Why the G-20 Summit Mattered

Most international summit meetings are long on photo-opportunities and short on substance. Last Thursday’s G-20 meeting in London did have genuine substance.

Nobody reads the communiques, or listens to the press conferences of leaders or finance ministers. But here it is:

Top of the list of accomplishments was expansion of IMF resources. The new SDR allocation was perhaps the most noteworthy and unexpected decision: those observers who have proposed such a step in the current international crisis, or in past international crises, have usually been dismissed as pipe-dreamers (John Williamson, Dani Rodrik, George Soros, Joe Stiglitz…). In addition, there seems to have been some forward movement on international regulation of the financial sector, as the Europeans wanted. Although President Obama acquitted himself well overall, the failure to achieve agreement for coordinated additional fiscal stimulus, as the Americans wanted, was probably the greatest shortcoming of the meeting.

I believe the G-20 meeting will be remembered historically, but not primarily for the above reasons. It will be remembered as the occasion on which primary emphasis shifted from the G-7, the global steering group that until now has had a monopoly on real economic decision-making power, to the G-20. Of the various substantive ways in which developing countries could and should have been given more representation in recent years, the shift to the G-20 is the first one to have actually taken place.

Comments

[CautiousInv...:]

There are some other subtle, interesting outcomes.

The G20 rejected Obama's plea to increase globally coorinated fiscal spending but they did agree to a material increase in IMF lending capabilities. So, in a way, more resources are available to combat the global recession.

Also, the leadership structure of both the IMF and World Bank is likely to change; the former has been run by a European while the latter by an American. It is expected the I.M.F.’s managing director to resign within a year, to resume his (promising) pursuit of the French presidency. The leadership race for the next managing director effectively starts today and the battle will be pitched.

How did the Obama administration pull this off? In a brilliant move, they took the lead by volunteering to open up the selection process for the World Bank, the I.M.F.’s sister organization, which has always been run by an American. The next president of the World Bank is very likely to be Chinese.

Apr 07 09:00 AM

[Ferdinand E...:]

For me the worst part of the G20 was the move to give more resources or options or authority to the IMF (and the World Bank), and the sight of Gordon Brown greeting the big-wigs at the door of 10 Downing. On the whole however I was impressed by what I heard of the meeting, and agree that it was necessary.. The TV audience wants more consumption, but less work and less thinking, which is a lopsided relationship, and so happenings like the G20 have to be added in order to obtain a balance..

Apr 07 10:24 AM