A meeting and its results
Monday, April 6th, 2009
Observers of the G-20 summit - whose tagline ’stability, growth, jobs’ acknowledged our ongoing global slowdown - didn’t expect much to come out of the meeting. Since it ended however, a wave of positive press has followed. One good thing that has come out of it is that the IMF is likely to change its composition to reflect the power of emerging countries like India, China and Brazil. There is also some applause surrounding the fact that leaders have pledged around $1.1 trillion towards fighting the recession, but of this, $500 billion is through the IMF, and half of that money was in the works before the meeting.
Another big question is how exactly will such a money stimulus boost global growth. I’m somewhat sceptical of the ability of state-provided funds to drive extended growth in markets, if they are not accompanied by policy changes. Money flowing into an inefficient, badly regulated market system only strengthens entrenched interests and makes existing lobbying groups stronger and better-funded.
The Indian government for instance, has already funnelled stimulus money into the economy in 2008-09. without adding in policy corrections, and much of this cash has been aimed at extended credit through already existing farm schemes (which typically favour farmers who own mid to large landholdings) and financing for existing SMEs and industry groups, while doing nothing to make business easier for new or innovative firms who struggle even more for capital and against red tape in a weaker economy. Downturns and growth slowdowns cannot be patched with notes of cash alone - these will only drive cycles of boom and bust.