The idea that today’ special G-20 summit in Washington is going to be as important as the 1944 Bretton Woods conference, which laid out the rules for post-World War II financial and trade relations between the world’s industrialized countries and resulted in the creation of the World Bank and the IMF, needs to be taken with a pinch of salt. The meeting may indeed represent 90 percent of the world’s GNP, 80 percent of its trade and two-thirds of its population, but despite the hype, it would be wise to have low expectations of it. It may well end up with an agreement in principle that the IMF and World Bank should be reformed and that the G-8 group be expanded to take in emerging economies such as Brazil, India and China — but these were coming anyway. Reorganization of the IMF and World Bank was on the table before the present crisis. Similarly, since 2003, G-8 has been G-8 in name only; it has been G-8 plus 5, the five being India, China, Brazil Mexico and South Africa. Other countries are also regularly invited to G-8 summits. Since these changes were already happening, the question has to be whether the Washington meeting can do anything to solve the present crisis. That has to be doubted. Reform of IMF and World Bank are not going to end recession in US and Europe or calm international investors’ nerves. Moreover, although there are a few proposals on the table, such as banning golden parachutes or short-term investing, such ideas can only work if all the world’s markets agree — and there is little chance of that. It is also difficult to see what an expanded G-8 could do in the present circumstances. After what has happened it has to be doubted whether any group — G-7, 8, 20 or any number you can think of — would be able to restore order and calm. The G-8 governments have thrown trillions of dollars to bail out the system but still the markets fluctuate wildly. That is, however, no call for keeping things as they were.
Leaders such as Indian Prime Minister Manmohan Singh and Brazilian President Luiz Inacio Lula da Silva are right to say that it is not fair that their economies and those of other developing nations should suffer in a crisis not of their making. Although fundamentally strong, such economies are certainly suffering. Just last week, Tata, one of India’s corporate giants announced cut backs in expansion plans because of difficulties raising capital, one of the key consequences on the global financial crisis. Not that Tata’s problems are wholly due to greed and inadequate financial regulation in New York or London (or, for that matter, Singapore, Tokyo and the rest of the world’s major stock markets, Mumbai included). As one of India’s major vehicle manufacturers, it has also seen a slump of domestic car sales as a result of the earlier oil price rise. In short, it is a complicated picture. But that is all the more reason why there has to be change when it comes to deliberating on the global economy. It is not the private concern of a handful of players who were the only players 60 years ago but today are among many others in a complex global machine. There cannot be any meaningful decisions on global financial relations without the input from countries like Brazil, India and China — or for that matter Saudi Arabia as the largest producer of what keeps modern economies afloat. That is not to say that the US or the EU is no more important than anyone else. The present crisis proves that is not the case. Recession in Europe and the US affects us all. But the world economy is just that — a global affair. It has taken a crisis to demonstrate that is the case. What is special about today’s summit is that it finally reflects it.
