The 2008 financial crisis brought the G20 into the limelight and promoted it to firefighter-in-chief. In 2009 the G20 became the key forum in charge of dealing with economic and financial matters. What about 2010? Will it be remembered as the year when the G20 secures the economic recovery, progress on the reform of regulatory framework, establishes the Framework for Strong, Sustainable and Balanced Growth? Or, will it be when the whole process sinks?
These questions will lurk in the background when the G20 re-opens for business this weekend - the first meeting of this year's process and the first under Korea's leadership. Discussions will converge on the current economic outlook, the coordination of exit strategies and the plans to establish the Framework for Strong, Sustainable and Balanced Growth. The agenda also includes financial regulation, energy subsidies and climate change financing.
It is an ambitious programme that sets positive expectations for the months ahead. Will it deliver tangible results? Here are a few suggestions for the G20:
- Policy measures should be considered in terms of their desired impact and adverse effects. They should also be coordinated to offset potential spillovers.
- A good policy at the wrong time is not the right policy. The proper sequencing of policy is essential.
- Most good policies need to be coordinated to offset potential adverse spillovers.
- Creativity matters. As when fighting the crisis, do not think only in terms of conventional policy tools. They may not be enough, or may have lost their capacity for impact and need to be used more vigorously. New unconventional measures may be needed in order to get similar or slightly diminished response.
- Before deciding the policy measures assess first how the post-crisis world economy would look like, so as to avoid using inappropriate and ineffective tools, at best, or rekindling the crisis, at worst. Also, assess the long-term implications of economies policies and recovering measures, and avoid repeating past errors that may sow the seeds of future crises.
- Ask whether the model of economic growth that has underpinned the world economy in the past couple of decades is still adequate. Problems with that model could generate sub-optimal policy responses. Don't assume that the future will be like the past. Long-term scenarios are bleak and may suggest a decline in potential output, especially in mature economies.
- Seize the opportunity - and the urgency - to expand the policy debate to fundamentally rethink the model of growth that underpins the world economy.
- Most of all keep international markets open and support the circulation of goods, capital and people within the world economy.