The Pittsburgh Pitstop

I cannot believe that I have not blogged for almost a month, leading up to this post! Maybe it was the mid-sem or the change of base to Pluto; perhaps a blogger's block or the new rage, Twitter. But those are no excuses to disappear from the blogosphere for such a long time. Govind and Abhishek, have been urging me to blog. I was on the look out for a topic, and Govind suggested, why not blog about the G-20 meet in Pittsburgh, USA? I said, well, why not?

As I blog this, leaders of a self-anointed group that decides the economic course for the entire globe are meeting in Pittsburgh, Pennsylvania to debate on a variety of issues; from evaluating the road to recovery after the recent economic slowdown to charting a new framework for the world's financial system, that will prevent another meltdown. They will be taking stock of the lessons learnt from the recent credit crisis, and how the global economic system will guard itself against too-good-to-be-true financial products that keep rearing their ugly heads on the Streets. Dangerous levels of exposure to untried and untested-even illegal-debt instruments was the reason behind the caving-in of Wall Street behemoths like the Lehman Brothers. Some like, Freddie Mac and Fanny Mae received life support from the US Government. But a few others like Lehman were allowed to implode, taking with them investor confidence and sense of financial security, that engulfed the whole world in a pall of gloom. Now after a year, the new engines of global economic growth, India and China, are getting out of the so-called recession in their domestic markets and surfing a new wave of consumption-led growth. In an increasingly Asia-dominated world, the relevance of the G-20 and its policies and actions will be under the microscope in Pittsburgh. Can the developed nations, along with new power-centres like India and China come to agree on a common framework to re-direct efforts for financial recovery, and put the worst crisis in recent memory behind them?

Pittsburgh, USA

One hard lesson to have come out is, stocking dollars is probably not a country's best bet. The need to diversify export markets and not just be a large trading partner of the US has emerged as an important policy agenda of different countries. Exploring new markets and diversifying the exports basket will be on top of policy-makers' minds. But here is a catch. Governments are turning to protectionist policies to drive up domestic production and consumption. Re-energising entire sectors that have been in a hole for a year requires infusion of money, referred to as a 'stimulus package' and new tax regimes. The resurrection of comatose industries requires nipping the flood of cheaper imports from other countries that have been equally hit by the recent economic crisis. But these countries are just boosting their exports by helping their own domestic industries, right? One man's terrorist is another man's friend, right? Wrong!

This is exactly why the leaders are meeting in Pittsburgh. To chart out a path to recovery that will be acceptable to all stake-holders. More importantly, there is a need for monetary policy-makers to come together and develop new regulations for the global financial system. One that will have checks in place and uniform rules across the board for trading in untested financial instruments. But here lies the problem. No one is quite sure of what these rules and checks should be, and how much protectionism are they going to allow to be weaned away from them. Reminds you of Doha, anyone?

The summit will be a great test of the relevance of G-20. They need to come to agree upon various issues if the group is to be taken seriously. Otherwise we may not have seen the last of the 'big bubbles just waiting to burst'. Some pundits are predicting a W-shaped recovery. It is up to the G-20 leaders that it stays U.

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* Tailpiece *

The major change to have happened since I last blogged is that our class in IITB is no longer HIV- The Incurables. With the exception of our Class Rep Ojas, all of us have moved to a colder, more distant world, HIX-Pluto, just like the eponymous former planet. With marginally better mess food, our new home is treating us well, I hope it stays that way. Abhishek and I are roomies no more but we do make it a point to loaf off in each other's rooms. Also, my comp in my room makes up in part for his absence(I know he'll kick me for writing this!)!

This Wednesday, I was in Khagol Mandal, editing the coming issue of the club magazine, 'Vaishwik'. I went scissor happy, after Dilip Sir gave me a free hand to 'tear articles apart' as he put in Marathi. It was a different experience to edit a magazine. I hope I get this chance every issue. I learnt elementary editing techniques. I hope to learn type-setting next!
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