World leaders trumpeted a new global economic order at the G20 summit yesterday as the old industrialized elites ceded influence to fast-growing developing powers.
While developing countries such as China and India have long argued for a bigger say in the economic councils of the world, it took the global financial meltdown to persuade the United States and other rich nations that they cannot go it alone.
The decision at yesterday summit in Pittsburgh to transfer a chunk of control in the powerful International Monetary Fund to "dynamic" emerging economies, such as China, India and Brazil, and to enshrine the G20 as the world's economic steering committee both mark a profound shift in the global power balance.
"The old system of international economic co-operation is over. The new system, as of today, has begun," British Prime Minister Gordon Brown declared.
Brazilian Prime Minister Luiz Ignacio Lula da Silva said: "It's a sacred thing that's happening: The crisis is opening people's minds."
Yesterday's moves come after an extraordinary week in which the changing of the global guard made itself evident outside the economic sphere as well.
At the UN this week, U.S. President Barack Obama said: "We brought the global economy back from the brink. We laid the groundwork today for long-term prosperity."
He promised a new era of international co-operation to those who have criticized the United States for acting alone - but appealed for shared responsibility on other global interests, seeking Russian and Chinese help in pressuring Iran to drop its nuclear-weapons program.
Yesterday, the Group of 20 nations agreed to give emerging economic powers such as China, India and Brazil more sway in the IMF, a move that will come at the expense of European nations such as the Netherlands and Belgium. They indicated such shifts of control should be repeated at the World Bank.
Now Canada - which used to boast about being at a table of eight big powers - is one of 20, along with Australia, Mexico, Indonesia and Turkey. It now has the assurance it will stay at the table for some time, however, and not be bumped by rising powers.
Prime Minister Stephen Harper acknowledged that Canada's influence will in some ways be diluted in a group of 20, but said other countries still see Canada's influence as valid.
He said the real difference in the G20 is not what is being agreed to, but how it can be made to stick, like a global stimulus plan.
"Obviously, when China is quickly becoming the second-largest economy in the world, when India is in the top 10, you're past the stage where you can deal with major economic issues with only the established developed countries."
The G20 summit was not all one-way traffic, however. The U.S. got a commitment from G20 leaders to work on its initiative to prevent large global trade imbalances - situations in which some countries export far more than they import, or vice-versa - that lead to large financial flows that can breed instability.
Attacking that means pushing for citizens of exporting nations such as China and Germany to spend more, and for importers such as Americans to save more.
China has long viewed that agenda suspiciously, seeing it as a drive to have Beijing strengthen its currency, which would promote Chinese consumer spending but hamper the country's export growth.
"We just can't have growth driven by the American consumer, or driven by the accumulation of huge exports and huge reserves in certain developing countries," Mr. Harper said at the close of the summit. "So, in order to get a rebalancing of global growth, everybody's had to be at the table. Now, as I say, I think a lot of work is to be done to make all of this truly real, but we're moving in the right direction."
The G20 leaders, who in their two previous summits agreed on a massive global stimulus-spending program and pledged a $1.1-trillion development fund, saw more modest advances on issues around regulating financial institutions to avoid a future crisis.
They agreed to boost requirements for the capital banks must set aside to absorb losses, with details to be worked out by next year and put into effect in 2012, and that guidelines for bankers' bonuses would link compensation to "long-term value creation, not excessive risk-taking."
They made a general commitment to phase out national subsidies for fossil fuels - with no firm timelines - but failed to make any progress on a financing plan that would transfer money from rich countries to poorer ones to adapt, a crucial step for international treaty negotiations.Report Typo/Error