G20 Summit and Shaping the Future

It has been four months since the heads of states of 20 rich countries met in Washington to hammer out a consensus on how to save global economy from recession. The economic indicators of all the G20 countries have since worsened.

Today, they are meeting again in London, still groping in the dark on how to put back global economy on the path to recovery. While a synchronised global economic downturn calls for a coordinated policy response, it is difficult to envisage a common approach pursued by all countries as they do not have common 
economic structures.

It does not come as a surprise that leaders are split in finding a common cure for the economic malaise. What is suitable for America might not necessarily be useful for Germany. 
Despite the differences, the G20 leaders can make significant decisions to restore the stability of the international financial system. There is general agreement on the need for greater supervision and regulation of financial institutions and markets.

The world needs a robust set of rules by which banks and hedge funds have to play. These are testing times for all countries, but the temptations of erecting high import barriers to protect their own economies should be quashed. Though every member of the group understands that protectionism is counterproductive, each of them faces sufficient political pressure at home to give in. 
The World Bank, in its latest report has warned that, in the absence of international support, as many as 84 developing countries could face major funding issues this year.

Without strong and well-funded multi-lateral institutions, many of these countries would be forced to cut social spending. While there is consensus on boosting financial strength of the International Monetary Fund and the World Bank, developing countries including China will 
be unwilling to participate in restructuring 
these institutions.

Many erstwhile powerful nations have yet to make way for emerging economies to have a greater say in these institutions. Long gone are the days when the world economy hinged on critical decisions by the group of seven rich industrial nations. The transition from G7 to G20 reflects the progress the developing countries have made over the past two decades. The West might still be the all- powerful group, but going forward, it is the developing countries that could define and reshape the future.