G20 leaders summit seeks new business models for the post-economic crisis era
The world leaders used the September’s G20 Summit in Pittsburgh, United States, to review the progress made since their last April gathering in London at the height of the ongoing world economic recession as they outlined a broader policies agenda to stabilize the crisis-hit global economy and prevent the reoccurrences of similar future financial catastrophes capable of putting the whole world again on the brink of an economic bankruptcy.
“The London summit in April marked a ‘turning point’ in the G20’s efforts to prevent an economic catastrophe,” U.S. President Barack Obama, the host of the Pittsburgh G20 Summit, said at the conclusion of the meeting, which ran from Sept. 24-25. “With several significant steps taken by the G20 since then, we brought the global economy back from the brink, and today, we laid the groundwork for long-term prosperity as well.”
The world leaders summarized their new objectives in a joint statement released after the summit, where they pinpointed lack of adequate financial markets regulations as the key cause of the current financial debacle. “Major failures of regulation and adequate supervision, plus reckless and irresponsible risk taking by financial institutions, created the dangerous financial fragilities that contributed significantly to the current crisis. A return to the excessive risk taking prevalent in some countries prior to the crisis is not an option,” the statement said.
“The G20 pledged to devise a new and responsible global order in doing business in the post-crisis era capable of giving post-crisis neo-capitalism ‘a real human face’ in the first 21st century.”
The G20 leaders also noted their successes since the last meeting, including the adoptions of sweeping reforms to tackle the root causes of crisis and transform global financial regulations. “Substantial progress has been made in strengthening prudential oversight, risk management, transparency, market integrity, etc. The steps we are taking here today, when fully implemented, will result in a fundamentally stronger financial system than the one that existed prior to this current crisis. To avoid another crisis, the G20 members agreed to forge a new framework for strong, sustainable and balanced growth.”
New world economic era in global politics
Judging by the resolutions adopted at the meeting, the Pittsburgh summit will surely go down into contemporary world history as a place, where the world’s top-20 most economically advanced nations finally pledged to use their enormous collective political will and colossal economic might to redesign a new, more reliable road map that will usher in a new and more responsible global economic and political order in doing business in the post-crisis era, which is expected to give the post-crisis model of neo-capitalism ‘a real human face’ in the first 21st century. Indeed, most of the resolute decisions taken at the Pittsburgh summit were both timely and forward looking, as they are directed at changing everything linked with the pre-crisis business practices.
The emerging outlines of the new vision of the post-crisis global economy being proposed on both sides of the Atlantic and beyond could be summed up as a ‘zero tolerance policy’ to the pre-crisis, purely speculative capitalism — perfected by Wall Street zealots and other ‘neo-economic adventurists’ across major global financial centers into a typical Las Vegas-style casino business model — that rewarded only those ready to risk both their personal wealth and shareholders’ assets with the reckless of addicted gamblers and utter disregard for consequences.
This ‘zero tolerance policy’ message was first driven home in a keynote address on this issue to Wall Street business executives, seen in and outside of the United States as the key precipitators of the current economic downturn, by Obama ahead of the Pittsburgh summit in early September, when he noted that his administration would undertake the most ambitious overhaul of the financial system since the Great Depression by enacting strong rules and other fiscal measures to guard against the kind of systemic risks that led to the current crisis so as to protect the economy from similar cataclysms in the future. Condemning those in the financial industry, who have failed to learn from the historic lessons of the Lehman Brothers demise and other negative effect of the crisis, Obama warned that there will be no return to the reckless behavior and unchecked excesses, driven by appetite for ‘quick kills and bloated bonuses.’
As it is now clear from the Pittsburgh summit, the new system that Obama and other world leaders at the G20 leaders have in mind, will be crafted in a way that only promotes transparency and accountability of businesses, ensures that markets foster responsibility, and not recklessness, and rewards only those, who will compete honestly and vigorously within the new economic order, and not those, who will try to circumvent it to achieve their selfish ends at the expense of others.
In Russia, President Medvedev, in a series of public statements and publications ahead of the Pittsburgh summit, also rolled a list of lessons learnt from the crisis and ways of rectifying them. Noting that the current global economic crisis has shown the absolute ineffectiveness of the Russian economy, the president blamed the country’s staggering losses in this recession in particular, and its high vulnerability to all the systemic risks in the global economy in general, to the lopsided dependence on mainly natural resources, which make the economy feel all the negative effects of any price fluctuations on the global commodities markets.
To reverse this trend, Medvedev plans to comprehensively diversify the economy, make it less reliant on the energy and other raw material resources, while boosting the innovational and intellectual-products aspect of the country’s national output. Globally, Medvedev noted that the formal institutionalization of the G20 as a new platform of global economic governance among the Pittsburgh summit’s achievements. “It is now clear that the G20 will continue to function as a constant economic forum. This because the G8, with all due respect to its members, has proved unable to solve all today’s economic woes, while the G20 has, as it offers a better platform for taking the most vital decisions.” Other achievements include decisions to cooperate more deeply and keep watch on each other’s macroeconomic activities so as to be able to preempt signs of future catastrophes in any of these major economies, he noted. “This is a revolutionary decision and will enable us to set a more effective system of early warnings on possible crises in the future.”
