G-20: Don't Expect the Earth to Move

Economic summits can be invaluable during crises, but rebalancing commerce or reforming regulation takes more than a meeting

Eric Feferberg/AFP/Getty Images

By Theo Francis and Steve LeVine

By Friday evening, the heads of the world's 20 biggest economies—from the U.S. to South Africa, encompassing 85% of global economic activity—will have dined, met, lunched, met again, and made their pronouncements.

If history is any judge, there may not be much in the way of immediate or lasting results.

Certainly, weighty issues are on the table: rebalancing world commerce, reforming the global financial system, reining in executive pay, fending off protectionism, and plotting out how to extricate national governments from deep involvement in the financial markets. But already, officials are seeking to tamp down any lofty expectations established by the last two summits—high-octane events held in Washington last fall and in London in April amid a punishing financial crisis, and which are widely heralded as having helped to stop the global economy's slide into depression. "This is not a trillion-dollar summit," Mike Froman, White House deputy national security adviser for international economic affairs, told reporters last week.

Mixed Record for Summits

Few global economic summits measure up to the legendary Bretton Woods agreements of 1944, which established the world economic order for the next three decades. Since then, most conclaves have been less ambitious and have yielded mixed results. The 1985 Plaza Accord, signed by Japan, the U.S., France, West Germany, and Britain at New York's Plaza Hotel, pushed down the value of the dollar to help the U.S. out of recession and ease the country's trade deficit. Just two years later, the Louvre Accord (which added Canada to the mix) sought to slow the dollar's decline again, but its precepts were largely abandoned soon after.

The most successful events have been those bringing together technocrats and finance ministers over extended periods, rather than heads of state gathering for a 24-hour series of photo ops. "Certainly in the last few years they've been mostly elegant garden parties, it seems to me," says economic historian and author John Steele Gordon.

Simon Johnson, a former chief economist of the International Monetary Fund who teaches at the Massachusetts Institute of Technology, says G-20 leaders simply are not grappling with the biggest issues lingering from the global financial collapse. Instead, they are drafting plans to fix problems in the "medium run"—postponing difficult choices until a time when new developments will demand a different approach still. "The G-20 is dropping the ball," Johnson said. Not only is the glass not half-full when it comes to global coordination on economic and financial policy, "I'm saying there is no glass."

Smoothing Over Tensions

Of course, even some critics say it's worthwhile to bring heads of state together periodically, particularly in the bilateral, side meetings that accompany group summits. President Barack Obama and China's Hu Jintao were expected in their meeting on Sept. 22, just ahead of the G-20 summit, to try to smooth over tensions resulting from the U.S. president's Sept. 11 decision to slap high tariffs on Chinese-made tires.

Plus, simply having a forum like the G-20 allows for speedy communication and cooperation, which proved invaluable during last fall's financial crisis, and again this spring. Its existence clearly signaled to financial markets that world leaders were prepared to coordinate stimulus spending, monetary policy, and other moves to stabilize the economy. "It's big and clumsy, and very often hobbled by procedure. There are just too many voices to really get anything done" says Kenneth Rogoff, a Harvard economist specializing in international issues. "But the crisis definitely showed what it can do."

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