The emergency meeting of the Group of 20 this Saturday, November 15, was called because the world’s financial system is broken. The meeting was suggested by French President, Nicolas Sarkozy to President Bush. Although Mr. Bush did not want to take up the issues that will be brought up at the meeting, he agreed to host it at Mr. Sarkozy’s insistence.
The primary issue to be discussed will be helping the developed and emerging markets out of the deepening recession that the world now faces. But, included in the discussions will be proposals made by European and emerging market leaders to reform banking regulations that would prevent the kind of financial meltdown that started the downward spiral this year.
Mr. Bush has publicly warned about stifling economic growth by excessive regulation, while the European leaders and Brazil, specifically, are more prone to take a strong government hand when they see a larger public need.
This argument is ancient in origin, and there has never been a consensus about the exact amount of regulation that is needed in every situation. Don’t look for a resolution to this issue at the meeting today. Mr. Bush couldn’t do anything about it even if he wanted to, given his status as out-going President, and the discussions today will last only about five hours.
Another meeting is planned after Mr. Obama assumes the Presidency, and at that meeting, more detailed work can be done to help coordinate government efforts to stave off what threatens to be a major downturn in many of the world’s economies. America is just entering a recession now, and the prognosis is looking increasingly bad. Europe is already in a recession, lead by Germany, the world’s third largest economy. Almost all the emerging markets, with the exceptions of China and India, are in recession, and even China and India are experiencing significantly lower growth rates for 2009.
The following description from Economix of the NY Times will be helpful in understanding the structure of The Group of 20:
The Group of 20, or G-20, is an international body that meets to discuss economic issues. Some of the things members discuss are ways to expand (or at least stabilize) the international economy, to reform international economic financial institutions like the International Monetary Fund, and to coordinate economic and financial policies (like policies that reduce tax evasion)
Members – 19 countries with some of the world’s biggest industrial and emerging economies, plus the European Union – represent about 90 percent of the world’s gross national product, 80 percent of world trade (including trade within the European Union) and two-thirds of the global population. Member countries usually meet annually.
The annual meeting already took place last weekend in São Paulo, Brazil. This weekend’s meeting was not on the regular schedule and was arranged specifically to address concerns about the international financial crisis. It is unprecedented because heads of government will be attending.
The member countries are 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 European Union is also a member, represented by the rotating council presidency and the European Central Bank.
The membership of the G-20 has not changed since it was established, and the organization says there are “no formal criteria for G-20 membership.” With the exceptions of Argentina, Saudi Arabia and South Africa, all of the member countries fall within the list of the top 20 biggest state G.D.P.’s in the world.
Usually, the attendees of the annual meetings are the finance ministers and central bank governors of the member countries, plus top leadership of the World Bank and the International Monetary Fund.
This is the first time that heads of governments will attend a G-20 meeting.
A number of economist and other leaders are hoping specific policy proposals will be discussed at this meeting, but the expectations for what can and will be accomplished in the next 24 hours are relatively low.
The last-minute nature of the meeting allowed for little preparation time. The meeting itself is also relatively short.
“I would be surprised if much happens,” said Edwin M. Truman, a senior fellow at the Peterson Institute who served as the assistant secretary of the Treasury for international affairs during the founding of the G-20. “When you think about it, it’s 20 people, and they’re all heads of government. They’ll meet tonight for dinner, informally, and then they’ll meet tomorrow for just five hours. That’s not a lot of time for everyone to talk.”
There is only so much that attendees at this event can commit to, anyway, since any major policy changes will likely have to be approved by leaders’ full governments back home. President Bush — as an outgoing president — would have an especially hard time committing to anything substantial. (Former Secretary of State Madeleine K. Albright, and former Representative Jim Leach will meet with representatives of G-20 nations on President-elect Barack Obama’s behalf this weekend.)
The smaller G-7 and G-8 have memberships of only the largest economies, which exclude, China, Brazil, India and Russia, to name a few, and there has been strong criticism leveled at these groups because they exclude far too many of the world’s economic powerhouses. Most would agree with this criticism, and for this reason, and bolstered by the enormous growth of the emerging countries, the G-20 will probably assume a much larger role in the future in discussions of global economic issues. We may be seeing the first emergence of this new role in today’s meeting.
I look for much more substance from the second meeting than this one, but this one is important as a necessary first step.
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