An overhaul of the world economic order can't be done in a day. Still, a one-day summit of 20 leading economies Saturday showed big ambitions to correct the global system. How to fix all the problems matters less than the fact that so many countries came together to seek solutions.
This quick response to a financial meltdown and the threat of global recession stands in historic contrast to a lack of coordinated action after the Great Depression. Even the simple act of putting up a united front of promised reforms sends forth some measure of hope.
And in another sign of how humanity has learned from the past, this meeting of the "G-20" nations – which represent 85 percent of the world economy – was more inclusive than the G-8 grouping of advanced economies that began convening during the economic crises of the 1970s.
Many more countries that now rely heavily on the global flows of goods and money, such as China and India, deserve a seat at the table, reflecting a new balance of power and the spread of wealth through capitalism.
The summit only set out principles on how to fix the global economy. Difficult negotiations over details will culminate in a meeting planned for April 30, the 101st day of the new Obama administration. The timing allows the new president to fine-tune a response to the summit's calls to enhance oversight of financial institutions.
The need for better replies to these global problems reflects a general unwillingness of each country, especially the US, to give up national sovereignty over its financial industry. Currently, governments generally rely on voluntary agreements to set standards, such as minimum capital reserves, but with little enforcement power.
But shocks in one nation these days ricochet easily around the world. It is becoming difficult to justify each nation acting alone.
The summit's call for a "college of supervisors" to examine major financial institutions that operate globally is aimed at trying to set up a warning system to prevent another crisis. The root of the current crisis lies in too many banks holding bad American mortgages that could not be valued as US housing prices fell. And it was compounded by the wobbliness of a new type of financial insurance known as credit default swaps, which are now unregulated.
Taking steps for greater transparency, combined with better cooperation between national regulators, should be within reach.
Driving such actions is a recognition by the G-20 leaders that "some advanced countries did not adequately appreciate and address the risks building up in financial markets."
The summit communiqué wisely encourages an expansion of free trade and warns against protectionist policies. Left unsaid, however, is the need to correct the huge imbalance caused by China's manipulation of the value of its currency. By skewing trade in this way and by building $2 trillion in reserves, Beijing has harmed the global economy.
Using economic packages to fix the world's financial architecture while also fighting off a global recession will take concerted goodwill among the G-20 nations.
If the crisis has done anything, it has taught nations that they can't simply seek to satisfy their own narrow interests through the global financial system without some sacrifice for the greater good.