Experts warn against complacency and premature victory euphoria
However, experts have warned against complacency among policymakers in global politics and businesses, following the G20’s declaration of a “mission accomplished,” as this could lead to serious disappointment similar to the disillusionment that later followed ex-U.S. President George Bush’s ill-timed victory speech over Iraq mission, when the real triumph was still ‘light years’ away. By the way, today victory is still far away that it might never be achieved in the war-ridden Arab state.
“The emerging new vision of the post-crisis global economy being proposed by global leaders could be summed up as a ‘zero tolerance policy’ to the pre-crisis, purely speculative capitalism.”
Experts’ apprehensions stemmed from the fact that some of the key issues yet to be completely resolved such as the accumulating losses on commercial real estate loans, excess liquidity in the global economy resulting from the estimated $10trln pumped by governments in their anti-crisis measures, the inflexibly high unemployment in developed countries, etc., are all more than capable of triggering uncontrollable relapses in the global economy that could necessitate major policy re-thinking — both at the national and global levels — of all the adopted policies and declared successes.
However, the G20 leaders noted these apprehensions in their declarations — both collectively and individually, both at the official events and at the sidelines, when they warned against complacency both among G20 nations and the larger global community in general. Specifically, this aspiration is included in the G20 leaders' 23-page statement, pledging more sustained future efforts to strengthening the global financial system and expedite full recovery of the world economy. “The G20 acknowledged there was considerable work to be done to make the global economy less susceptible to future crises, and have agreed to work toward growth without cycles of booms and busts, which will markets foster responsibility, and not recklessness,” the statement said. In all, the U.S. president expressed satisfaction over the job done by the summiteers. “There is still much more work to be done, but I believe that the G20 leaders left the Pittsburgh summit today ‘more confident and more united’ in the common effort of advancing economic security and prosperity in the world,” Obama concluded.
Crisis changes economic beliefs and myths
Meanwhile, it is now clear that this current crisis has and will still certainly change some, if not most, of the economic teachings that were previously seen as untouchable as the ‘sacred cow’ and/or as ‘infallible as the Roman Catholic pope.’ One of these is the popular economic teaching that downplays the role of governments in national economies in an era of globalization. As President Medvedev rightly noted at the Yaroslavl Conference on Modern States and Global Security attended by global policymakers, it was not the products of business globalization — the so-called transnational corporations or international financial institutions with multibillion-dollar annual turnovers — that came to the rescue of national economies and millions of people thrown onto the streets at the peak of this global crisis, but national governments, which had to inject hundreds of billions, and even trillions, into their monetary systems to dislodge the financial clogs that 
blocked credit flows to and from banking systems to businesses and individuals and put the economies back on tracks. Indeed, it was the collective efforts of governments’ anti-crisis measures that led to the present stabilization of major financial markets and industries, social security of citizens, and finally, the increasingly positive signs of normalization of national and global economies.
As rightly noted by the Pittsburgh summiteers, it is still far from the party time, as governments still have to do much more work to ensure that these ‘embryonic recovery signs’ eventually blossom into full normalcy through legislation of more stringent regulations in their domestic economies and radical overhaul of major international financial institutions to make them more reflective of the reality and with the real capabilities to tackle all the major challenges of the 21st century. More importantly, the governments need to completely rein in the absolute recklessness of business executives in their respective economies, who, seemingly unfazed by the depth of the current cataclysm and their roles in it, are again doing what they know how to do best: seeking excessive bonuses, inventing complicated financial instruments and non-transparent investment vehicles, displaying gross irresponsibility to employees, shareholders and societies at large.
It will, indeed, require more collective efforts of governments to successfully solve these all problems. This is why one cannot, but completely agree with Medvedev, when he noted that the new rules for the post-crisis global economy should be the ‘results of collective efforts’ of all sovereign nations ‘arrived at via open and free discussions and exchanges of opinions by all members of the global economic community, without the use of pressure by the larger and richer countries on the less privileged’ to achieve these noble objectives. This seems logical, as only resolutions arrived via compromises aimed at safeguarding the interests of all parties are binding on all signatories to such decisions, and hence their effectiveness as collective measures.
The Romans, famous for their oratory skills and philosophy, once summed up this axiom poetically as “the resolution of an issue that affects everyone in the same degree equally requires the approval of all concerned by the issue.” This aged principle of achieving successes in collective actions in a society is even more relevant in today’s global economy devastated by an unprecedented crisis that equally requires an unprecedented scale of collective actions by all members of the global community.
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