When the heads of state of the G-20 nations meet in Pittsburgh, Pa., later this week, it will mark nearly six months since the group's previous meeting in London last April, and just over one year since the collapse of Lehman Brothers last September. At the time of the London Summit, the world was still in the throes of an unfolding crisis, leading the group to adopt a triage strategy. That amounted to essentially stopping the global economy and its credit markets from flat-lining. Accordingly, the major decision to come out of the April meeting was a $1.1 trillion global liquidity package that, among other things, would triple the IMF's lendable resources.
At Pittsburgh, the agenda will be decidedly different. With many pundits and officials declaring the worst of the crisis over, the world's major economies are naturally transitioning from emergency medicine to preventive care. As a result, the attendees will be spending less time discussing how to fix the current predicament and more time wrangling over how to stop something like this from happening again. Specifically, reaching an agreement on international financial regulations is likely to be the primary goal of the meeting.
It is widely acknowledged that such a global agreement on financial regulations is necessary. But no such consensus exists over the appropriate regulatory prescription. More importantly, unless there is an effective enforcement mechanism put in place, any agreement is doomed to be temporary.