In 25 days, leaders of the 20 most powerful economies are going to fritter away an opportunity — the biggest the world has ever seen. As the Group of 20 (or G20, an informal gathering of 19 countries and EU that collectively represent about 85 per cent of the world’s economy) congregates at Pittsburgh in the US to help fight the ongoing global recession in the developed world and slowdown in emerging economies like India, China and Brazil, the lesser one expects out of what is steadily turning out to be the world’s most high-profile clubbing conclave the better.
To give credit where it's due, the six influential leaders (the aggressive US, UK and India, an invisible behind-the-scene China, and rebels France and Germany) in the past two summits at Washington (November 15) and London (April 2) have helped prevent the world from imploding. Exactly two months after the global economy fell off the cliff, the Washington Summit laid out the broad contours of what needed to be done — strengthen transparency and accountability; improve regulation; promote market integrity; reinforce cooperation; and reform international institutions.
From New Delhi's perspective, the two important economies of the US and India, then, had a lame-duck political leadership, so when the results of the Washington Declaration were intangible, nobody came back disappointed.
Given that the global economy had all but stalled, the stockmarkets halved, the liquidity in country after country vaporised and the impact on real economy through loss of business and jobs visible, I, like many others, had expected more.
But our solutions-seeking appetite was satiated somewhat in the hope that the London Summit, less than five months away, would deliver them — on the way back, some 30,000 feet above the Atlantic, Planning Commission deputy chairman Montek Ahluwalia told me that it was a good beginning and “you can’t really expect any more”. I nodded: after all, it’s not easy for 19 governments to agree on life-changing decisions in two months.
The London Summit and its run-up was encouraging for India. “We commit to fight all forms of protectionism and maintain open trade and investment,” a March 14 G20 finance ministers’ and central bank governors’ communiqué, in its very first paragraph said. This was a position that Manmohan Singh had insisted upon, as one developed market after another began to close. Two days before, the Financial Stability Forum (that was baptised Financial Stability Board in the April 2 London plan), expanded its membership to include India, as well as Argentina, Brazil, China, EU, Indonesia, Korea, Mexico, Russia, Saudi Arabia, South Africa, Spain and Turkey. Again, an India initiative.
At the London Summit, after much prodding and bullying by the US — the loose-policy epicentre of the crisis — the G20 agreed to pledge $1.1 trillion (a little more than the size of India’s GDP) to spend their way out of the crisis. But beyond this, all we had were empty words of intent: restore confidence, growth, and jobs; repair the financial system to restore lending; strengthen financial regulation to rebuild trust; fund and reform our international financial institutions to overcome this crisis and prevent future ones; promote global trade and investment and reject protectionism, to underpin prosperity; and build an inclusive, green, and sustainable recovery (the last was Singh’s contribution, with reference to Africa and the environment).
And while the G20 leaders also planned measures for cracking down on tax havens, their focus was four small nations, not Switzerland that continues to play an outdated power game, serving the interests of the US and cocking a snook at India. The country seems to be blissfully unaware of the changed global economic environment, where the markets — and hence the politics — of India, China, Brazil and South Africa need to given a little more respect than what this Alpine nation has been doing (hiding behind Swiss banking rules and regulations, and keeping the illegal financial pipelines of drugs, corruption and terror money well oiled). But as Finance Minister Pranab Mukherjee told us on Friday, “Where will they (money launderers) go?”, hinting that the world over, such havens are drying up. I couldn’t but help notice a mischievous twinkle in his eyes when he said that.
As the core of the ongoing crisis, what the world expects from the US financial system is a change in its incentive structure of those who drive global finance. Everything else — making IMF more democratic, throwing taxpayers’ money into the system to revive it, and all 19 countries working together (all of which has helped stem the downward economic spiral) — is secondary. If the incentive structure of the fat cats of finance is not moderated, if looting consumers is looked upon as economic freedom and reform, if profits are strictly private and losses absolutely public, this completely shameless, hurtful, despicable and no-longer-invisible hand of the market is best amputated.
Which is something the G20 leaders, taking US president Barack Obama’s hard political words but highly indulgent actions on this front into account, will be loath to do. But if this issue is not resolved at Pittsburgh, we may as well say hello to many Lehmans ahead and learn to live in a serial-crises-no-reforms world, where the guilty will continue to indulge in sophisticated crimes and we taxpayers continue to finance their scams. Pittsburgh is the world's last chance at change. Our leaders need to realise — and bring in —that change.