As world leaders prepare to descend on Washington for the upcoming G-20 summit, the grim economic news just keeps coming.
In the United States, consumer spending has fallen off a cliff and the fate of the auto industry hangs in the balance. Shares in General Motors dropped below $3 Tuesday, continuing a downward slide that accelerated after a particularly dire third-quarter earnings report. Bankruptcy looms unless the U.S. Congress can put together an effective rescue deal.
The Bush administration yesterday announced new measures to help homeowners renegotiate their mortgages, but critics -- including the Republican chair of the FDIC -- fear the move won't have a big-enough impact. Meanwhile, new data from Europe, China, and South Africa suggest the long-feared global recession has finally arrived. Oil prices, accordingly, have fallen below $60, a level not seen for 20 months. Former Canadian PM Paul Martin hopes the G-20 summit will lead to greater input from emerging economies such as China and India. "Do what you think is necessary with the Bretton Woods institutions, but for heaven's sake, stop keeping half the world out of them!" he tells FP.
Raghuram G. Rajan, former chief economist at the IMF, doesn't expect sweeping changes at the summit, but warns that "if enough of the other countries make their voices heard at this meeting and say 'we are not willing to go along with incremental
change,' it does put a lot of pressure on the Obama administration to respond, because this is a crisis that was made in America."
This can be an opportunity to rethink and reorganize (to recreate the Rule Set, as Tom Barnett might say). Sometimes I feel we're in a race against time. Can we wait long enough for a new American administration? Can we survive what the old one will do over the next two months?
On the other hand, the Obama team seems to be using this time to think--really think--about what needs to be done. That's a luxury few presidents have had: enough time to think about the fundamentals, followed by a clear mandate (domestic and international) for change.