Friday was the day of the big G-20 summit in Pittsburgh, where leaders from the world's major economic powers convened to talk money. But if you're like me, you were listening to your headphones at the gym during Obama's G-20 press conference, trying to pick up the highlights via closed-captioning teletext. (Or maybe you just missed it.) Anyway, I've rounded up some of the key points from Friday's meeting, to keep us all in the loop.
G-Who?The G-20, or Group of 20, constitutes 20 of the world's most dominant economic forces—19 countries and the European Union. Formed in 1999, the G-20 has been picking up steam since the 2008 Washington D.C. summit, the first meeting among the leaders of its member countries, which was motivated by the shaky global economy. The G-20 met again in London this April, followed by Friday's meeting in Pittsburgh.
There's also the Group of 8, a collection of those longstanding (and primarily Western) economic titans: Britain, Canada, France, Germany, Italy, Japan, Russia and the U.S. The G-8, formerly the G-6 and G-7, was created in the early 1970s following the oil crisis.
But one of the provisions from Friday's meeting stated that
the G-20 will replace the G-8 as the dominant economic council. This makes sense, as the G-20 contains emerging economic powerhouses like China, India, and Brazil. In the same vein, the G-20 voted forward a U.S. provision to increase the representation of developing nations at the International Monetary Fund. Critics of this say that the shift in voting power—at least 5 percent, all coming from Europe—is not significant enough to make a change.
Obama had a good quote about the importance of global economics:
Because our global economy is now fundamentally interconnected, we need to act together to make sure the recovery creates new jobs and industries while preventing the kind of imbalances and abuses that led us into this crisis.
Balancing ActG-20 leaders also passed the U.S.-proposed "
Framework for Sustainable and Balanced Growth," encouraging developing nations like China to stimulate domestic demand. Basically, most countries are used to profiting from U.S. consumerism, but as we start saving instead of spending, those countries are going to have to sell goods and services to their own people to avoid a financial mess. The proposal asks G-20 countries, along with the IMF, to review each other's policies, a plan some analysts say lacks sufficient enforcement.
Regulation for BanksTo avoid some of the excess that lead to our current recession, the G-20 adopted a new policy
linking pay to performance for bank executives. This is sort of a compromise, since several European countries were calling for pay caps, which the U.S. rebuked. The pay-to-performance regulations will be left up to individual continues and monitored by the Financial Stability Board.
Additionally, the G-20 is pressing banks to retain greater amounts of capital in their reserves to protect them from losses due to bad investments. This policy was likewise lacking in specifics; countries are asked to formulate a plan by 2010 to be enforced by 2012.
All Killer, No Filler?Overall, critics of Friday's conference worry that the new provisions are vague and overly idealistic, while proponents defend them as at least moving in the right direction. To me, the whole thing reminds me of trying to order a pizza with a large group of people—you have to accommodate everybody, from the crazy guy wanting anchovies to the mooch who forgot his wallet. In the end you just wish you'd brought a sandwich.
What do you think about the G-20 provisions? Is it smart to discuss economics in a global forum, or should the U.S. stick to domestic concerns?For more G-20 info, check out the coverage by
The Los Angeles Times and the
Associated Press.
Comments (1)
We live in a global economy, everyone is interrelated, it is important that economics be discussed not only in our own country but with the whole world as well. I think it is important for each country to consider their impact on the global economy and not just their own economic future. I also agree banks need to raise their capital limits to become more stable, but I am cautiously awaiting what the new capital requirement will be and how that will affect the banks and economy as a whole. Also I don't like any upper limits on compensation for any industry.