I. E. Brown | Published: 4/7/09
The leaders of the top 19 industrial nations and the European Union gathered for the second time in six months last week, amid mounting global economic turmoil. The G20 summit, held in London, aimed to increase confidence in the financial sector, and the leaders discussed new strategies for the regulation of the global financial market.
G20 member countries include Canada, the United States, Britain, France, Germany, Russia, China, and Japan as well as emerging economies like Mexico, Indonesia, and South Africa. The summit addressed several specific weaknesses in the global economy: underwriting standards, the lack of systematic risks oversight, the lack of oversight of unregulated pools, and the weak performance of credit rating agencies, to name a few. To combat these problems, four working groups were created to generate solutions: regulation and transparency, reinforcing international co-operation, reforming the International Monetary Fund, and issues concerning the World Bank.
The G20 sought to avoid the protectionist tendencies that exacerbated the Great Depression of the 1930s. Instead, the G20 summit has attempted to determine regulatory policies that will maintain the level of trade between countries.
"I think tougher and more co-ordinated financial regulation is the key to prevent future events [like the global economic downturn," said Francisco Alvarez-Cuadrado, a McGill professor who specializes in theoretical macroeconomics and economic growth. "Nonetheless, the devil would be in the details, and initially the U.S. and Europe might have large disagreements on what is the ideal degree of regulation."
Co-ordinated regulations would allow countries to enhance trade with a smoother, more cohesive playing field. If there were standardized regulations, financial institutions wouldn't be able to seek out loopholes like the tax havens provided by countries like Monaco, the Bahamas, and Luxembourg. Jagdish Handa, a McGill professor who specializes in monetary economics and macroeconomic theory, agreed that an increase in common regulation would be beneficial.
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