Last week, the international community witnessed the latest session of the G-20, hosted in London.
The summit, which reunited the finance ministers and central bank governors of 19 countries, plus the European Union, had a tough agenda to tackle: draft a plan of action that would ease the devastating effect of the financial crisis through coordinated stimulus packages, the revamping of the rules of global financial markets and the halting of protectionist measures.
Some people view the summit as just another diplomatic meeting where flowery communiques are published and diplomatic photo ops and goodwill handshakes are exchanged. Given the current circumstances, however, there is much more at stake than not having a picture taken with a favorite head of state.
The most recent statistics show, in fact, a dismal panorama for the world economy. According to the World Bank, global trade will slump by 6.1 percent and global output will contract by 1.7 percent – the last figure representing something that has not happened since World War II. Protectionism is also on the rise. The Telegraph, a British newspaper, reported that based on World Bank data, 17 of the countries who were represented at the G-20 have already imposed such measures.
Despite the odds and the protests taking place in the streets, world leaders agreed to boost the role of international organizations such as the International Monetary Fund and provide “a $1.1 trillion package of measures to restore growth and jobs and rebuild confidence and trust in the financial system,” according to the official G-20 Web site.
Qualitatively, it is important to highlight the role of President Barack Obama, who, according to a report from ABC News’ Jake Tapper, acted as mediator in a quarrel between China’s Hu Jintao and France’s Nicolas Sarkozy over the regulation of tax shelters, as the new face of American diplomacy.
It is tempting to only focus on the current maladies of the American economy and think the G-20 summit will not immediately solve high unemployment levels and restart credit markets. However, it is important for the average citizens to understand that now, more than ever, the world economies depend critically on each other like a vintage clock depends on the coordination of its intermeshing gears, regardless of their size.
Let us also remember that although the financial crisis started in the United States with the defusing of the subprime mortgage market, its ripple effect has undeniable global consequences. The collapse of the entire banking system in Iceland, for instance, prompted the country to face bankruptcy and require financial aid from the European Union and the IMF. According to The Telegraph, the IMF has also provided aid to Mexico, Pakistan, Latvia, Bosnia, Ukraine, Serbia, Romania, Hungary, and Belarus.
Even while the G-20 summit is far from having solved the global financial crisis, it represents a good public display of international cooperation among countries – a sign that a global recovery might already be in course and become more visible by the end of this year.
Carlos Valera is an economics and political science major from Lima, Peru.