All together now
Monday, 17 November 2008 10:05am
It is just fitting that the world leaders from the Group of 20 nations decided to meet on 15 November 2008 to hatch their battle plans for ending the global financial crisis.
For on this very same day in 1920, the League of Nations also held its first general assembly in Geneva, Switzerland. Wikipedia described the League of Nations as ‘an international organization founded as a result of the Treaty of Versailles in 1919-1920. At its greatest extent from 28 September 1934 to the 23 February 1935, it had 58 members. The League's goals included disarmament, preventing war through collective security, settling disputes between countries through negotiation, diplomacy and improving global quality of life.'
Fast forward 88 years and the leaders of 20 nations that make up around 90 per cent of the global economy meet again. The League's primary objective back in 1920 was to prevent future world wars. This time, the G20 is trying to battle a different foe that could prove as debilitating as any world war.
The G20 weekend meeting produced an action plan to revive growth in the world economy - fitting given this coincided with news that the Eurozone has officially fallen into recession - and deter a repeat of the current financial market mayhem that all are now experiencing.
The G20 pledged a more macro approach and coordinated policy response to the on-going crisis. Greater regulation of financial institutions, more fiscal spending, further cuts in interest rates, increased accounting transparency, trade reforms and the establishment of an all-encompassing oversight body - regulatory colleges -- were all tabled at the meeting. Each nation is mandated to submit their action plans by the end of March 2009. The G20 will then meet at the end of April to finalise definite actions in their battle against the financial crisis.
This is well and good. But given the scale and reach of the problem, four months to come up with a concrete battle plan and perhaps, another four months to implement might be too late. Is this a case of ‘Nero fiddled while Rome burns?' Japan is reporting its third quarter real GDP growth figures today - more likely than not, this will officially add the country to the list of economies that have contracted. More dominos will fall as the G20 Generals think and ponder.
However, this is much better than going into battle unprepared. Note the futility thus far of the various reactive fiscal, monetary and regulatory policy decisions made over the course of the year. Besides, the global recession has picked up enough momentum that it could not easily be reversed even if the G20 implemented some sort of action the very next day. All they could hope for at this time is to restore frayed confidence with their show of unity.
The League of Nations ultimately proved incapable of preventing World War Two and was replaced by the United Nations. What would replace the G20 if they fail to stop the rot? They better not.
Benjamin Ong
