NEW ECONOMIC ERA

THE G20 meeting in Pittsburgh finished on a high note with broad agreement on what can reasonably be called a new global economic order. President Obama, who chaired the meeting, called the outcome “A new era of engagement” which would avoid the old “boom and bust” economics of the past. The president's use of the “boom and bust” phrase will have been music to the ears of Gordon Brown who has consistently argued for measures that would bring a global acceptance of the need to control imbalances that lead to this problem. At the heart of the Pittsburgh agreement will be annual meetings of the G20 attended by national leaders whose decisions and their outcome will be peer-reviewed by the International Monetary Fund.

These meetings will replace the existing consultations at finance minister level and consequently will carry the highest possible endorsement. This is a significant shift in the way the world economy is managed. The G8 meetings of leading industrial countries have been found wanting as a mechanism for this purpose in the 21st Century and from now emerging industrial economies will be properly represented in critical decision-making. Also at Pittsburgh there was acceptance of the need to continue existing stimulus measures until there is more solid evidence that the recession is ending (an Anglo-American priority) but no agreement on controlling bankers' bonuses. Despite his failure to win the day on bonuses, President Sarkozy did not go through with his threat to walk out of the conference.