G-20 Leaders Set Out To Tackle Global Recession

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President Obama believes the emergency G-20 economic summit will produce a significant agreement to tackle the deepening global recession. The meeting is portrayed as a debate between people who want to fix the immediate problem, and those who want long-term reform.

STEVE INSKEEP, host:

It's MORNING EDITION from NPR News. Good morning. I'm Steve Inskeep.

RENEE MONTAGNE, host:

And I'm Renee Montagne. World leaders face two big questions as they meet today in London. One is how to end the economic crisis, another is how to keep it from happening again.

INSKEEP: And that in turn leads to an even bigger question. We live in a capitalist system that's been taken for granted as much as the sunrise, and the question is how much that system should change now. NPR's John Ydstie is covering the G-20 Summit in London.

Hi, John.

JOHN YDSTIE: Hi, Steve.

INSKEEP: So if this is a debate between people who want to just fix the immediate economic problem and people who want long term changes, who's winning?

YDSTIE: Well, I guess I'd have to say that those who want to focus on the reform and regulation of capitalism have made a strong last minute push. The Obama administration had hoped this meeting would lead to greater commitments to stimulate economies, while the continental Europeans, the Germans and the French, have wanted to reign in what they see as unfettered cowboy capitalism in the U.S. and Britain.

Over the past couple of days, French President Sarkozy threatened to walk out of these meetings if there wasn't stronger emphasis on reform. Yesterday he was joined in a press conference by German Chancellor Angela Merkel, who said, quote, "This is a historic opportunity to give capitalism a conscience, and we have to seize this opportunity."

INSKEEP: But what kind of regulation are they talking about to impose that conscience?

YDSTIE: Well, at the top of the list are regulating hedge funds and tax havens and strengthening the oversight powers of the IMF and a body called the Financial Stability Forum. According to a leaked draft of the communiqué obtained by Reuters, those things will be in the document that's produced today. Merkel and Sarkozy also want stronger guidelines on executive compensation.

The irony is that the U.S. has signed up for much of this already. A lot of this was in proposals that Treasury Secretary Tim Geithner made to Congress last week. But I think the effort by the Europeans is part of the sort of periodic swing of the pendulum.

Before this crisis we were in a long period of deregulation, and that contributed to the crisis we now face. President Obama acknowledged that again yesterday. The question is how far the pendulum swings back.

INSKEEP: And I suppose also whether the United States makes its own reforms or gets reforms forced on it by the rest of the world; that will be a kind of a political question.

YDSTIE: Exactly.

INSKEEP: Let me ask about another thing, John Ydstie. Obviously two of the key players there are the United States and China. How are they getting along?

YDSTIE: Well, U.S. officials were clearly happy with the meeting that President Obama had with China's President Hu Jintao yesterday. President Obama accepted an invitation to visit China later this year and the two sides set up a high level economic and diplomatic task force that includes Secretary Geithner and Secretary of State Clinton. And according to White House officials, they said there were no discussions of the Chinese concerns about the soundness of U.S. Treasury bonds, which they own a lot of.

INSKEEP: Oh yeah, the Chinese have made some remarks in recent weeks about how they're worried about their investment in the United States.

YDSTIE: Yeah, yeah. And apparently this didn't come up. And China and the U.S. were on the same side in this other argument that we've have talked about, saying that more stimulus is what needs to be focused on right now and not regulation.

INSKEEP: Well, let me understand what's going to happen there then. If stimulus - basically lots more government spending - is what China and the U.S. want to have happen, is the rest of the world going to go along?

YDSTIE: Well, not directly. The more likely outcome is that the leaders will agree on a very big increase in resources for the IMF, that the IMF could lend around the world, and that would especially helpful for emerging economies in developing nations who don't have the means to stimulate their own economies.

The number being talked about now is a tripling of current IMF resources for this purpose to a total of $750 billion, so a lot of stimulus there. The question is where those funds will come from. The EU, Japan, and the U.S. have suggested they will pony up, and China is being asked to do the same. They seem inclined to do that, but in exchange they want a greater voice, greater power in the IMF.

INSKEEP: John, thanks very much.

YDSTIE: You're welcome, Steve.

INSKEEP: NPR's John Ydstie is covering today's G-20 Summit of major world leaders in London.

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