The outgoing US president says major reform will not be achieved in one meeting, writes Denis Stauntonin Washington
TWENTY WORLD leaders gather in Washington today for a two-day summit to discuss the global financial crisis and to consider joint action that could prevent another shock.
US president George Bush yesterday sought to lower expectations ahead of the meeting, however, telling the Manhattan Institute in New York that reforming the financial system was too large an undertaking to be accomplished in a single discussion.
"This summit will be the first in a series of meetings," he said. "It will focus on five key objectives: understanding the causes of the global crisis; reviewing the effectiveness of our response; developing principles for reforming our financial and regulatory systems; launching a specific action plan to implement those principles; and reaffirming our conviction that free market principles offer the surest path to lasting prosperity."
Besides the US, the countries represented will be Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey. Between them, they account for almost 90 per cent of the world's economy.
The European leaders who pressed for this weekend's meeting initially envisaged an ambitious attempt to reorder the global financial system that would be seen as a successor to the 1944 conference held in Bretton Woods, New Hampshire.
Bretton Woods set up the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (IBRD) and the General Agreement on Tariffs and Trade (GATT) and established an exchange rate system that lasted into the 1970s.
Today's leaders agree that the challenges facing the global economy are formidable. The Organisation for Economic Co-operation and Development (OECD) reported this week that the entire developed world is slipping into recession. Governments also acknowledge that international institutions and regulatory systems can no longer deal with an increasingly complex and powerful global financial system.
However, few expect this weekend's meeting to agree any sweeping changes, much less to redesign the international financial architecture.
The meeting starts with dinner this evening and the leaders will meet for just five hours tomorrow, allowing each participant to speak for just 15 minutes.
Mr Bush, who has always been lukewarm about the summit, has just over two months left in office and his successor, Barack Obama, will not attend the meeting. Mr Obama is sending two representatives - former secretary of state Madeleine Albright and former Republican congressman Jim Leach - to meet leaders on the sidelines of the summit. Neither Ms Albright nor Mr Leach are, however, members of the president-elect's economic advisory committee and Mr Obama has made clear that he will not be pressurised by the summit conclusions into taking any action in January.
Mr Obama is more enthusiastic than Mr Bush about strengthening regulation but he has not endorsed French president Nicolas Sarkozy's call for a global financial regulator. The EU has called for the G 20 to put in place "strong, ambitious and operational" measures within 100 days to improve oversight of international bankers, a timetable that would require the new US president to agree sweeping changes within weeks of being sworn in.
Mr Bush suggested yesterday that this weekend's summit could establish principles for "adapting our financial systems to the realities of the 21st-century marketplace" and discuss specific actions to implement these principles.
"We will direct our finance ministers to work with other experts and report back to us with detailed recommendations," he said.
"Our nations must make our financial markets more transparent. For example, we should consider improving accounting rules for securities, so that investors around the world can understand the true value of the assets they purchase."
The leaders are also likely to discuss co-ordinating fiscal stimulus plans and the action they are taking to recapitalise banks and guarantee loans in an effort to get credit moving again.
Most economists believe that more ambitious reform is needed, including a strengthening and restructuring of the IMF and the introduction of an effective global regulatory framework. Berkeley economics professor Barry Eichengreen suggested this week that the leaders should explore the idea of a new world financial organisation that, like the World Trade Organisation, would blend national sovereignty with globally agreed rules on obligations for supervision and regulation.
Meanwhile, campaigners on behalf of the world's poor fear that those who suffer the most from economic and financial crises will be forgotten in Washington.
"We can't depend on the people who are responsible for the global crisis to pull us out of it," said Nessa Ní Chasaide of Debt and Development Coalition Ireland. "Governments have found billions of dollars to bail out wealthy investors because of their own irresponsibility. We have the resources to provide everyone on the planet with a decent standard of living."
