind called by President George Bush, as he is preparing to leave office and attended by the biggest rich and emerging economies, accounting for nine-tenths of global output. The meeting was in response to the global slump that has affected the economies of almost all major nations, resulting in one of the worst financial crash since the onset of the Great Depression. In some ways, this meeting was aimed at creating a world response just as it paved way for one after the international conference in 1944 that laid the institutional foundations for the postwar world economy.
President George W. Bush welcomes Prime Minister, Dr. Manmohan Singh
to the Summit on Financial Markets and the World Economy
at the National Museum Building in Washington, DC.
The 2008 meeting was in contrast to the G- 7 countries (the richest members of the G-20, sometimes with the addition of Russia, which makes it the G-8) who get together every summer and issue a bland communique that often did not have any real significance for the rest of the world. Many admit that the G-7 of rich countries has outlived its purpose. It was vital to bring in all the emerging economies such as China, India and Brazil, if there was to be any real impact.
Included in the G-20 were Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the United States. The 27-nation European Union bloc is also a member of the grouping. Spain and organizations like the World Bank and International Monetary Fund also took part in discussions.
It was encouraging to see that the rich nations have come to recognize the importance of the emerging economies, accepting the dawn of a new global order. The global meeting was also sign of the inter-dependence of all nations. Every major policy of one nation affects the rest of the world and vice versa. No country can overcome the current economic downturn all by itself. It requires a concerted effort. The US, which is considered the only super power is beginning to recognize this new world order and wants every nation to be part of this recovery effort.
The G-20 Summit leaders endorsed a series of broad goals to fend off future economic calamities and to revive the world economy. They called for intensified government efforts at bolstering national economies, cooperation on international regulation of the financial system and reform of global structures to aid needy developing countries. They were right to point out that a dramatic failure of market oversight in “some advanced countries” was among the root causes of the crisis, an implicit rebuke of the US.
Under the plans outlined by the leaders, countries such as India, China and Brazil would gain greater roles and responsibilities as part of a restructuring of the international financial system. European leaders also won a commitment to new regulations and controls on banks, rating agencies and exotic financial securities. One major question that faces everyone is how to reform global financial regulation of big banks and financial firms that are global enterprises and they will have to cooperate more closely across borders: There is a need for a new oversight body — or else grant new oversight powers to an existing one, the IMF — whose job would be ensuring that differing national regulations conformed to some basic principles. However, the United States has been opposing this effort from the beginning.
The role of India was encouraging in many ways at the historic world summit. Outlining a far-reaching action plan to tackle the growing global economic crisis, world leaders agreed to act urgently upon all the three major issues Indian Prime Minister Manmohan Singh raised at the G-20 summit. Manmohan Singh articulated the need for greater inclusivity of emerging markets in the international financial system; the need to ensure that the growth prospects of the developing countries are not hampered, and the need to avoid protectionist tendencies. Seeking a global response to the financial crisis, he called for a multi-pronged response to arrest the deepening recession and avoid another one in future.
“Since the crisis is global, it calls for a coordinated global response and this summit is, therefore, timely,” he said. Among the measures suggested by Manmohan Singh were a coordinated fiscal stimulus to mitigate the severity and duration of the recession, special initiatives to counter the shrinkage of capital flows to developing countries and a reform of the global financial architecture to prevent similar crises in future. In a declaration released at the end of their two-day summit, they pledged to arrest the damage wrought by the global financial crisis by taking all steps necessary to stabilize the financial
system based on five common principles.
Coming from six continents with diverse economic systems, they managed to find some common ground on both the causes of the crisis and areas that need to be fixed. However, they acknowledged that this crisis could not be solved in a single meeting and therefore, sketched out an agenda for more work in coming months They are meeting again in April 2009 in London to review the progress on the announced initiatives. By that time their host, US President George W. Bush would have handed the charge of the world’s largest economy to president-elect Barack Obama.
BY AJAY GHOSH