Different tracks

It is now six months into the global economic crisis which began with the collapse of Lehman Brothers on September 15,2008.

Written by The Indian Express | Published: March 14, 2009 1:20 am

It is now six months into the global economic crisis which began with the collapse of Lehman Brothers on September 15,2008. The one thing which stands out is the plain fact that no country has been spared by the crisis — we are all losers together. There was much hope from China,India and the emerging world when the G-20 met in November — now the emerging world including China and India have seen the shine evaporate from their impressive growth records. So,the finance ministers and senior economic officials from the G-20 countries have their task cut out this weekend as they prepare the ground for the heads of government summit on April 2.

The early signs on the cooperation front are unfortunately not that encouraging. As is often the case with such multilateral discussions and negotiations,various countries are already taking strong and divergent positions. While one set of countries led by the US and the UK are pushing for more coordinated fiscal stimuli in each of the member countries,another set led by France,Germany and Japan are against further stimulus and instead want to focus the discussions on the issue of supranational regulation. It isn’t clear where many of the other countries including India stand at the moment. It is important for the G-20 not to draw battle lines on these issues. It mustn’t be a case of either/ or. At the moment,there is little doubt that all the major economies need to urgently stimulate demand in the face of collapsing consumption levels,exports and growth. Regulation is not a substitute for this. The question of regulation should also be discussed,but this process should be parallel to getting the global economy back on track. It will not be easy. Supranational regulation is likely to be controversial and consensus will be difficult to achieve — some countries will question the fundamental effectiveness of international regulation. After all,if domestic regulation in none of the major G-20 economies could detect and prevent a looming crisis,what are the chances,given the gaps in information,for an international regulator to be effective?

At this stage,the world can ill-afford a deadlock like the Doha round of trade talks. We would have then wasted far too much time and prolonged the slowdown much longer than necessary. The G-20,this time round,should focus on rallying its members against protectionism,a serious concern. And press all the members to do their best to stimulate demand. The global economy needs this,not a deadlock.

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