Also some surprises, such as the document from the Governor of the Bank of China, with the proposal to create a new super monetary reserve unit, maybe the IMF’s special drawing right (SDR). Such proposal was immediately supported by Russia, which had advanced a similar request considered legitimate by the IMF and quickly adopted by Nobel Prize winner Joseph Stiglitz.From his UN Commission, Stiglitz suggests the new unit could be in use in just 12 months-time.
Another surprise, even bigger, is the unanimous coincidence in refloating the IMF and the World Bank. Both multilateral credit organizations have been undergoing a decade-long process of loss of prestige after so many failures in the areas of crisis prevention and crisis solution, corruption episodes and dubious results in terms of development – on top of being part of the problem.
The G-20 leaders agreed to increase the resources of both institutions to put out the fire in the emerging economies and developing countries, and promised changes in terms of conditionality and vote power. The scale of the resource increase denotes the seriousness of the impacts foreseen; a serious reform of multilateral development banks, however, will remain unresolved.
In the meantime, several countries started a competitive devaluation process, while others adopted many protectionist measures.
By March 30, no winners could be seen in the scenario.
In an attempt to reduce the scale of the summit differences, President Obama stressed the cost of the measures proposed and pointed out that taxpayers demand precise information on the use of such monies, and do not feel comfortable in seeing the Government keeps using their money to rescue the banks, which, in their view, are responsible for this catastrophe, without any consequence in the solution of their concrete problems.
Obama remarked the USA could not solve the issue by themselves, and had come to the summit in search for solutions, rather than culprits, and stated that people expected firm concerted efforts. He remarked, nonetheless, that countries could not base on the voracity of the American consumption their expectations for an increase of their export incomes.
In the struggle between fiscal stimulus and more regulation, Obama was supported by Great Britain against the Germany-France Axis, and other countries, such as those of the BRIC block (Brazil, Russia, India, and China) shared his views on boosting demand and consumption to reactivate trade and the economy at large.
The die was cast: the worst scenario, in London, was that of an even more serious situation brought about by the participants themselves. Urgency prevailed behind the scenes, and fear finally led to a compromise.
On granting each side part of its demands, the participants recognized shared responsibilities. In this sense, the USA won – they left the summit as part of the solution, rather than being considered as the sole guilty party.
However, the compromise was an obvious provisional solution; a break in times of urgency.
None of the measures agreed being immediate, the only possible expectation is that they be the departure point for a reversal of the global disaster process.
