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MANILA BULLETIN
Business & Society
October 26, 2009
Emerging Markets in G-20
Given the many uncertainties bedeviling the advanced economies, much hope is being pinned on the emerging markets to stimulate consumer spending in their respective economies in order to give a bigger push to the global economic recovery. In a meeting held in Pittsburgh, U.S.A. in late September 2009, the countries constituting the Group of 20 (G20) agreed on coordinating their respective policies that are geared to a sustainable recovery from the global crisis. Going beyond the traditional G-7 or G-8 that used to determine the fate of the world economy in the past, the G-20 includes such emerging markets as Brazil, China, India, Indonesia, South Korea, South Africa and Mexico. These emerging markets can contribute significantly to boosting consumer markets and public and private investments.
In an article for the Financial Times (September 3, 2005), President Lee Myung-bak of South Korea and Prime Minister Kevin Rudd of Australia made it also very clear that global recovery is not assured and that now is not the time to be complacent. They suggested the challenges that should be squarely faced by the G20 countries in their Pittsburgh meeting. First, these twenty countries should follow through their existing commitments by delivering their promised fiscal stimulus; reforming their financial system; modernizing and providing resources to international financial institutions like the World Bank, IMF, and the Asian Development Bank; and supporting developing countries. Secondly, they should manage the transition from crisis to recovery. There should be a clearly defined exit strategy to reduce fiscal deficits and to prevent inflation. They should avoid the mistakes of the 1930s when exit strategies were poorly managed, thus leading to a double-dip recession. Finally, they should formulate a transition towards a more balanced global growth, which will require both cooperation and flexibility. Unlike the notorious Washington consensus framed by the World Bank in the 1990s, the G20 leaders should keep in mind that there are no one-size-fits-all solutions. Each country should be given enough flexibility to craft policies tailored to individual circumstances.
As a concrete action plan for the Pittsburgh Summit, the following three-stage process was suggested by President Lee and Prime Minister Rudd. First, the national governments should develop their own national strategies for recovery. Then they should deliver these strategies to IMF before the end of 2009 for coordination and consistency. Then, in the G20 meeting that will be held in South Korea in 2010, there should be an agreement on responsibilities and specific actions. These initiatives of some of the members of G20 give reason for optimism. The economic power of the emerging markets, based on their growing consumer markets, abundant financial resources and rich natural resources, can be harnessed to assure a quicker return of balanced global growth. For comments, my email is .