As most well-informed observers were stressing all week, yesterday's G20 meeting in Washington was not going to lead to new financial architecture for the glo
bal economic system. "Bretton Woods, the Sequel," this ain't. For one, it was not taking place in the New Hampshire hotel after which the original conference was named (see photo). For two, this meeting was not complemented by several years of preparatory groundwork or by unilateral American leadership coming on the heels of a paradigm-shifting depression and world war. So maybe Mr. Brown and Mr. Sarkozy were getting ahead of themselves with all of their blustery rhetoric.
Now, as is expected for these types of events, the G20 meeting produced a declaration (available here) that contained a fair bit of vague language on what the world leaders are going to do to a) address the current crisis and b) fortify the financial architecture to prevent a repeat performance. But the meeting did produce one, large, significant shift in the way our global economy will be governed in the near future: the G20 appears to have taken over from the outdated G7/G8. On this point, the punditry appears to be unanimous. This is important because the G20 includes powerful emerging economies like Brazil, China, India, Indonesia and Turkey.
This shift is long overdue, but will necessarily make international negotiations that much more difficult. As I alluded to above, the successful completion of the original B.Woods in 1944 was in large part due to the ability of the United States to push its agenda forward unilaterally. Had the Brits not been so crippled by the war, they surely would not have ratified the agreement. It should be clear that, 60 years on, there remain important philosophical differences between the Americans and Europeans on financial governance. Insert China and India into the mix and things become more complicated. But global financial governance is complicated and excluding these countries is a non-starter.
The agenda for the G20 membership from now until the next meeting in April 2009 is to make progress on a number of fronts. Highlights:
- Reform of the World Bank and International Monetary Fund to be more representative of the distribution of economic power (not new).
- Expand the membership of the Financial Stability Forum to include G20 members (relatively new). The FSF is a body that combines governments and international regulatory agencies to establish "best practices" in everything from accounting to insurance.
- Members have agreed to undergo a financial checkup by the IMF and increase funding for IMF lending programs to crisis-stricken countries (that's right, the IMF is relevant again).
- Various other sensible, but hardly revolutionary, promises to beef up financial supervision.
- And finally, a promise to deal with the fact that the Doha round of trade negotiations is dead. It has ceased to be. Bereft of life, it rests in peace. It's bleeding demised. It has rung down the curtain and joined the choir invisible...
bal economic system. "Bretton Woods, the Sequel," this ain't. For one, it was not taking place in the New Hampshire hotel after which the original conference was named (see photo). For two, this meeting was not complemented by several years of preparatory groundwork or by unilateral American leadership coming on the heels of a paradigm-shifting depression and world war. So maybe Mr. Brown and Mr. Sarkozy were getting ahead of themselves with all of their blustery rhetoric.
