The G20 summit in London is not only a shot in the arm for the global economy but also marks a historic shift in the economic system and the balance of power, according to early reports on the just concluded meeting.
World leaders pledged more than $1 trillion in emergency aid to cushion the economic fallout, reports Bloomberg. The Guardian has published the full text of the communique.
The Wall Street Journal says:
The summit announced a tripling of the lending power of the International Monetary Fund to around $750 billion.
The leaders also unveiled a $250 billion expansion in the IMF's reserve currency — the special drawing right — to boost liquidity in the global financial system by expanding member countries' foreign exchange reserves. They committed to selling IMF gold to help poor countries.
The package does not include a coordinated fiscal stimulus as originally proposed by Brown and President Obama, notes The Times
But while countries will maintain control of their own markets and companies, the G20 established a new Financial Stability Board to work with the IMF to provide early warnings of emerging risks, adds Bloomberg.
Bloomberg says:
The G20 statement amounts to an effort to rewrite the rules of capitalism to address an integrated world economy that has outgrown the ability of individual governments to keep it in check. The group, which represents 85 percent of the world economy, devised a model for how finance should be regulated everywhere in a bid to prevent a repeat of the market turbulence which has roiled the world for almost two years.
It notes the summit called for stricter limits on hedge funds, executive pay, credit-rating companies and risk-taking by banks.
Reuters columnist Paul Taylor writes:
The London G20 summit shows just how far power has ebbed from the United States, and from the West in general. Until late 2008, the Group of Eight mostly Western industrialized nations — the United States, Canada, Germany, France, Britain, Italy, Russia and Japan — was the key forum for economic governance.
