The Global Economy in Turbulent Times

CHAPTER 7 G-20 Summit, Toronto 2010: Reflects a Fragile Unity¹

What a difference half a year makes. On the Pittsburgh G-20 Summit held in the fall of 2009, I concluded in Chapter 4: “Sure, there have been successes. And this has been an unusual period of desperate cooperation. But, the process of repair and recovery remains incomplete.” What’s worrisome is that the root cause of the recent global crisis was left unresolved, that is, the critical issue of global imbalances. “If we don’t correct them, we’ll have the recipe for the next major crisis. And this of course would be totally unacceptable.” Indeed, these imbalances have deeper roots in global macroeconomic policy. I ended with four parting shots: (1) imbalances are not self-correcting; (2) the eurozone does not behave like one zone—each policy response is uncoordinated and nationalistic (no wonder the Greece crisis sparked off a new European crisis in March 2010); (3) no one-size-fits-all solution exists; each country will tailor-make its own solution, but this has to be well calibrated (why is no one surprised it wasn’t?); and (4) there is no way to police this—none of surplus or deficit nations is ready to surrender sovereignty over its macroeconomic policies. G-20 had but started a conversation on these critical issues. The Toronto Summit ended at end-June 2010; its communiqué reflected, at best, a fragile unity. It’s still too early to say where it will take us by year-end. I dare say, however, expectations of G-20 ...