Leaders of the Group of 20, holding their third summit in less than a year, proclaimed that the 21st century needed a new way of coordinating the global economy to replace the much smaller Group of Seven and later the Group of Eight that ruled over economic decision making for the past three decades.
Going forward, it will be the G-20 calling the shots. That means that the old economic powers
- the United States, Japan, Germany, France, Britain, Italy, Canada and relative newcomer Russia
- have now been joined by fast-growing developing countries like China, Brazil and India.
The old leaders were effusive in their praise of the expanded club. British Prime Minister Gordon Brown said the new grouping would be the "premier economic organization for dealing with economic management around the world."
President Barack Obama, who had helped handle the membership negotiations between the old guard G-7 members and the new countries, said that "we can no longer meet the challenges of the 21st century economy with 20th century approaches."
But despite the lofty rhetoric, the results the G-20 managed to produce in Pittsburgh looked very much like the mishmash of proposals that have been produced through the years by the G-8: lots of lofty goals but few specific details.
That shouldn't be surprising since the process of getting results is the same. Before the leaders sit down together, their aides spend hours working on the details of agreements.
Getting a bunch of government bureaucrats in a room for lengthy negotiating sessions invariably means that any bold proposals get whittled down to the lowest common denominator to meet objections from other countries.
France and Germany called for tough caps to penalize greedy bankers, an effort that ran into objections from the United States. The result: a proposal that calls for banking regulators to do a better job of linking pay to performance but without any binding caps. This is a disappointing outcome for voters already angry about a return of significant paydays for bankers whose institutions received massive government bailouts only a few months ago.
Likewise, an effort by the United States to avert another financial meltdown by forcing all countries to adhere to stronger capital standards seems destined to fall short of its lofty goal of preventing the next financial meltdown.
On its surface, the idea seems sound. Banks got in trouble last year because they did not have enough capital, the reserves used to cushion against losses from bad loans and other sour investments.
The G-20 did adopt the broad outlines of a tougher approach to capital, but the effort is likely to run into heavy opposition between the goal-setting phase and the implementation phase from banks upset that the new rules could cut into their profits.
The list of misses in the G-20's Pittsburgh communique is a lengthy one. In some areas the best that can be said is that the countries agreed to keep talking about thorny problems they have already been debating for years.