• Gordon Brown • Felipe Calderón
• Han Seung-Soo • Kgalema Motlanthe
Chaired by • Fareed Zakaria
Friday 30 January
18.00-19.00
Global cooperation, not a retreat from globalization, is the best approach for solving the current economic crisis and could set the pattern for dealing with other critical international challenges such as climate change, poverty and energy security, a panel of government leaders representing four of the G20 countries agreed. The discussion, moderated by Fareed Zakaria, Editor, Newsweek International, USA, provided a preview of issues likely to dominate the agenda at the upcoming G20 summit next April, which will bring together governments of the leading economic powers in both the developed and the developing worlds.
Gordon Brown, Prime Minister of the United Kingdom, called for coordinated action on a number of fronts, including fiscal and monetary policy measures to stabilize the global financial system and revive economic growth, reform and recapitalization of the major multilateral lending institutions, and a resumption of stalled free trade talks to combat a dangerous turn to protectionism. The immediate priority, Brown said, is to encourage a resumption of lending and reverse the tide of capital outflows from developing countries. Governments, he said, need to consider “radical options” for dealing with the problem, such as risk-sharing schemes that would insure banks and other investors against further losses on toxic assets. “We need international discussion on what is the best model,” he added.
Felipe Calderón, President of Mexico, offered a perspective from a country – and a part of the world – that has suffered repeated financial crises over the past 25 years. One key lesson, Calderón said, is the need for urgency in crafting a policy response, recognizing that delay increases both the economic damage and the ultimate cost to taxpayers. Fortunately, he added, macroeconomic reforms put in place after Mexico’s last major crisis, in 1995, have enabled the country to respond more quickly and more forcefully to this one on both the monetary and fiscal policy fronts.
Han Seung-Soo, Prime Minister of the Republic of Korea, cited his own country’s experience during the 1997-1998 Asian crisis as a sign of how great the costs of a financial rescue can be, noting that his country spent the equivalent of 16% of its GDP to shore up Korean corporations and financial institutions.
Strengthening multilateral institutions will also be a top priority for the G20 summit, the leaders suggested. Brown argued forcefully that the evolution of the global economy and capital markets since the IMF and World Bank were created in the 1940s makes it essential that they are able to offer lending support to countries before a financial collapse, rather than afterwards: “We need a crisis prevention capability, not just crisis resolution.”
Reforms should include greater representation – and influence – for the developing countries. Kgalema Motlanthe, President of South Africa, noted that “many countries today feel they have no voice at all, that their views are never taken on board.” However, developing countries will need to put their own governance in order if they want to be offered a better seat at the international table, he suggested. “There is no way we can have transparency and accountability [at the multilateral institutions] if we don’t practice them in our own countries.”
The leaders also expressed alarm at signs that the crisis might be generating a protectionist backlash in some countries, arguing that such measures would risk a repetition of the disastrous collapse in world trade during the 1930s. “We have to promote trade and investment at this juncture, otherwise we will all suffer,” Han warned. He expressed the hope that a Korean-US bilateral free trade agreement negotiated by the previous US administration would be ratified by Congress before the end of President Barack Obama’s first term. Motlanthe, meanwhile, called for a speedy conclusion to the stalled Doha Round of multilateral trade talks.
