Sudip Bandyopadhyay’s Blog

Dominique Strauss-Kahn, managing director of the International Monetary Fund, observed that in spite of recent spats the leading economies had, by and large the G20 summit, met the Fund’s call for a fiscal boost of 2 per cent of global output. Alongside it, the world has seen an unprecedented monetary stimulus, with interest rates as close as it matters to zero. More stimulus may be needed, but for now that argument is an artificial one. The communiqué also includes a huge injection of funds to increase the firepower of the international financial institutions so that they can prop up emerging economies and support trade. The numbers here were higher than even some optimists had hoped for. Statements on bank regulation and tax havens were made. Something on those issues needed to be done, if only for politics’ sake. But a clampdown on bank accounts in Liechtenstein is not the most urgent task.

The summit’s deeper significance, though, lay in its unspoken recognition of the remaking of the geopolitical landscape. Not so long ago, this would have been a gathering of the Group of Eight rich nations, perhaps with cameo roles for China, India and a few others. Whatever the imperfections, the process promises to embed the habit of multilateralism in a multipolar world. History reminds us that big shifts in global power, such as what we are witnessing, often end in war as rising states challenge the status quo. A few arguments about tax havens or bank regulation are a small price to pay for a peaceful transition. Managing the Sino-American relationship on both sides is and will continue to remain a huge challenge. Europe still has to find a path out of its present state of denial. The rising nations will not easily shed their suspicions of the west. So, yes, there will be fissures and fractures. It will take more than a summit or three to conjure a new global order. But looking hard in the mirror is as good a place as any for the leaders to start.