You can read through the reports about the economic summit that took place in Washington yesterday in America’s two newspapers of record and still walk away fairly confused about what exactly it is that the leaders of the G-20 agreed to do.
The Washington Post, for example, characterizes it as a fundamental change in the world economic order:
World leaders holding an emergency meeting to combat the economic crisis agreed yesterday to a far-reaching action plan that, over the next 4 1/2 months, would begin to reshape international financial institutions and reform worldwide regulatory and accounting rules.
The leaders’ 11-page statement spoke of broad principles, leaving the details to be worked out by lower-level aides before another summit meeting in April, after Barack Obama assumes the presidency. But the gathering in Washington of the nearly two dozen nations — from every region of the world — reflected the new balance of power emerging in the aftermath of a financial crisis that has devastated even well-run economies, a wrenching process that British Prime Minister Gordon Brown has dubbed “the birth pangs of this new global order.”
Under the plans outlined by the leaders, countries such as China, Brazil and India would gain greater roles and responsibilities as part of a restructuring of the international financial system, while European leaders won a commitment to new regulations and controls on banks, rating agencies and exotic financial securities. The leaders also agreed that a dramatic failure of market oversight in “some advanced countries” was among the root causes of the financial crisis, an implicit rebuke of the United States.
The only thing that seems clear, is that we’re living in a world with much more international economic regulation:
The leaders agreed to set up a new regulatory body, “a college of supervisors,” to examine the books of major financial institutions that operate across national borders, so regulators could begin to have a more complete picture of banks’ operations. They demanded greater scrutiny of hedge funds and the completion of a clearinghouse system to help standardize and limit risk on some of the opaque and exotic financial derivatives that helped bring down Wall Street’s investment banks.
Leaders also agreed to submit their countries’ financial systems to regular, vigorous reviews by the International Monetary Fund — assessments that some countries, including the United States, had long resisted. And they urged new constraints on the pay schemes at financial firms that “reward excessive short-term returns or risk-taking.”
From The New York Times, though, one gets the impression that this is all really much ado about nothing:
[F]or all the talk of action and history-making change, some experts said the outcome was disappointing.
“This is plain-vanilla stuff they could have agreed on without holding a meeting,” said Simon Johnson, an economist at the Massachusetts Institute of Technology and a former chief economist of the International Monetary Fund. “What’s new, except that this is the G-20 instead of the G-7?”
That, it seems, is a very good question.
