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The balance of world economic power irrevocably shifted today, as China, India and other powerful developing economies were officially given roles in determing the future of financial policymaking in the West.
Early today as world leaders headed for the second day of the two-day G20 summit in Pittsburgh, it was announced the co-ordinated plans to keep the world afloat by continuing to pump into the global economy would be overseen by the Group of 20 leading industrial companies.
That announcement for the first time formalises that it is the G20 which will be responsible for world economic policymaking, breaking the previously US and Western-dominated G7 and G8 groupings.
It marks a shift in power in which the likes of China, India, Brazil, Turkey and Saudi Arabia now join Russia in shaping global economic policies.
The countries making up the expanded global policymaking body that is the G20 account for 85% of the world's economic activity.
Prime minister Gordon Brown said: “What we are trying to do is create a system for economic co-operation across the world. We have this one chance to make a huge success of international co-operation.”
Despite tensions ahead of the summit, notably from Germany's Angela Merkel who has been demanding from President Barack Obama strong action on the US-led bank bonus culture which she blames for the crisis, the G20 is set later today to announce a range of agreements.
Those will include a pledge that its members are to continue offering financial stimulus packages to get economies out of recession, as well as making commitments to bring in safeguards to prevent future crises.
Ahead of final communiques to be agreed today, the G20 pledged to rein in the banks and the excesses of the financial community, working together to tighten rules on how much capital banks must keep on their books to absorb potential losses.
A draft of the agreement to be signed today calls for “strong policy response until a durable recovery is secured” and “to avoid any premature withdrawal of stimulus.”
The 20 nations will also be urged to sign an agreement that will see stimulus packages withdrawn only in a “co-operative, coordinated” way.
Finance ministers and central bankers will bring together a co-ordinated analysis of economic policy for the next G20 meeting in November.
•Having fallen more than 2 cents against the dollar yesterday, the pound dropped a further 0.26 of a cent trading at $1.6032.
Reader views (1)
The obvious item lacking in this analysis is that, while the infusion of huge financial help has put the 'market' back on track, there has been little to no help for the average consumer.
Like building a house on sand, we are shaky. Although a Kensian myself, I think that if even 25% of the money already allocated to bail out the big banks were spread into the lower and middle classes (who have shown a new/recent tendency to pay down debt rather than raise it beyond their means, where the hell did that come from?).
I digress. Slowly, PAINFULLY, the economy will come back if the mney goes to the people. A variation on 'Vote with Your Feet', Put the money in the hands of the consumers and THEY will weed out the losing companies in the ultmate of Capitalist death arena - a fair market, which the major markets of the world seem to have abandon.
- Michael, Chicago [Uptown}, US, 25/09/2009 11:29
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