President Barack Obama travels to London this week to attend the second meeting of the G20 nations’ leaders, where they will discuss the imminent need to resolve the worst financial crisis since the Great Depression. In light of this summit, the Center for American Progress hosted an event Tuesday, “Back From the Brink: Strengthening the Group of 20 to Tackle Global Crises,” to mark the release of the new CAP report “The Case for Leadership: Strengthening the Group of 20 to Tackle Key Global Crises.”
A group of experts joined CAP to discuss the present and future role of the G20 and strategies for addressing the global economic crisis. CAP Senior Fellow Nina Hachigian moderated the panel that included Colin Bradford, nonresident senior fellow of Global Economy and Development at the Brookings Institute; Bruce Stokes, international economics columnist for the National Journal and a fellow at The German Marshall Fund; and CAP’s Associate Director of International Economic Policy Sabina Dewan.
The G20 nations account for 80 percent of the world’s gross domestic product, and this week they must take proactive and substantial steps to quell the economic downturn. The panel highlighted several areas the summit must address, such as an internationally coordinated stimulus plan; the implementation of an effective financial regulatory system; avoiding protectionism; coordinating aid and outreach to developing countries; and restoring the IMF as a central global institution.
In regard to financial reform Stokes said that, “There’s going to be a commitment to do systemic risk. Each country is going to be asked to do a risk assessment of its institutions and practices and determine if they pose a risk to the global financial system.”
And while measures to restore financial stability are important, so is strengthening international institutions such as the International Monetary Fund. “It’s important politically that the message coming out of the summit on Thursday is ‘someone’s has to manage the store,’” said Bradford, “and the IMF is one of the only existing institutions that can do this.” It would not be difficult for the G20 nations to raise the money needed to provide the IMF with the resources to effectively regulate global markets. However, it is important that the IMF opens up its leadership structure to countries other than developed nations. Bradford emphasized that both EU and U.S leadership, “Must give up their prerogative to appoint cronies, and allow emerging nations to feel that they can be players and get involved.”
A pressing moral priority that must come out of the G20 summit is a commitment to help people in the areas hardest hit by the global economic crisis. “A third wave of the crisis is now affecting developing nations. The first wave hit industrialized countries, and then we saw emerging markets hit, and now the lower-income developing nations are being particularly hard hit,” Dewan said. Investment, remittances, and demand for exports are all declining in these nations, causing economic peril. The G20 nations should create better institutions and safety nets to increase resilience in these nations
CAP’s new report lays out the framework for what a successful G20 organization might look like in the future. Among the several points made in the report, CAP proposes that G20 membership criteria should be refreshed every five years, and should be made up of the top two economies from the major regions of the world—the Americas, Europe, Asia and the Pacific, North Africa and the Middle East, and Sub-Saharan Africa—alongside the next top 10 economies in the world.
The report also advises that, in order to make the G20 more transparent and efficient, a secretariat should be established to implement crucial decisions, and its leaders should hold meetings every year—spring meeting in the city this secretariat is based, and fall meetings in New York alongside the United Nations General Assembly.
The panelists agreed that any steps the G20 member states take this week should improve regulation and oversight, which were lacking in the lead up to the current crisis. “We need more transparency, accountability, and openness,” Bradford said. “This is the new ethic: If you are not open and you are operating behind closed doors, you are not acting in a modern, 21st-century way.”
Hachigian added that, “The G20 has the potential to fill a major vacuum in global leadership and decision-making.”
For more details on this event, please visit the events page.