The summit of the Group of 20 leading high-income and emerging countries in London on Thursday seems set to achieve progress. But achievement must be measured not just against past performances, but against “the fierce urgency of now”. Unfortunately, it will come up short.
The Organisation for Economic Co-operation and Development now forecasts a 4.3 per cent contraction in the economies of advanced countries this year, followed by stagnation in 2010. In advanced member countries, joblessness may rise by 25m by 2010. Meanwhile, the International Monetary Fund forecasts that the global economy will shrink by between 0.5 and 1 per cent this year. This would be an increase in the “output gap” (gap between actual and potential output) of some 4 per cent.
Will the G20 rise to these exceptional challenges? No, is the answer. What is needed is a large increase both in aggregate demand and a shift in its distribution, away from chronic deficit countries, towards surplus ones. On both points, progress will be far too limited.
The remainder of the article can be read here. Debate from our panel of economists appears below.
