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US should fix its own economic woes first

By Hong Liang (China Daily)
Updated: 2008-11-18 07:50

The G20 conference was no Bretton Woods.

Those observers who hoped for the emergence of a new global economic order from Washington DC, where leaders of 20 nations met last weekend to revive their economies, are likely to be disappointed.

To be sure, there were positive outcomes from the conference in which leaders of the Group of 20, which represents nations holding an 85 percent share of the global economy, pledged their commitment to free market and free trade.

They also agreed to hold future meetings to address the issues that highlighted sharp differences between the United States and the major European economic powers.

Despite all the talks about the need to overhaul the financial regulatory framework, the US appears to have remained skeptical about the establishment of any form of international supervisory body with cross-border authority favored by some European countries.

Although the US is no longer the ONLY power in the world, as French president Nicolas Sarkozy has said to reporters at the conference, it will unlikely compromise the primacy of its national regulatory authority.

Other thorny issues that have showed up the philosophical divide between the United States and the major European powers include the scrutiny of executive pay and tightening control of the risk arising from the proliferation of financial derivative products, which are largely blamed for perpetuating the US credit crisis.

Instead of wishing for a new world order to eradicate the economic problems we are facing, it may be more realistic to hope that the United States will introduce an effective stimulus program to revive its sagging economy. In so doing, it can help lift the global economy out of the gloom.

The Bush Administration is known to be less than enthusiastic about expanding the fiscal package that has already been put in place. But things may change after president-elect Barack Obama is sworn into office in February, 2009.

Many world economies have already introduced strong and positive fiscal and monetary measures to counter the projected impact of the so-called "financial tsunami."

As the largest emerging economy, China has long recognized that its primary responsibility to itself and the rest of the world in time of crisis is to maintain stable growth by greatly expanding domestic consumption.

To help achieve that goal, the Chinese government has introduced a series of initiatives through new investments worth 4 trillion yuan in the next two years.

It has also pledged to take necessary measures to raise consumer demand for goods and services.

Although the United States may not be the only power in this "new world order," it's still by far the biggest.

The global economic crisis has driven home the point that the US' economic health is of much greater significance to the rest of the world than that of any other country.

The majority of the people of the United States have apparently given its newly elected president a clear and strong mandate to fix the country's economic problems.

That seems more important, at least in the short term, to the global economy than the overhauling of the global financial regulation.

E-mail:jamesleung@chinadaily.com.cn

(China Daily 11/18/2008 page8)