G20 to become main economic forum

“We pledge to avoid destabilising booms and busts in asset and credit prices and adopt macroeconomic policies, consistent with price stability, that promote adequate and balanced global demand,” the summit communique said.

“We will also make decisive progress on structural reforms that foster private demand and strengthen long-run growth.

“Where reckless behaviour and a lack of responsibility led to crisis, we will not allow a return to banking as usual.”

‘Depression averted’

The G20 leaders said that they had succeeded in preventing the deepest global recession in decades from deteriorating into a protracted depression.

“Because of the bold action we took millions of jobs have been saved,” Barack Obama, the US president, told a press conference in Pittsburgh.

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“The decline in out-put has been stopped. Financial markets have come back to life.

“We must make sure that when growth returns jobs do too, that’s why we will continue our stimulus efforts until our people are back to work and faze them out when our recovery is strong.

“Our new framework will allow each of us to access each others policies, to build consensus on reform and to ensure that global demand supports growth for all.”

But the leaders acknowledged that the G20 still had to do more in order to prevent a global economic crisis of the current scale from occurring again.

The G20 countries, which account for 90 per cent of the world’s economic output, said that they would maintain emergency economic supports until a recovery is assured.

The move to take decision-making on the global economy away from the exclusive club of rich Western nations is a reflection of the power that fast-growing economies such as China and India now hold, analysts say.

“You can’t talk about the global economy without having the major dynamic emerging economies at the table,” John Lipsky, the deputy managing director of the International Monetary Fund (IMF), said.

IMF access

In the communique, G20 leaders said that they had agreed that emerging economies should have greater voting rights in the IMF.

“Our forceful response helped stop the dangerous, sharp decline in global activity and stabilise financial markets” Excerpt from the final communique by G20 leaders gathered in Pittsburgh

“We are committed to a shift in IMF quota share to dynamic emerging markets and developing countries of at least 5 per cent from over-represented countries to under-represented countries using the current quota formula as the basis to work from,” they said. 

But Max Lawson, a senior policy adviser at Oxfam, said that the changes that had been suggested were not enough to overcome deep-seated imbalances in the IMF.

“Unless it changes its rules to give poor countries a real say in the way it is run, the IMF will remain the world’s rich country club,” he said.

Banking reforms

The apparent recognition by Western nations that the G20 should lead decision-making on the global economy comes in the wake of the most severe global economic downturn since the 1920s and 1930s.

The global recession is considered by many analysts to have been sparked by reckless risk-taking in Western financial markets.

The document also said that pay schemes for those who work in banks and large financial institutions should be overhauled, following criticism that pay bonuses had encouraged an aggressive and reckless culture in the financial markets.

Bankers’ pay should be linked to “long-term value creation, not excessive risk-taking”, the document said, although it did not mention imposing caps on pay, as some European leaders had proposed.

Leaders also agreed to phase out inefficent subsidies for fossil fuels over the “medium term” to help combat global warming.