Pittsburgh promises

As the G-20 upstages the G-8,India biggest idea should be national economic ambition

WILL history judge Pittsburgh as the inflexion point in global political economy in terms of substantively,as opposed to symbolically,broadening the power base? There were things agreed to at the G-20 meeting that,say,two years back would have been considered near unmentionable. The best example is peer review of major countries macroeconomic health. Perceptive economists have long argued that if some of the worlds biggest economies run fiscal/monetary/exchange rate policies that seem destabilising and if theres no mechanism to discuss the dangers of such policies,global economic management is effectively meaningless. Pittsburgh has made the idea of such a mechanism politically acceptable. How this works out,whether in the short term this works out at all,how America or China the two great de-stabilisers will take to peer review,are all valid questions. But the potential now exists for a better system,of which a better and reformed IMF,

another Pittsburgh promise,will be a key part.

Pittsburgh may have delivered in some areas it didnt seem to deliver. The vagueness and the evident lack of unanimity on financial regulation is an efficient outcome. Remember,globally applied Basle norms did not stop the crisis. Bank behaviour does need to change,banks capital reserve requirements should become pro-cyclical increasing in booms and reducing in busts but these are really national questions dependant on internal financial/political structures. India,Indonesia and Italy shouldnt be looking at a common set of finance guidelines.

The Indian delegation has let it be known that it is happy with Pittsburghs outcome. Theres reason to be happy. But theres also reason to be self-aware. Indias place at the global high table,or Indias relative ranking there,is dependant on the economy producing about a decade of high growth. This is wholly doable provided the national purpose is clear. For example,India must address the problems with its overpopulated,small holding model of farming. It must act upon the recognition that its manufacturing base needs to be hugely broadened,that its basic education system needs a huge revamp,that its banks are too hemmed in by regulation theres a space between the way Lehman functioned and the way SBI has to function. These are essentially political questions. Indias politics will need to be consistently motivated by its economic ambition. Can we bet on that?