The Pittsburgh G-20: President Obama Takes the Reins
September 23, 2009
Q1: What are the stakes at Pittsburgh for President Obama and world leaders?
A1: The global financial crisis and the London G-20 thrust President Obama onto the global arena just weeks into his presidency. He and world leaders can take credit for avoiding some of the critical early mistakes of the Great Depression. Yet Pittsburgh will be a fundamentally different type of test and—ironically—far more challenging. The president proactively called for this meeting, and for the first time on this global stage, the ball will be in his court. Now G-20 leaders will look to him to set the agenda and chart a way forward on the global economic crisis that has dominated the world’s attention since he came into office and may ultimately determine his and the G-20’s legacy.
We have had a series of summits marked by broad, ambitious sounding pronouncements, but now comes the harder part—moving from statements to concrete actions that require political capital and sacrifice. As “green shoots” of recovery ease the sense of crisis, the critical question is whether world leaders will have the political will to move past broad statements and take the tough actions needed to avoid a tepid, jobless recovery or—worse yet—be mired in inaction that could set the stage for global financial crisis 2.0.
Q2: What are the critical G-20 issues on restoring global growth and preventing new crises?
A2: Improving transparency, operation, and international cooperation in regards to international financial markets will be critical to both providing the confidence for a solid recovery and continuing to advance new safety measures for preventing another crisis. In Pittsburgh, we can expect some important new efforts to improve financial industry capital requirements that will better enable us to weather downturns. Yet many other parts of this critical agenda risk being delayed or papered over in summit statements. U.S. and European leaders still face serious divides on how to change the global regulatory structure. Much of the political debate has covered issues such as capping bankers’ pay, which will have limited impact on the recovery. Calls to finish the World Trade Organization’s Doha round and stop protectionism have been largely honored in the breach. Major reforms of global institutions, such as the IMF and World Bank, to reflect the rise of emerging powers like China, India, and Brazil are still pending.
One key element to watch is the Obama administration’s proposal for a new “framework” for sustainable and balanced growth. This would seek to address the imbalances and breakdowns in the global economy, such as the massive U.S. deficit and Chinese surpluses, in the most comprehensive way yet. Whether this is just the latest broad statement or a significant step forward will depend critically on two issues—accountability and enforcement. Particularly, will there be serious steps taken to address issues such as currency manipulation that could lead to future problems?
Q3: Will the G-20, G-8, or some other group lead the way forward after Pittsburgh?
A3: After almost a year of G-20 summits, there is still no official answer on whether the G-20 leaders’ summits will even continue into next year, leading to what is truly a G-?. World leaders will be looking to President Obama to set the course not only on substantive issues but on the structure of the way forward. Not allowing the Republic of Korea, which is scheduled to chair the G-20 in 2010, to host a leaders’ summit would seriously undermine the credibility of global efforts, sending a signal that while the G-20 summits were convened in recognition of the importance of rising powers, only old G-8 members will be permitted to host summits. With efforts to reform the IMF and World Bank pending, 2010 is shaping up to be a critical year for determining whether our often-creaking, 1940s-era institutions can be brought up to speed for the twenty-first century, or face a path of declining legitimacy and influence.
Q4: What is the greatest global challenge facing G-20 leaders?
A4: The greatest global threat facing G-20 leaders in Pittsburgh is neither financial collapse nor climate change, but domestic politics, which could ultimately derail these leaders’ efforts to do anything meaningful on challenges. As publics tire of seemingly endless summits, they are faced with a deep disconnect: G-20 leaders pointing to success in averting a crisis, while their populations struggle with deep unemployment and joblessness at home. This will likely put incredible pressure on leaders to address domestic priorities and move to protect domestic industries and jobs. In the 1930s, such pressures helped lead major powers to retreat from the world and resist coordinated global action on both economic and security issues. An overriding challenge for President Obama and G-20 leaders is to convince citizens in Pittsburgh and around the globe that strong, multilateral action is important. This is true both on the economy and on security challenges like Afghanistan and nuclear proliferation. If they fail to do so, our leaders may face even greater challenges in the years ahead.
Steven P. Schrage holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
© 2009 by the Center for Strategic and International Studies. All rights reserved.