G20 & Global Financial Turmoil

The Washington weekend conference of leaders of the Group of 20 nations underscores the global financial crisis. The world economy seems defined by wildly gyrating equities markets and frozen credit markets. There is broad consensus a global recession is beginning.
Immediate reactions to the conference include criticism of general statements about cooperation which lack specifics. However, participants did commit to resisting protectionism, promoting transparency, and much stricter regulation of banking and finance.
The history of international economic cooperation in the twentieth century indicates success reflects sustained work over the long term. There are no quick solutions to vexing structural problems, which is what the international economy currently confronts. This conference should be viewed as a sensible beginning; expecting immediate dramatic outcomes is utopian.
Many observers draw parallels between the current period and the Great Depression of the 1930s. There are very significant differences between that era and our own, but durable lessons as well. Shortly after the 1929 U.S. stock market crash, Congress passed the exceptionally restrictive Smoot-Hawley tariff.
Americans were following British example. London’s highly protectionist Imperial Preference cut off the enormous British Commonwealth and Empire in economic terms from the rest of the world. In retrospect, such moves along with unilateral currency devaluations added to the severity of the Great Depression while feeding totalitarian movements and extreme nationalism.
In addition to reconfirming opposition to go-it-alone policies, the conference represents a notable expansion of national participants. In the past, such meetings have focused on the G7, the sizable economically highly developed nations of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. In recent years, Russia has also been included, reflecting geographic proximity, military power and natural resources rather than comparable economic development.
Current emphasis on the G20 indicates consensus that a very small group of nations can no longer effectively lead the global economy. Brazil, China, India and other developing nations are rapidly evolving into major manufacturing powers, along with traditional roles as important suppliers of raw materials and other natural resources.
President Luiz Inacio Lula da Silva of Brazil has been notably optimistic in commenting on the conference. His background leading the political left in his country personifies the point that current economic consensus transcends ideology.
Since the Second World War, regular comprehensive negotiations have expanded trade, providing a generally stable foundation for the smaller gatherings representing the major economies. The current Doha Round has been vexed by disagreements on agriculture. Among the most successful was the Uruguay Round during the Reagan administration, spearheaded by U.S. Trade Representative Clayton Yeutter.
In 1944 at Bretton Woods New Hampshire, senior representatives of the Allied powers hammered out the economic structure for the post-war period. New institutions under the United Nations umbrella included the General Agreement on Tariffs and Trade (now the World Trade Organization), the International Monetary Fund and the World Bank. Functions have changed, especially after the Nixon administration in 1971 ended fixed monetary exchange rates, but the institutions have proven remarkably durable. Their founders planned for the long term.
The original United Nations vision was in the Atlantic Charter, announced by Prime Minister Winston Churchill and President Franklin D. Roosevelt after their epic Canada summit several months before the attack on Pearl Harbor. Many associate FDR more closely than Churchill with the UN. However, the British leader in his history of the Second World War notes proudly that he drafted the Charter.
Arthur I. Cyr is Clausen Distinguished Professor at Carthage College and author of ‘After the Cold War’ (NYU Press and Macmillan/Palgrave). He can be reached at acyr@carthage.edu