Issue of the week: What did the G-20 accomplish?

Leaders at the G-20 summit established "an elaborate structure to coordinate economic policies,” though they failed to create a mechanism to discipline any country that doesn’t cooperate.

Amid the uproar over Iran’s secret nuclear site, it was easy to forget that the global economy was the main item on the agenda at last week’s G-20 summit in Pittsburgh, said Bob Davis and Jonathan Weisman in The Wall Street Journal. Yet President Obama, Britain’s Gordon Brown, France’s Nicolas Sarkozy, and the other leaders of 20 of the world’s largest economies managed to overcome the Iranian distraction long enough “to establish an elaborate structure to coordinate economic policies.” They did not, however, create a mechanism to discipline any country that doesn’t cooperate. And though the leaders promised to limit pay at financial firms and require banks to shore up their capital reserves, they left the details—and enforcement—to each individual country.

The G-20 missed a crucial opportunity to strengthen the financial system, said Jennifer Liberto in CNNmoney.com. A distinguished group of academics and regulators known as the European Shadow Financial Regulatory Committee warned G-20 participants that their agreements “are not likely to substantially reduce the likelihood of future crises.” In fact, the summit may have “worsened our predicament” by delaying the vital task of recapitalizing the banking system, said Simon Johnson in The New Republic. The Obama administration wants U.S. banks to build up their capital before the next crisis hits. But Obama “seems to think that we need to bring others with us,” fearing that foreign banks will flee the U.S. if it’s too strict about capital. Well, let them flee. Let’s recapitalize our own banks and make clear to foreign institutions that “if you want to play in the U.S. market, you need a lot of capital.” Banks that prefer “reckless, high-risk activities” are welcome to take their business elsewhere.

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