Useful Steps at the G-20 Summit - but a Missed Stimulus Opportunity
THE MEETING in London of leaders of 20 top world economies produced a number of pledges of useful action to cope with the global recession. Increased economic coordination, a reaffirmed commitment to open trade and assistance to developing nations -- these are all hugely important, if leaders follow through. And the conversations among the 20 countries are useful in and of themselves -- the type of coordination that must accompany a tightly linked global economy. But the summit would have benefited from a greater focus on the U.S. priority of fixing the crisis we are in before moving on to protecting against the next one.
Entering the summit, there was a tension between the U.S. desire to focus on economic repair and France and Germany's interest in using the summit as a launching pad for a more coordinated financial regulatory regime. Perhaps President Obama could have pushed harder; on the other hand, he was handicapped by worldwide belief in U.S. culpability for the crisis and residual resentments of perceived U.S. high-handedness under the previous administration. Mr. Obama wanted to represent U.S. interests without appearing to bully other participants. Some of his counterparts, in turn, were happy to turn his dilemma to their advantage. One can only imagine the reaction if Mr. Obama had emulated French President Nicolas Sarkozy and threatened to walk out if he did not get his way.
So it was not a surprise when the summit birthed a communique chock-full of plans to increase and strengthen regulatory institutions but devoid of any commitment to further fiscal stimulus. It is a lost opportunity, nonetheless, that the leaders were gauzier in the area that matters most -- actions to restore economic growth -- than on almost any other topic that was covered. Standing between the world and an economic recovery are a broken financial system and inadequate global demand. Extended discussion of how best to jump-start lending and clean up banks' balance sheets would have been beneficial as nations struggle to find the right model for cleaning up toxic assets. And even if no specific stimulus actions would be taken right away, a commitment to spend more if the global economy continued to deteriorate would have been progress. On the other hand, devising a system to ward off the next crisis and cracking down on tax havens fall into the category of crucial but less urgent.
Still, some important and positive policies came out of the meeting. The commitment to a free and open system of trade is particularly critical in the face of protectionist sentiments emerging around the world. The substantial increase in resources for the International Monetary Fund and for poorer nations will help countries in need and provide capital to help keep trade flowing at a time when it is expected to contract. Both policies reflect not only important measures to help the world economy but continued economic integration, instead of an isolationist step backward.
When asked how he thought he did, Mr. Obama said, "I think we did okay." That sounds about right.