It could have well been another showdown between America and Europe, with the fiercely independent, cantankerous Germans and French lined up against the United States president, but this time America's president is a man made for crisis - and consensus.

The German and French leaders were stubbornly resisting American pressure to bloat their deficits by committing to a hefty stimulus package, with French President Sarkozy, snapping: "The crisis didn't actually spontaneously erupt in Europe, did it?"

German Chancellor Merkel spoke for Europe when she insisted that the G-20 meeting adopt measures to impose greater regulation in the financial system. "This is a historic opportunity afforded to give capitalism a conscience," says German leader Merkel, adding "capitalism has lost its conscience".

Massive stimulus package

When the G-20 communiqué was issued on Thursday, both the American president and the Europeans had got their way: A massive $1.1 trillion stimulus package was announced and laissez-faire capitalism was dealt a serious blow. Says the communique signalling that the Europeans had had their way: "We stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over. Strengthened regulation and supervision must promote propriety, integrity and transparency ... reduce reliance on inappropriately risky sources of financing and discourage excessive risk taking."

Also, "Regulators and supervisors must protect consumers and investors and support market discipline ..." Before the G-20 meeting began on Wednesday there was talk that a strongly worded communiqué on reforms and regulations could be put off for later while attention was focused on a stimulus package to boost global demand, but the Germans and French, particularly, would have none of it. Said Merkel: "This has nothing to do with ego or tantrums, but the decisions need to be taken now - today and tomorrow." They were.

The G-20 meeting agreed to "take action against non-cooperative jurisdictions, including tax havens", and to "extend regulatory oversight and registration to credit-rating agencies to ensure they meet the international code of good practice".

Obama's conciliatory temperament helped forge a set of agreements whose impact has already been forcefully and positively felt on stock markets. Developing countries came out as major winners in this G-20 meeting, and this was not just because countries like Brazil, Argentina, and Mexico were there. The Europeans themselves have been strong advocates of support for the developing and emerging economies, recognising as they do the significant role they play in the global trading system, and reflecting a deepening concern for social welfare; a victory for progressives who have struggled for decades in advocacy for the developing world.

Summit of the Americas

As I said in my recent column on 'Crisis and opportunity for CARICOM', developing countries like those in the Caribbean benefit significantly from the momentum which has been built for the development agenda. The Caribbean goes into the Summit of the Americas with much if its work already done, only to be cleverly positioned now to pull out some concrete commitments.

The G-20 leaders agreed to treble resources available to the International Monetary Fund (IMF) to reach $750 billion and to support a new Special Drawing Rights allocation of $250 billion. Some $100 billion has been allocated for multilateral development banks, which should see more money being pumped into institutions like the Inter-American Development Bank (I mention the more favourable international climate for development and cite the fact that last year the IDB made a total of 131 loans at a value of $11.2 billion, compared with 89 loans valued at $7.7 billion the previous year. The IDB has petitioned for its resources to jump from $101 billion to $280 billion).

The G-20 agreed to make resources available for social protection to the poorest countries, including investing in long-term food security and providing a boost to the World Bank's Vulnerability Fund and the Rapid Social Response Fund. The G-20 leaders pledged commitment to reaching "an ambitious and balanced conclusion" to the Doha Development Round "which is urgently needed". This conclusion, they admit, could boost the global economy by $150 billion.

Best of times and the worst of times

It is the best of times and the worst of times. On the day before the G-20 meeting in Britain, the World Bank issued an update to its Global Economic Prospects report. In its Global Economic Prospects 2009 Forecast Update the World Bank says, "External financing requirements for developing countries are expected to increase to $1.3 trillion this year, comprising current account deficits of $330 billion and principal repayments of private debt due of $970 billion."

The World Bank says the financing gap for developing countries could be as wide as $700 billion this year. In the current projections, 84 of the 109 developing countries would face financing gaps. "This suggests that in the absence of sufficient international support, countries could be forced into generating a sharp reversal in current account balance, implying further decline in domestic demand and imports."

The capitalists of the world realise that unless they take urgent and decisive action, capitalism could be imperilled and so enlightened self-interest has chipped in. The World Bank's warnings were heeded by the G-20 leaders meeting in London.

