Wednesday, September 23, 2009; 11:30 EST
What to Expect From the G20
Washington Post economics reporter Annys Shin was online Wednesday, September 23 at 11:30 ET to discuss what to expect from the G20 summit commencing in Pittsburgh on Thursday, where the leaders of the world's largest economies are scheduled to meet to take stock of what they've done but are unlikely to announce major new initiatives.
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Philadelphia, Pa.: Is climate change on the agenda? If so, what areas are open for discussion? If not, why not?
Annys Shin: Climate change is on the agenda, though financial regulatory reform, rebalancing the world economy and reform of the IMF and World Bank are likely to hog most of the attention. The main climate change-related proposal being pushed in Pittsburgh by President Obama would be a phasing out of fuel subsidies among G20 members. The Environmental Law Institute estimates here in the U.S., the federal government handed out $72 billion in tax breaks and other subsidies to the oil and gas industry between 2002 and 2008.
Karachi, Pakistan: What should be the goal of G-20? Addressing present financial and economic crisis and ignoring the long term goal of prosperous life for all? Or a comprehensive strategy for new global political and economic model that will address short-term plus medium-term issues along with the long-term objective of human civilization? Is it possible to avoid in a future crisis like present one with lopsided political and economic scenario? Could poor and so called developing countries contribute at their full (or optimum) capacity without releasing rural folk and farm workers and employing underemployed people in informal economies? If the manufacturing sector goes high-tech in places where the working age persons, particularly stuffed in rural and informal economy of developing countries, will find the opportunity to contribute towards sustainable and inclusive global growth? If G-20 cannot think about them, what are else they are supposed to do? Please offer your comments.
Annys Shin: Well to answer you broadly, there is some consensus among the G20 that what you are talking about -- more balanced economic growth with emerging economies having more clout --is what should happen. Getting there is the issue. In Pittsburgh, the U.S. would like the G20 to agree to alter policies in order to ensure more balanced economic growth. Such a plan would involve the U.S. promising to reduce its deficit and China relying more on domestic consumption,etc. One reason behind the proposal is global growth is unlikely to return to its precrisis levels now that the U.S. consumers is broke and has cut back spending unless that demand is replaced somehow. The proposal is also a way for the U.S. to try to get China and other export-dependent countries to ease their trade imbalance with the U.S. China this morning has offered some support for this idea, though the Chinese aren't too keen on anything that implies they had anything to do with causing the financial crisis in the first place. The main weakness of the U.S. proposal is that it's not really enforceable. The U.S. wants a peer review process in which the IMF keeps tabs on what is going on but has no authority to penalize anyone if they don't play along. The U.S. has tried this before in various incarnations so folks who have followed this issue for a long time are not optimistic it will amount to much.
washingtonpost.com: What are the most contentious issues likely to be raised at the summit? Is there any reason to believe any real progress will be made toward resolving them?
Annys Shin: The most contentious issues revolve around the details of financial regulatory reform. (i.e. How to restrict bankers' pay? How high to raise capital requirements?) and this U.S. proposal to get everyone to agree to adjust their policies to ensure more balanced global growth going forward. The U.S. and the emerging economies are also pushing to reform the structure of the IMF and the World Bank, which is not as popular with smaller European countries that stand to lose seats but that's sort of an old chestnut and not a fresh controversy.
Washington, D.C.: Are protesters expected at G20, and if so, how disruptive are they expected to be?
Annys Shin: There are indeed protestors expected.And the Pittsburgh authorities have gotten back up from forces as far away as Montgomery County, Md to help them. We wil let you know if any windows get smashed.
Washington, D.C.: Hey Annys, is it possible that we are entering a period of secular stagnation? Average growth rates have fallen every decade since WW2. If you take away the housing bubble the US already had a lost decade. What if we need bubbles to grow? Barring some revolutionary innovation might we be entering a period with a 10 percent "natural" unemployment rate?
Annys Shin: You must be an economist. Well, there are folks who are saying this. The basic issue is what is the next engine of growth? There isn't one on the horizon. U.S. consumers have lost so much wealth. They're going to be digging out for a while. Even if demand from emerging economies does pick up, it's unclear whether it will make up for the loss of demand from U.S. consumers. Barring, as you say, some miraculous innovation, unemployment will take years to come down. There are plenty of folks who are saying the natural unemployment rate is not going to be near five percent for a while. There is just too much slack in the economy and employers are reluctant to hire. I want to know what is going to happen to the folks who have been out of work for more than 27 weeks, not to mention people who ended up dropping out of the workforce.
Reston, Va.: Are all G-20 agreements made public? For those who attend the G-20 and generate policy, are there any investment limitations placed on their personal portfolios?
Annys Shin: Hmm. The conflict question is intersting. I have to find out. The agreements are made public in the form of a final communique that is put out at the end. These agreements don't have much fine print. They tend to be very generalized. Trying to get consensus among 20 economies is tough going so the final product can be short on specifics. The nitty gritty still has to be hashed out at the national level, like with financial reg reform. They can agree to general principles but the details are left to the normal sausage making process on the Hill and legislatures around the world.
Annys Shin: Well, I am off to Pittsburgh. Be sure to keep following the Post's coverage of the G20. Thanks for joining us today.
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