Last April's G-20 Summit brought together the leaders of the major world economies. Yet in terms of their announced goals for the Summit, financial regulation seemed to be the only one that gained traction.
That impression is confirmed by the weekend's meeting of Finance Ministers, in preparation for the next Summit in Pittsburgh later this month. The key deliverable now under discussion is that of requiring banks to reduce their leverage. There may also be some minor curbs on pay mechanisms within the finance sector.
As the blog has continuously warned of the dangers of excess leverage, it has to applaud the G-20's efforts, even if they are an example of shutting the stable door after the horse has bolted. But it will save its full approval for the moment when the G-20 endorses the new Trade and Development Report, published today.
Issued by UNCTAD (UN Conference on Trade & Development), this notes that "in the United States, the share of the financial industry in GDP grew from 5% to 8% between 1983 and 2007, while its share in total corporate profits rose from 7.5% to 40%". As chief economist Heiner Flassbeck suggests, the real need now is "to focus banking on supporting investment in productive businesses".