"We start from the belief that prosperity is indivisible; that growth, to be sustained, has to be shared and that our global plan for recovery must have at its heart the needs and jobs of hard-working families, not just in the developed countries, but in emerging markets and the poorest countries of the world, too." The total fiscal expansion will amount to no less than $5 trillion by the end of next year.

Good broad-based approach

Much was accomplished at the G-20 meeting and the leaders must be commended for the broad-based approach they took. But there was one major issue which was not dealt with frontally in the communiqué, and which did not feature in the formal summit talks, but which Time magazine insightfully labelled 'The G-20's Hidden Issue: A Global Trade Imbalance'.A major cause of this global crisis, as I have pointed out in these columns, is the global imbalances - the deficits and surpluses in the global economy.

One of the most crucial face-to-face meetings which took place at the summit was the one between the US and Chinese presidents.

Obama has been clear in his pronouncements: Said Obama last week: "The world has become accustomed to the United States as the voracious consumer market and the engine that drives a lot of economic growth. But we are going to have to take into account a host of factors that can increase our savings rate and deal with our long-term current account deficits."

The glut in the savings of China, India and the Gulf States, and the galloping deficits of the United States are major contributors to the present global crisis. A special report just published in March by the Council on Foreign Relations, 'Global Imbalances and the Financial Crisis', sets out the issue plainly.

Referring to the G-20 meeting - for which it was timed - the report notes that, "For these discussions to have a substantial impact, the agenda will have to be broadened beyond economic stimulus and financial market regulation. If not, global policymakers will miss a chance to make the world economy and financial markets more stable".

Former Treasury Secretary Henry Paulson is quoted as saying, "If we only address particular regulatory issues - as critical as they are - without addressing the global imbalances that fuelled recent excesses, we will have missed an opportunity to dramatically improve the foundation for global markets. The pressure from global imbalances will simply build up again until it finds another outlet." An insightful comment.

This is why the talks with China were so crucial in London. Obama had said, "If there's going to be renewed growth it can't be just the United States as the engine." That was an essential issue with the Europeans, too. In what seemed like a clear reference to countries like China and Japan, he said the world has to move away from the situation where some nations are "only exporting and never importing", to a "balance in how we approach these issues".

Obama has vowed to cut the US fiscal deficit in half. After the Obama-Hu Jintao meeting, the Chinese president, according to one report, "emphasised China's commitment to expand domestic demand, particularly consumer demand". In other words, China will spend more while the US will spend less - hence dealing with the underlying issue of global imbalances.

G-20 communiqué

Notice this carefully worded part of the G-20 communiqué: "We will conduct all our economic policies cooperatively and responsibly with regard to impact on other countries and will refrain from competitive devaluation of our currencies. We will support independent IMF surveillance of our economic and financial sectors."

The global crisis has promoted a level of international coordination and action which has been sorely needed. It has also provided a significant window to countries like Jamaica, long shackled by IMF, World Bank and credit-rating agencies free-market dogmas and socially suffocating policies.

Those who fought vigorously for a New International Economic Order in the 1970s would be pleased with the belated recognition - and concrete action - of the G-20, that radical reforms are needed in the international system.

To hear someone like Robert Zoellick, formerly of the Bush administration, now president of the World Bank, say that, "In London, Washington and Paris people talk of bonuses or no bonuses. In parts of Africa, Asia and Latin America, the struggle is for food or no food."

Some 53 million were projected to be pushed into poverty this year as result of the global crisis. On top of the 155 million pushed below the poverty line last year a result of food price hikes. But happily, the IMF now has a Flexible Credit Line and the institution has adopted a reformed lending and conditionality framework.

The actions of the G-20 leaders have given a boost to world stock markets and has contributed to confidence building.

The Caribbean must now ride this wave into the Summit of the Americas and stamp its intellectual leadership and grasp of issues on our visitors, coming away with practical, measurable results.

Ian Boyne is a veteran journalist who may be reached at ianboyne1@yahoo.com or columns@gleanerjm.com.