G-20 prepares for London meeting
Leaders of the G-20 represent 85% of the global economy, and 65% of world population. Set up by Finance Ministers after the Asian crisis in 1997/8, they first met at Heads of Government level in the USA last November. Sadly, although their communiqué was filled with earnest promises, few of these have since been enacted.
Most critical for the chemical industry is the outlook for global trade. This is now seriously threatened. The above chart from the OECD shows trade fell 24% in Q4, more than in 1975, and is forecast to fall at similar levels for Q1 2009. And as the World Bank has already documented, protectionism is on the rise - with 17 of the G-20 countries having introduced new measures since the November meeting.
The blog is always optimistic, and so it hopes that the meeting will provide an opportunity for world leaders to put aside the rhetoric and focus on the real issues. These are:
• Is fiscal stimulus the way to go? If so, how should it be done? The US has already committed $12.8 trillion (versus total GDP of $14.2 trn). Is this money well spent, or simply storing up more debt for the future?
• How far should governments go in combating the downturn? Are we, as the blog speculated in October, getting to the point where the principle becomes "markets where possible, governments where necessary"?
• What should be the future role of regulation and central banks? What changes need to be made to the global financial system? How should they be implemented?
• What happens if things get worse, not better? The consensus view is that the economy will 'naturally' recover at some point. But as the blog discussed in December, an L-shaped downturn is certainly possible.
These are big issues, and the blog does not expect immediate answers. But much time has already been lost, as politicians (and some industry leaders), denied that a crisis was underway. Hopefully, tomorrow's discussions will finally start to move policy in the right direction.