G20 summit

With the participants of the two-day G20 London summit all set to discuss the severest global economic recession in decades, there are growing signs that they will have a tough time reaching a consensus on how to tackle the crisis. Even in this so-called global village, countries and regions have differing perceptions that hinder the search for a universal solution. Some want to move away from neoliberal policies.

Others are trying to find a solution within the status quo. Such divisions have led to public scepticism regarding the G20’s ability to make meaningful progress on transforming the crisis into an opportunity as Chinese President Hu Jintao had counselled. Little wonder then that American President Barack Obama has called for delivering ‘a strong message of unity’ while German Chancellor Angela Merkel has stressed that the G20 leaders were coming together to make a joint decision, not to compete against one other.

But will their words have the intended effect? The participating countries may want to put the world economy back on its feet, but not without first fighting with each other on how to do it. Russian President Dmitry Medvedev’s pre-summit comments are more revealing about the differences: ‘We’re proposing a more equitable international financial system … all states are talking about this.’

The issue is where to put the emphasis and whether we want to move forward or simply remain stuck in the situation we have today.’ With the world economy forecast to contract for the first time in 60 years and trade projected to be at its lowest point in 80 years, there is a lot more at stake in London than just the American or European corporations. At stake are the interests of people from developing nations like Pakistan that depend on exports, workers’ remittances, foreign inflows and investment for economic and financial stability.

The World Bank has warned that the impact of global recession on the poorer countries would be severe and the 129 poorest nations would face a shortfall of up to $700bn in foreign aid and investment. Only a quarter of them would be able to ease the downturn through job creation or safety-net programmes because richer nations are borrowing more and developing nations are being squeezed out.

If failure to reach a consensus on future financial and economic restructuring is going to be bad news for the world, inaction on the part of the G20 to help the poor countries could prove catastrophic. As a World Bank official recently stated: ‘Clearly, fiscal resources do have to be injected in rich countries at the epicentre of the crisis, but channelling infrastructure investment to the developing world where it can release bottlenecks to growth and quickly restore demand can have an even bigger bang for the buck and should be a key element to recovery.’