World Crisis Online

Between June 12 and July 27, 1933, with the Great Depression setting in with a vengeance, a world economic conference convened in London, and included delegates from 66 countries. Due to vast differences of opinion about what to do about the situation, however, not least between the UK and the US, the two-week conference yielded little but inflated and eventually heated and nasty rhetoric.

Now, in the midst of another global economic crisis which many think parallels the Great Depression, London is once again to be the site of a conference, this time of the Group of 20, to hash over ways and means to deal with the current situation.

In fact, it was the failure of the 1933 London Conference that laid a basis for the US leadership of the in the global financial system. This time it is the US-led world financial system facing challenges both similar and different, but no less serious.

G20 finance ministers and central bank governors have been flying in and are today and tomorrow attending a preparation meeting for the Conference.

The Chinese delegation arrived in London at the beginning of March, and consists of a number of working groups led by the Ministries of Finance and Commerce, the central bank, and the China Banking Regulatory Commission. Different groups will focus on macroeconomic policies, reconstruction of and supervision over the global financial system, IMF reform, and reform of the World Bank and other multi-lateral banks. The Ministry of Commerce will also form a special working group to discuss trade protectionism.

The group focusing on macroeconomic policies will mainly discuss short-term and long-term measures to cope with the financial crisis, especially how to reconstruct credit channels and how governments should release relevant macro-policies.

The G20 meeting held last December focused mainly on the collapse of the financial system, but as the crisis has continued to drag on, the focus of this meeting will be the global economic recession. Imbalances in the world economy and the root of the crisis will not be main topics of discussion. Henry Paulson, the former US Treasurer, pointed a finger at China as being partly responsible for the global crisis and attempted to discuss the root of the crisis at the last G20 meeting. But Paulson’s statements were seen by many as unhelpful and these topics are unlikely to be discussed at the current confab.

The IMF, on the other hand, will be a lively topic of discussion. Recently China, the US, and European countries have all been talking about reinforcement of the IMF’s status and function. If this meeting successfully promotes the IMF’s increased funding plan for more countries, the IMF will become a loan-transfer institution during the crisis. For example, China’s funding support for certain countries could then be transferred through the IMF to avoid a direct creditor-debtor relationship. Other reforms, however, such as more special drawing rights, reform in IMF shares and voting rights, and the appointment mechanism of the IMF president and senior officials, are unlikely to see any breakthrough.