A New Regime

The G20 conference, being held in beautiful downtown Pittsburgh, has apparently led to a decision to shift the gravity of international coordination on economic policy from the G8 to the Group of 20, according to the Financial Times. The G8 will turn its focus to international security. I question the effectiveness of this decision if the goal is to avoid financial crises such as the one that we have been engulfed in for the past 20 months for two main reasons. Attempts to establish a new international norm for evenly distributed development, financial regulation, and trade are inherently distributional. These will bestow different costs and benefits to various countries which will make finding, let alone implementing, a common solution increasingly difficult as the number of actors involved in the negotiations increases. Because of the difficulty in finding a solution with so many more actors, any agreement reached is likely to be of the third- or fourth-best variety (if that). Coordination is a good thing, but formalizing it in this manner is likely to result in no better (perhaps even worse) outcomes because of the inability of a few countries (G7 or G8) to come to an agreement which sets the standard and the agenda for other industrialized countries.