Editorials

No more quick fixes

(China Daily)
Updated: 2011-02-18 08:17

Two years after the Group of 20 (G20) managed to haul the world economy out of a global crisis that might otherwise have been much worse, there is growing disappointment over its apparent lack of any sense of urgency in coming up with concrete measures and a timetable to fix the increasingly outdated global economic and financial systems.

When finance ministers and central bank governors from the G20 rich and developing countries meet in Paris on Friday and Saturday, they should no longer expect the coordinated stimulus packages to replace the painful but necessary long-term solutions.

Admittedly, the world economy is on track for a dual-speed recovery. But the current easing of the global crisis does not mean that the root causes of the global economic woes have been identified and fixed.

A lasting global recovery will definitely require a comprehensive overhaul of the global economic and financial systems to better reflect and serve the new world economic landscape.

It is right for the two-day G20 talks in Paris to focus on stabilizing the global economy by working on an agenda that includes regulation of the commodities market, monetary reforms and reaching a consensus on indicators to measure the global imbalances.

Yet, such an agenda still falls far short of what is required. Major global policymakers have to come to grips with the severity of the problems within the international economic and financial systems and find solutions in order to ensure a sustained global recovery.

The proposed agenda recognizes the need to gradually reduce the world's reliance on the US dollar. But the international monetary reform it suggests is too incremental to prevent inflation in emerging economies and deficits in rich countries from running out of control.

The rising food prices and rapid inflows of capital are stoking inflation in many developing countries, which threatens their fast growth, and rich debt-laden countries still ignore their fiscal responsibilities with a loose monetary stance instead. The US' proposal for a $1.1-trillion deficit reduction over the next decade, for instance, will hardly make a dent in its long-term fiscal problem.

Under such circumstances, it looks only a matter of time before fast-growing developing economies either grind to a halt, slowing the global recovery, or high-deficit rich countries are eventually forced to bite the bullet of defaulting on their public debts.

Both results are neither desirable nor unavoidable.

If policymakers can wean themselves away from their reliance on stopgap painkillers, such as printing more money, the G20 meeting will serve as a useful platform to seek a framework for more stable and predictable world economic growth.

However, if they just focus on tinkering with the obsolete global economic and financial systems and concentrate on reaping only low-hanging fruit, they will find less and less to agree on because of their different domestic challenges and policy mandates.

The current easing of the global crisis may be a false dawn. But the G20 can render it a window of opportunity by setting in motion the necessary tough reforms required.

(China Daily 02/18/2011 page8)