Foror the first time since World War II, the world economy will contract this year. That was the prediction made by the World Bank on Tuesday.

It echoed a similar forecast issued by the International Monetary Fund (IMF) two weeks ago. Even prudent commentators no longer dismiss talk of depression as alarmist.

There is now a real risk of the world economy collapsing as decidedly as it did in the 1930s.

Under this cloud do the leaders of the world's major economies gather today in London. Summits are usually dismissed as talk-shops, but the Group of 20 (G20) summit is shaping up to be a make-or-break occasion for the world economy.

Already, parallels are being drawn to the 1933 London Economic Conference, which ended in disagreement, with the participants returning to tend their own, diminishing gardens.

For theatre, one can hardly beat the show put on by anarchist protesters who tried to storm the Bank of England in the run-up to the summit.

Need for reassurance

The need for some kind of reassurance from the summiteers is great. Sadly, the omens are not very encouraging.

United States President Barack Obama wanted the world's major players to agree to a coordinated stimulus plan.

The Germans told him to go packing. Host Gordon Brown came to Obama's support, only to have his central bank tell him he cannot afford to do it.

The French, for their part, said they might take their ball and go home if they do not get their way on regulation.

It's enough to make one nostalgic for the boom days. But, since the excesses of the past two decades are the very cause for this impasse, there is nothing to it but to face up to the problems, lest they overwhelm the planet. What, then, might be the best hope for a successful summit?

Reformed IMF

One agenda item on which the conference participants do seem to agree is that the IMF needs to play a revitalised role. It needs more capital, and it needs its governance structures reformed to give a greater voice to developing countries.

If - a big if - a reformed and recapitalised IMF emerges from this summit, it may be the best thing to happen to the world economy. Here's why. The World Bank estimates that the developing world will continue growing through this year of contraction. All countries will slow down and some still face contraction, but overall, the recession will not reach the developing world.

The rich countries will sink the world into recession (not that we're surprised to hear that). But poor countries are likely to lead them out of the slump.

But the bank indicates that, to get back on the road to recovery, the world will have to pump money into developing economies.

It estimates that they will face a financing gap - the accumulated cost of financing their imports in the midst of declining exports - of US$270 billion to US$700 billion.

Without that, developing countries are likely to start defaulting on their debts and shutting out imports.

That could create a chain-reaction that would tip the world economy into a long slump.

Matching words, actions

Much is likely to hinge on what the Chinese bring to the table. They are leading the call for reform of the IMF. But they will certainly be asked to put their money where their mouths are.

So, too, most likely, will the oil-rich states of the Persian Gulf. With their reserves flush with cash, they will be expected to do their bit to boost the coffers of the IMF.

The question is, will their actions match their words - or do they, too, want to eat their cake and have it?

John Rapley is president of the Caribbean Policy Research Institute (CaPRI), an independent research think-tank affiliated to the University of the West Indies, Mona. Feedback may be sent to columns@gleanerjm.com.