Arriving at a common point in multi-nation forums is often a tortuous process of compromise, truck and barter. At times, what countries set out to achieve and the end results are often at variance with each other. The outcome of the meeting of finance ministers and central bank governors of the Group of Twenty (G-20) nations, which concluded in Paris on Saturday, had a marked display of these features.
One big goal before the group was to begin the difficult task of redressing global imbalances. Even taking baby steps to that end are proving difficult. Far from actually changing the askew savings expenditure balance, G-20 ministers had a difficult time even agreeing to the indicators that reflect this imbalance. The final communiqué, issued on Saturday, eschews measures such as foreign currency reserves and current account balances among others in the list of indicative guidelines. A big reason for this has been the sensitivities of China. For example, Beijing was against using current account balance as an indicator as that would make it look an offender worse than it is. Instead, it favours using trade balance for this purpose as its exports have slowed of late.
This was a problem waiting to happen. Managing a global economy in crisis was a much easier task as every country’s existence was at stake. But once the crisis passed, it was only a matter of time before national priorities reared their head at this forum. At its face, the G-20 looks like a coherent bloc of big kids. It isn’t. Members in the group have huge differences in output (South Africa’s gross domestic product is 45 times smaller than that of the European Union—the biggest economy represented at the G-20), population (compare Australia and China) and growth rates, among a host of other factors.
Moving from a crisis management role to a crisis prevention function will require more than the kind of two-day get-togethers that G-20 meetings often are. The group needs a permanent set of officials who can coordinate these tasks year round. It will also require greater understanding on the part of certain countries to realize that the global economy is yet to come back to normal. Greater give and take is called for if G-20 is to fulfil its potential.
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