G-20 Summit: Little Action, Many Promises

Finance ministers, given a list of some 47 things to follow up on, agreed to meet again before the end of April

By Jane Sasseen

World Bank President Robert Zoellick took part in the Nov. 15 Group of 20 summit in Washington. MAURICIO LIMA/AFP/Getty Images

Expectations for the weekend summit of global leaders from the Group of 20 countries in Washington, D.C., were low. And they were fully met.

After a state dinner at the White House on Friday night, Nov. 14, and five hours of meetings on Saturday, Nov. 15, the heads of state from nearly two dozen countries agreed to continue working closely together to take the needed steps to bring stability back to the global financial system.

"Our nations agree that we must make the financial markets more transparent and accountable," said President George W. Bush soon after the summit drew to a close. "We agree that we need to improve our regulation and to ensure that markets, firms, and financial products are subject to proper regulation and oversight."

All of the leaders backed the importance of continued monetary and fiscal stimulus to juice the globe's staggering economies. And there was plenty of agreement on the need to improve regulatory regimes—in individual countries as well as the coordination between countries—so that all financial markets, financial players, and financial products are better regulated. There was much talk, too, of how critical markets, such as credit default swaps, or critical players, such as giant global banks and the influential credit ratings agencies, are regulated and monitored both nationally and internationally.

Lowered Expectations Going In

But in recent weeks, European leaders—led by French President Nicolas Sarkozy—had toned down their original plans for a summit that many hoped would more aggressively challenge the strongly antiregulatory, free-market precepts that have dominated U.S. policy in recent years. Calls for extensive new regulatory structures, championed by Sarkozy and backed by others, found little receptive audience. Nor did talk by British Prime Minister Gordon Brown of the need for a larger coordinated stimulus gain much ground.

"In advance of the summit, there had been much discussion [that] this was going to result in an assault on capitalism, or the death of capitalism, or the revamping of capitalism," said one senior U.S. official after the summit ended. "Quite to the contrary." Instead, he adds, there was a significant affirmation of free market principals; a "universal recognition" by all the leaders that the reform efforts would only be successful if they were grounded in a commitment to the rule of law, open trade and investment, and competitive markets.

That left the leaders to signal their agreement on the broad principles to be studied, such as improving transparency, accountability, and disclosure, but with few specifics attached. As Kenneth Rogoff, the former head of research for the International Monetary Fund who now teaches economics at Harvard University, points out, those are hardly ideas anyone would disagree with: "It's motherhood and apple pie, or whatever the European equivalent of motherhood and apple pie is."

Actual Decisions Prove Difficult

But getting down to the nitty-gritty of what that might mean in terms of new regulation, or coordinated regulation between countries, or whether any of the 20 countries even share the same view as to what changes are really needed, is another story altogether. "Agreement on financial regulations is the elephant in the room. Every country will have a different view as to what to do," says Rogoff. They may have agreed on the areas to study, he adds, "but that's not an agreement on what to do."

If little concrete solutions came out of this weekend's meetings, the list of follow-up items has the potential for far-reaching and ambitious changes. But that will depend on whether the next stage goes beyond talking about the general principals that can be agreed upon, to determining the specifics all can abide by. And that ultimately will depend on the most powerful leader in the world—the one who wasn't even in the room. Now enmeshed in putting together his Cabinet, President-elect Barack Obama stayed clear of the summit.