The all-pervasive economic gloom—rising unemployment, foreclosures and corporate bankruptcies, capped by a forecast of fall in growth in world economy by 0.8 percentage points to 2.2% by the IMF—made everyone expect something dramatic to come out of the recent economic summit of G-20 countries held on 15th November in Washington, DC. Indeed, many have gone to the extent of calling it `Bretton Woods-II', hoping it would—like the original meeting held in New Hampshire under the shadow of World War II that created the IMF and World Bank, fixed exchange rate system, and a body to oversee world trade—come up with some such dramatic tools.
But such a comparison sounds silly, though the current summit is equally of paramount importance for a variety of reasons: first, the whole world is in a great hurry to somehow contain the financial crisis that the US has created, which has exploded into a systemic crisis, said to be the worst since the recession of the 1930s, affecting the emerging economies adversely, that too, for no fault of theirs, all because the world economy is now so strongly interrelated and interdependent that what happens somewhere deep inside the financial system of one country is enough to wreak havoc in another country that lies far off from it. Second and the obvious fallout of the first expectation is: financial regulation. The flaws of the existing system have become evident, calling for the establishment of a new financial architecture that can avert recurrences of such crises. Third is the disturbing phenomenon of global macroeconomics that is highly skewed: high savings of Asian and oil-exporting gulf-countries and Western spending. |
