World's Major Economies Gather In Pittsburgh

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The G-20 Summit in Pittsburgh is part of continuing global efforts to coordinate economic policy to recover from the worldwide financial crisis. The big issue on the table is what steps to take to avoid another global meltdown. David Wessel of The Wall Street Journal tells Linda Wertheimer that with the financial emergency over, it may be harder for summit attendees to agree on anything.

LINDA WERTHEIMER, host:

It's MORNING EDITION from NPR News. Good morning. Renee Montagne is with our member station KQED in Northern California today. I'm Linda Wertheimer, in Washington.

STEVE INSKEEP, host:

And I'm Steve Inskeep in New York.

During this week's meetings at the United Nations here, world leaders have talked over global warming. They've listened to speeches by leaders like Muammar Gaddafi of Libya, who questioned the power that a handful of nations have at the U.N. Security Council. And today, they will listen as President Obama chairs that same Security Council in a discussion of nuclear proliferation. Then, many of the leaders depart for Pittsburgh and a meeting of the world's top economies.

WERTHEIMER: To talk about what's on the agenda in Pittsburgh, we turn to David Wessel, who is economics editor of The Wall Street Journal. David, welcome.

Mr. DAVID WESSEL (Economics Editor, The Wall Street Journal): Good morning.

WERTHEIMER: Now this is the third time that the leaders of the G-20 countries have met in a year. They met in Washington in November, in London in April. Is this going to be a different kind of meeting? Why are they having so many meetings?

Mr. WESSEL: The circumstances of this meeting are quite different than the ones that occurred earlier. There's much less an air of crisis. In fact, you can almost feel a gigantic sigh of relief that they no longer have to prevent the world from descending into another Great Depression. With the emergency over, though, it maybe harder for them to get agreement on anything. And the big thing on the table this time is what steps should be taken to prevent a repeat of the financial panic that produced such a very deep recession?

WERTHEIMER: Do you think there is general agreement on what the steps should be?

Mr. WESSEL: I think there's general agreement on the bullet points, on the kind of headlines on the press release, and much less agreement on the specifics. These summits always depend on whether they can do something beyond mouth platitudes. This time, there seems to be agreement that banks - big banks need to hold more capital, to have bigger cushions of their own money to absorb losses so they don't collapse and cause so many problems for the world economy.

There's agreement that there ought to be changes to the way bankers are paid, so they're not given so many incentives to take huge risks that then, if they blow up, end up upsetting the whole global economy. And, as there has been in the past, there's general agreement that we need to rebalance the world economy, as they say. The U.S. needs to save more and spend less. The Chinese need to do the opposite.

But as always, it's hard to come up with a way to actually make those pledges concrete and find some way to monitor them, so they can hold countries to the promises they make in these big photo ops.

WERTHEIMER: Now, in the past, the economic summits have involved seven big industrial countries, the United States, Europe and Japan. Now there are 20 countries, and the group includes countries like India and Brazil and China. Presumably, that makes a big difference.

Mr. WESSEL: I think it makes an enormous symbolic difference. I think we'll look back on this period and say this is the moment when the leaders of the world economy finally agree that you can't have a board of directors of seven countries that happen to be standing after World War II, and have to recognize the fact that there's been so much growth in India, China, Brazil, Russia, South Africa, that those countries need to be at the table because they are important to whether we get economic growth going.

And it makes a difference. So the Chinese feel the developing countries don't have a big enough share of voting at the International Monetary Fund. And in order to get the Chinese to go along on some things that the U.S. wants, the U.S. has been pushing to give the Chinese and other developing countries a bigger share, for instance.

It's also clear that the Chinese have done a remarkably good job of fiscal stimulus, of creating growth in their own economy to help the world keep growing, or grow after this recession ends. And so we can't get out of this thing without the cooperation of countries as powerful and big as China now.

WERTHEIMER: Where do you think these developing economies, these new economies stand regarding the United States? Are they allies of the United States? Do they oppose the U.S.?

Mr. WESSEL: I think they're very much self-interested. They're looking at a world where they have, for years, been lectured by rich countries, by Washington and London about how to run financial systems. And it wasn't so long ago that we had this Asian financial crisis, where disruptions in Asian banking system caused problems. And this time they say, my gosh, we got side swiped. You guys said you knew how to run a financial system, and your financial system nearly brought down the world economy. And it's hurting us.

So I think they come a bit angry and saying now it's time for you guys to fix your financial system so we don't get hurt.

WERTHEIMER: David, thank you very much.

Mr. WESSEL: You're welcome.

WERTHEIMER: David Wessel is economics editor of The Wall Street Journal.

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