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Since its beginning in 1999, the G20 had been a mere finance ministers’ meeting. But when the Panic of 2008 hit, President George W. Bush and President Nicolas Sarkozy of France were instrumental in changing the G20 to the leaders’ meeting it is today.
The Panic of 2008 was one of the greatest financial catastrophes in history. In the aftermath of the Lehman Brothers collapse in September 2008, attention turned to a previously scheduled G20 meeting of finance ministers in November.
At the time, the G7 was the leading forum for economic coordination, but China was not in the G7 and its help would be needed to bail out the global economy.
Once China was included, the door was open to other large emerging markets economies, such as India and Brazil. The guest list was expanded and the G20 leaders’ summit was born.
Leaders at the November 2008 G20 meeting in Washington DC agreed that China was in the best position to pull the world out of the financial crisis, if the Chinese consumer could be mobilized to increase global aggregate demand.
China’s GDP composition was in some ways the mirror image of the United States. Consumption was only 38 percent of the Chinese economy, compared to the towering 70 percent level of the United States.
However, this rebalancing would come entirely at China’s expense. China would have to make all of the adjustments with regard to their currency, their social safety net and twenty-five hundred years of Confucian culture, while the United States would do nothing and reap the benefits of increased net exports to a fast-growing internal Chinese market.
This was the beginning of a globalist outlook for the G20, because the group wanted the U.S. economy to rebound.
The next G20 summit was in London in April 2009. The first two G20 summits, in Washington and London, were devoted to an immediate response to the Panic of 2008 and the need to create new liquidity sources through the IMF.
Those summits were also preoccupied with plans to rein in the banks and their greed-based compensation structures, which provided grotesque rewards for short-term gains but caused the long-term destruction of trillions of dollars of global wealth.
The third G20 summit was held in Pittsburgh in September 2009. By then leaders felt that while vulnerabilities remained, enough global financial stability had returned that they could look past the immediate crisis and begin to think about ways to get the global economy moving again.
That’s when the idea for increased U.S. exports and the associated revaluation of the yuan came the fore. The Pittsburgh G20 leaders’ summit produced a breakthrough plan for the …read more
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