The G20 summit in
London April 1st and 2nd aims to reach a
consensus on how to solve the global economic crisis. However, there are many
challenges that must be met first.
Kirton, director of the G20 Research Group at the University of Toronto, says
world leaders face "a very big job across a very broad agenda."
"The first thing
they have to do is to make sure that the fiscal and monetary stimulus that the
G20 countries are injecting into their economies to get growth back, to provide
jobs for their citizens, is enough. That it's working well. That it's targeted
in the areas that will really help the most. Secondly, they've got to make sure
that the financial system is working by unblocking the credit channels," he
comprehensive and up-to-date supervision and regulation of the financial
industry. Kirton also warns against a knee-jerk reaction to the global
He says, "They have
to make sure that we don't see an outburst of vicious trade protectionism,
which everyone knows punishes all concerned. But [it] is such a temptation for
politicians to engage in to appear to be doing something for their voters back
include meeting the Millennium Development Goals and modernizing major financial
"We need to reform
the global financial architecture, particularly the World Bank, International
Monetary Fund, international institutions that were designed in and for a world
of 1944, but really need to be changed for the 21st Century global
economy we now have," he says.
the problems are shared by all at the G20 summit, getting them all to agree
still won't be easy.
"When you have up
to 28 leaders from very diverse parts of the world, levels of development,
culture, it's very difficult to get consensus - far more difficult than it is
to get in the old G8 club," he says.
Kirton also says
that the current financial crisis is "characterized by a degree of complexity and
uncertainty that's never been seen before."
"So in some sense,
they're all in this together searching in the dark for a common answer. And I
think that is a unifying bond that will pull them together," he says.
At last November's
summit in Washington, the G20 did set the groundwork for modernizing the
financial structure. This includes assessing financial risks not just at
individual institutions, but across the whole financial sector. Kirton also
says financial institutions must end a typical cycle of economic behavior.
"So, for example,
when times are good and banks are making a lot of money, they should set aside
more capital for a rainy day (bad times). At present of course, when times are
good, they think they don't need that safety net so they put aside less. Then
when times are bad, of course, they realize they need it so they start hoard
their cash – exactly the wrong thing to do," he says.
Into this crisis steps
the new US President, Barack Obama, who, Kirton says, carries with him great hopes
and expectations. But he'll face European leaders, who may disagree with his
economic stimulus plans. The unknown factor at the G20 summit is China, which
has plenty of money at its disposal.
"It's difficult to
imagine that even if the United States and the Europeans come to a strong
consensus that they can actually solve the global problem unless China shares
in that leadership," he says.
The director of the
G20 Research Group expects the summit to address the needs of developing
countries for at least two reasons. One is the long-standing commitment of
British Prime Minister Gordon Brown to helping poor countries. And the other, Kirton
says, is the understanding Barack Obama has, from personal experience, of how
the crisis could affect such countries as Indonesia and Kenya. The unanswered
question is: Will parliaments and congress back home follow through and release
the money needed to help poor countries?