President Obama hosts his first summit of world leaders starting Thursday, a gathering of the G-20 nations that, for the most part, are just starting to recover from the worst economic cataclysm since the Great Depression. Now they must decide whether to keep interceding, by pouring more government money into their respective economies, or whether to back off that strategy.
Other big issues will be on the table, too, when leaders of the so-called Group of 20 banter around the table at the "environmentally correct" David L. Lawrence Convention Center here. Among them are global warming and, maybe, ways to keep bankers from making titanic amounts of money by taking extraordinary risks with the financial system.
Expectations are mixed for what these leaders, whose nations represent 90 percent of the world's economy, can actually achieve by the end of Friday. Some analysts anticipate they will reach agreements or at least concur on to a road map to solve global problems. Others, though, say the group's diversity and the leaders' different agendas may result in only an airing of the issues, but few solutions.
“On the one hand, it brings together all the major players – you need China, India, Brazil, and Indonesia. But on the other hand, their interests are more diverse, so it’s harder to reach agreement,” says John Duffield, a political scientist at Georgia State University in Atlanta. “But any agreement they reach will be more meaningful.”
Here are the major issues the leaders are expected to discuss:
•The global economy. The major issue is whether the leaders will agree to continue a global fiscal stimulus, which has meant the expenditure of trillions of dollars for roads, schools, direct aid to individuals, and tax cuts. They may also discuss how to start to wind down this spending – an exit strategy.
Part of this discussion will be whether to set up a new global referee, such as the International Monetary Fund (IMF), to blow the whistle when the world economies get out of balance – perhaps one nation growing quickly while another stagnates.
•Climate change. Following on the heels of Tuesday's climate change summit in New York led by United Nations Secretary-General Ban Ki-moon, this meeting is expected to continue the discussion on the threat posed by global warming. The US Congress has yet to act on major emissions-cutting legislation, making it challenging for Mr. Obama to insist on specific cuts for other major greenhouse-gas emitters, such as China and India.
•Financial reform. Because the recession started in the financial sector, world leaders may feel it is incumbent upon them to act in this arena. On the table may be whether to regulate or restrict bankers’ bonuses, as well as the amount of capital banks should have.
Although German Chancellor Angela Merkel is balking at continued fiscal stimulus, most of the nations are likely to agree to stay the course, says John Kirton, director of the G20 Research Group, based in Toronto.
Even as they agree to continue to stimulate their economies, the leaders are likely to begin discussions on an exit strategy that could be implemented in a year or two, says Mr. Kirton. “The scale and scope [of the stimulus] is unprecedented,” he says. The exit strategy "needs to be smart and sophisticated with a comparable complexity to how it was put together.”
Agreeing on some way to balance the world economies may be tougher, says Desmond Lachman, a resident fellow of the American Enterprise Institute (AEI) in Washington. “That proposal is not likely to go too far,” he says. “It will be resisted by the Chinese as a way to beat up on the Chinese.”
On global warming, the China is likely to remind Obama that Congress has yet to pass meaningful climate change legislation.
“Will China make some commitments, even though the cap and trade legislation has not passed both houses of Congress?" asks Steve Hayward, a fellow at AEI. “If China and the US reach a breakthrough, that will be key to an agreement" at the December climate change conference in Copenhagen, Denmark, he says. “Otherwise, they may just reach a framework.”
If a climate change agreement is reached, Mr. Duffield says, it might “light a fire under Congress, maybe help galvanize them.”
However, he notes, these large meetings are not known for major breakthroughs.
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