Monday, September 28, 2009

What G-20 Pittsburgh might have started


The Group of 20 meeting in Pittsburgh was watched intensely around world last week. Even this wide recognition of the event tells most of the story. In the past, G-7 or G-8 meetings were not a part of the global excitement. During those G-8 meetings, the rest of the world, including developing countries, glanced at those gatherings and told each other what a snobby bunch those leaders were who got together just to brag about how rich they are and then smoked cigars over their medium-rare steaks.

I wrote the following after a conference in Washington, D.C., in the second week of January 2009, even before President Obama took office: " … Dr. Anne-Marie Slaughter [now the director of policy planning for the State Department] pointed out that the G-20 is expected to replace the G-8 to tackle the world’s important challenges. The group already started to work to confront the current global financial crises, and there will likely be other issues to follow, like climate change. … "

After only nine months, the G-20 became the new economic forum for world leaders to work and coordinate better economic policies so that they can offset some of the imbalances in the world economy that everybody seems to be complaining about in recent times. Therefore, these gatherings are not about only a few private clubs of rich nations anymore. With the G-20, which represents 85 percent of the world economy and about 60 percent of its population, is much more relevant to billions of people around world and will have a bigger impact over world affairs. So, when this “relevant” body got together last week, billions watched their own leaders as well as other leaders, and took pride as to how they are shaping the world.

Whether it was only this feeling of belonging to this important club that made the summit successful or whether it was something else is hard to predict, although it was obvious how the Group of 20 countries, from many parts and corners of the world, were able to formalize a “communiqué” that consists of a set of agreements in the form of a very significant message to the world.

For example, the major powers, or the Group of 8, let the discussions start to take some concrete steps to reach greater equality. Ever since my own college years, there have been talks about how the developing nations, especially China, India and Brazil, were lobbying for greater voice over the world economy and that they were not content with the current power distribution in the IMF or in other international economic bodies. And it seems, at last, they are harvesting the fruits of their long rallies, maybe just after lending so many hundreds of billions of funds to the United States.

This newly created international forum will start addressing mainly world's economic issues. Whether other issues will follow will mostly depend on how the new grouping works in the near future. It is very possible that last week's international dynamic shifting, in the future, can be seen as a cornerstone, while the history books will describe the 21st century events.

In this new history, the president of China scolded the American leader because of his protectionist policies. Mark McKinnon, from the DailyBeast, explained Obama's mistaken tariff policy and how his decision angered many American domestic sectors as well as foreign countries. This tariff hypocrisy, McKinnon argues, also conflicts with last April's G-20 summit. When Obama talked during his presidential campaign about how he would re-negotiate NAFTA for the American people's advantage, many found it laughable and did not care much since it seemed like just a populist argument. However, with this decision of adding more tariffs on Chinese tires, Obama might really buckle under the pressure of union workers, as many have suggested in the past.

Not everyone agreed on the success of the meetings, and there were many articles in which one could see the arguments about how toothless the Pittsburg meetings were. If nothing else, the meetings proved that the leaders of the world understand global interdependence. Yes, this newly created international cooperation was embraced because of fear and vulnerability, not because of confidence and strength.

Still, all members agreed that the current economic crisis is leading to much tighter regulations over financial institutions and that the bosses of those institutions must also be restricted over how much they can accumulate over a given period. This was a historic mark. The current economic downturn proved that in this global economy, if some of the biggest economies would not agree to tighten their financial sectors, this would be at the expense of others. For if many of those financial institutions were to move to more relaxed countries, they would do the same damage from there by taking enormous risks, as was the case for some time.

Both sides at the summit, meaning borrowers and lenders, promised to work toward balancing the world economy. On one side, America, as a leading borrower, promised that it would increase its savings rate and reduce its trade imbalance and, of course, will address its huge budget deficit. On the other hand, countries like China, Japan or Germany promised that they would not only try to allure other countries' consumers, but also strive to increase their own consumer spending and do not depend too much on American consumers. And yes, there is no binding resolution to condemn the poor sport countries. Though, with “peer reviews,” each country will submit its own homework to its friends and see how they do. And all will be reviewed by the International Monetary Fund.

The summit was a new paradigm to teach us how globalization has finally arrived. Over a couple of decades, globalization has been making headway and wiring everybody's life with head-spinning communication techniques, free movement of capital, etc. Now, it appears that global equality will be realized in a more democratic way. This could be the beginning of the worldwide government Inc. And happily, Turkey, with its rising importance and big economy, will take part in this new world order.

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