With the advanced industrial economies staring at the unnerving prospect of their collective output falling in 2009—for the first time since the World War II era—President Bush is about to host a dramatic summit aimed at charting a path out of the global financial crisis marring his final months in office.
The Group of 20 summit on Saturday in Washington has been dubbed a "Bretton Woods II" by many who hope to see a 21st-century version of the historic breakthroughs that were finalized at a conference in 1944. That summit laid out a U.S.-dominated international financial system.
But the results of this summit are likely to be far less sweeping. "A substantive agreement is unlikely, given the lame duck administration in the U.S. and the participants' competing agendas," argues Dan Alamariu, an analyst with the Eurasia Group consultancy.
Instead, the G-20 meeting will probably set some broad principles on increased financial regulation, coordinated actions to bolster economic activity and stabilize markets, and movement toward giving rising nations a larger say in how global financial institutions are run. Future reforms will probably be hashed out in working groups over the coming months.
The G-20 brings together the world's leading industrialized nations and the leaders of the emerging nations, such as China and India, that are playing an increasingly important role in the global economy.
With the G-20 perhaps too unwieldy to fine-tune the coming changes, assigning the harder work to smaller groups may be essential. World Bank President Robert Zoellick is calling for leading countries to form a "steering group" to manage the task. In any case, the actual reform effort will flow deep into next year—in time for an incoming President Barack Obama to put his stamp on the process after his inauguration.
The summit may well call for some kind of stepped-up regulation of financial markets, especially of credit derivatives of the sort blamed for touching off the current crisis. Expected as well are calls for helping emerging economies in getting credit, for common accounting rules, for better transparency on the risks of financial products, and for improved "early-warning systems" of looming trouble in the markets.
Some European leaders, led by French President Nicolas Sarkozy, have tried to make the summit a key decision point. Indeed, the financial crisis has strengthened the political hand of a few leaders like Sarkozy and Britain's Gordon Brown, even as it has seemed to weaken Bush's.
But with disagreements over such issues as whether an international financial regulator should be established and how some voting power in the International Monetary Fund should be yielded to rising centers of financial capital like China, Brazil, and Saudi Arabia, big ambitions for this summit are unlikely to be met.
The summit also may well be a ready platform for critics of American-style capitalism, like Brazilian President Luiz Inácio Lula da Silva, who have complained bitterly that the Wall Street-bred crisis risks derailing the hard-won progress of their own reforms.
The members of the G-20 are Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, and the United States. The European Union is also a member, represented by the rotating Council presidency and the European Central Bank. The summit also will include leaders of the IMF and World Bank.
The original Bretton Woods conference benefited from two years of preparation, and it ran for 22 days. Plans for Saturday's summit are still being finalized, and the official gathering itself is to last about six hours.
Those who supply the stage for such large and formal exercises in summitry try to ensure that they produce real results, in addition to the pomp and policy papers. Such summits inevitably run the risk of being "just a big circus," says Daniel Hamilton, a former Clinton administration diplomat who is director of the Center for Transatlantic Relations at the School of Advanced International Studies.
Yet with the scope of the global economic wreckage so widespread and deep, the leaders gathering in Washington this week may insist that, at the least, they demonstrate the will to modernize a battered financial system.