The G20 summit has now concluded with a final communiqué outlining the common points of agreement between participants. The blogosphere has already parsed the outcomes, and the reviews are decidedly mixed. The meeting failed to create of a stricter system of global financial regulation; nor did it establish global stimulus package, two of the most important (and admittedly the most controversial) items on the agenda.
According to the Baseline Scenario emerging markets (like China, India, and Brazil) were the big winners, as the Europeans lost control of the International Monetary Fund’s managing director position. Most observers, however, were much more sanguine. Blogging for Foreign Policy, David Rothkopf described the meeting as important for its symbolism but falling short in substance. Paul Krugman generously described the outcome as “better than I expected,” pointing to the increase in funding for the IMF. And Dani Rodrock called the outcome “a glass half full.”
But in the Financial Times, Chris Giles notes that the G20’s communiqué likely overstates the actual increases in funding for the IMF. While Barack Obama and Gordon Brown were touting the $1.1 trillion in new funding for the IMF, the actual figure was probably far less than that…probably closer to $100 billion, according to Giles.
In reality, the final outcome of the G20 summit probably will do little to address the global economic crisis. As Clive Crook concludes,
In the longer term, it matters even more that the governments of some huge and (until recently) fast-growing economies, such as Brazil, China, and India, are being given a bigger voice…Valuable as entrenching the G-20 and reviving the IMF may be, though, the most urgent need at this summit was to deal with the immediate danger of a worsening global slump. Designing a coordinated fiscal stimulus to expand global demand, keep people at work, and relieve the pressure for competitive devaluation and new trade restrictions — the means by which governments traditionally try to export their unemployment — was the prize that mattered most.
While Brazil, China, and India will almost certainly garner greater influence in the international financial institutions as a result of the shift, such a shift was likely to occur with or without the summit. China’s $2 trillion is U.S. dollar-denominated assets makes it a critically important player in international economic discussions. And its suggestion of moving away from the U.S. dollar as the global reserve currency demonstrates its willingness to use its position to influence international talks.