Finance ministers from a dozen trading nations met in Washington Friday to share concerns about the effect high oil prices will have on their economies
The policy makers are in Washington for Saturday and Sunday's semi-annual gathering of the International Monetary Fund and World Bank. Friday's gathering was of the Group of Seven, finance ministers from North America, Europe and Japan. On this occasion the gathering was expanded to include ministers from five key developing countries that are increasingly important to the world economy-- China, India, South Africa, Brazil and Russia.
The major concern is the higher price of oil and the accompanying risk of either a slowdown in growth or an actual downturn or recession. IMF economists think the risk of a slowdown is real, but one is unlikely to occur. Nonetheless, with U.S. oil facilities threatened by natural disaster for the second time in a month, all eyes were on the energy markets. Oil prices are nearly 50-percent higher than they were a year ago and double what they were two years ago.
While the meeting of Group of Seven finance ministers went on, other policy makers attended a conference on reforming the the G7 and IMF at the nearby Institute for International Economics. Institute director Fred Bergsten said the Group of Seven has become illegitimate both because its membership does not include China and because it has failed to address pressing global economic problems.
"The global imbalances can not be addressed without the Asians. The energy problem can not be addressed without all the main importers and the key producers. And debt problem can not be handled without the chief debtor nations. The IMF will remain ineffectual if its own steering committee is ineffectual," he said.
Mr. Bergsten, a former U.S. Treasury Department official, says it is essential that China be admitted to the Group of Seven. "China has got to be in the steering committee. But it will be the first economic super power in history that is low income, not fully a market economy, and not a political democracy," he said.
Politically, the Group of Seven has evolved into a Group of Eight that includes Russia, which in July, for the first time, will host the annual summit of G8 leaders. The Group of Seven -- the, United States, Japan, Canada, Italy, Germany, France and Britain, continues to function on the finance ministers level, particularly in setting policy for the 184 member IMF.