The G20 Summit: A Disappointing Bunt to the Spring

The G20 Summit was first proposed by the UK and France during the first waves of the global economic meltdown. It was long anticipated as a coming together of the major nations in the world to discuss necessary changes to help better regulate international finance, attempt to help stabilize the current turbulent markets, and discuss ways to have additional oversight on the international playing field.
After unprecedented global cooperation of bank bailouts and stimulus packages during the crisis, there was much debate about the outcome of the summit this past weekend. Unfortunately, world markets reflect a relatively negative viewpoint of the outcome– falling multiple percentage points in Europe (-2.4% UK, -3.35% Germany, -3.3% France), the Middle East (approx. -1.0% in Israel, Kenya, and Egypt, and 6% in Saudi Arabia), and mixed returns in Asia (+3/4% in Japan, -1/10% in HK, +2% in Shanghai, and -2.3% in Australia).
While some of the initial shell-shocked mentality has worn off, most experts agree that some measures of oversight need to be implemented- the question is how? A number of factors put an unusual strain on the meeting where many claim little substantive work was accomplished. First, there are significant differences in ideological standpoints – According to a NYTimes article published on Saturday “World Leaders Vow Joint Push to Aid Economy,” stated “Europeans in general favor more state control over markets, even to the point of granting regulators cross-border authority, while the United States stresses the primacy of national regulators. President Nicolas Sarkozy of France, who called on Mr. Bush to organize the meeting, alluded to those differences, saying the negotiations, even on general principles, had been challenging.”
Furthermore, the article stated that: “Despite broad support for economic stimulus, the leaders were not able to agree on a coordinated global effort. The Bush administration, which does not favor a further stimulus, resisted that idea. And the proposal for colleges of supervisors fell short of an international regulatory agency favored by the French. The Bush administration opposes any regulatory agency with cross-border authority.”
It seemed like it left the world with conflicting messages. President Bush provided extremely strong language (in my opinion quite hyperbolic) about the state of the world financial system: “Mr. Bush said he felt compelled to act because ‘if you don’t take decisive measures, then it’s conceivable that our country could go into a depression greater than the Great Depressions.’” Yet, obviously the White House is in transition and Obama’s emissaries (who attended the summit in his place), discussed policies with attendees which probably conflicted in part with President Bush’s.
Another issue which has been in the forefront of many individuals’ minds (and certainly for those of us here at Emerginvest) is the fact that most emerging market and developing countries have been ravaged by the impact of the turmoil. In the same article, is states “Some leaders were simply eager to be heard. “Emerging market countries were not the cause of this crisis, but they are amongst its most affected victims,” the prime minister of India, Manmohan Singh, said.”
This is especially underscored by the fact that “With the United States and Europe struggling economically and consumed by efforts to stabilize their banks, China, Japan and Saudi Arabia emerged as the likeliest candidates to help distressed countries.” In numerous previous articles, I have mentioned how a number of nations will be filling the gap of power created by a recovering US and Europe – and cash-rich nations such as the three aforementioned make extremely likely candidates.
In short, it seems like the conference produced relatively little substance. There was a 5-page communiqué written which described broad goals, however detailed, actionable plans about how to attack the more difficult issues like financial regulations was scheduled for another meeting on April 30, 2009. A quote from the NYT article described it perfectly: ““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?”
Despite additional stimulus and bailout packages being announced (for example the $7.6 billion requested by Pakistan), it seems like the world will be without a major overhaul until late Spring of next year – which gives plenty more time for the violent economic waves to keep crashing around the world.
The Emerginvest Heat Map of the world for the past quarter:

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