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Opinion

Brazil's President Lula: The G-20's role after economic crisis

The group weathered this challenge, but the developing world needs more say in heading off future ones.

By Luiz Inácio Lula da Silva / September 23, 2009



Brasilia, Brazil

Optimism is the leitmotif surrounding the Pittsburgh summit Sept. 24-25. Yet certain concerns remain.

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A year ago, as the dramatic recession unfolded around the world, many were convinced the world was heading for a repeat of the crash of 1929.

Due to measures adopted at the G-20 summit in London last April, the worst threat in decades to the global economy was contained.

After a 9 percent reduction, global trade has rebounded, thanks to the injection of $250 billion in flexible, unconditional credit. By the end of 2009 nearly 50 million jobs will probably be lost, but there are signs that the worst is past.

Another $750 billion went to stimulate demand and stabilize the current accounts of many – particularly developing – countries hit by the drastic cutback in foreign trade and credit.

The scale of mobilized resources has been unprecedented. Yet even more significant was the quick and decisive show of collective will involved. The degree of trust thereby regained has helped keep the economy afloat during this period of uncertainty and turbulence.

The international community managed. Should we celebrate having avoided the worst? Should we sit back and wait for the next crisis? After all, the mirage that markets are self-regulating and that financial profiteering is somehow grounded in economic logic has finally collapsed.

Yet even those countries that were not wooed by the promise of easy gains found themselves unshielded from this gale-force crisis.

When G-20 leaders first met in Washington last year, no fully worked-out policy proposals were available. Yet leaders did not let themselves get bogged down in inertia or stalemate. They were aware that the crisis reflects structural imbalances that reach far beyond financial misdoings.

Climate change and growing global competition for energy resources and markets starkly confirm what we already knew: Globalization has made us ever more dependent on one other.

Last year Brazil took the lead in defending the consolidation of the G-20 as a forum of leaders who could manage the crisis rationally. The time had come for a show of political will and for undertaking fundamental structural adjustments.

This explains our dismay at the reluctance of developed countries to embrace proposals for reform of the Bretton Woods institutions. There is fierce resistance to putting teeth into financial markets' oversight mechanisms. Banks are going back to the very practices that precipitated the recent chaos. Bankers continue to be overpaid, while millions of men and women lose their jobs.

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