Middle-east Arab News Opinion | Asharq Al-awsat

Summit and News | ASHARQ AL-AWSAT English Archive 2005 -2017
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The G20 Summit in London ended with the participant agreeing on the importance of supporting the International Monetary Fund [IMF] with large financial contributions in order to enhance its ability to actively and directly contribute to the revitalization of the world’s economies. The dialogue sessions were important, and extremely embarrassing to Barack Obama who received a barrage of reproach and complaint from the European leaders – particularly French President Nicolas Sarkozy and German Chancellor Angela Merkel – with regards to the failures of the previous US administration to read the early signs of the global financial crisis, as well as due to the weak supervision and regulation of companies and the market. The summit also made clear that American economic “strength” will decrease, and that the percentage of the world economy held by the US will decline, and that growth will be seen in other sectors such as by China, India, South Korea, Brazil, Russia, and others.

Even prior to the G20 Summit, news from the US markets indicated that the wind of change was sweeping strongly through the US economy. Even giant car manufacturers such as General Motors and Chrysler have been given a deadline to reform themselves or else face bankruptcy. In the case of General Motors, this can be seen in the dismissal of its Chairman on the orders of the US administration. Everybody believes that this move is for the sake of rehabilitation and to prepare the US public for a wave of factory closures and worker lay-offs, this will reduce the production capacity of these two companies which reflect the mentality of the old [pre-financial crisis] economy which was one of high costs and poor-quality products.

All that a rational person need do is compare this to the new “Nano” car produced by the giant Indian car manufacturer “Tata Motors” which is the public’s “dream” car as it only costs an estimated $2,500. This represents a revolution in the public’s ability to own a car, and so a mass of people will be able to afford a car which previously would have been impossible for them to do. At the same time every car produced in the US today – in addition to its other costs- includes a fee of $2,000 which go to the labour unions, and so how are they [the American automotive industry] supposed to compete with this?

The London Summit presented to the world a striking vision for the future, in the shape of the new world economy, and the relationship between the states [in this new world economy]. The struggle between [financially] strong and weak states will be transformed into a “partnership of necessity” specifically in the short-term as competition cannot be tolerated these days due to the massive potential consequences that this might have. Perhaps the position taken by King Abdullah Bin Abdulaziz during the recent summit confirms this. Pressure mounted upon Saudi Arabia to extend some of is financial surplus to the IMF. Yet the King’s response was eloquent and logical when he said that priority would be given to the development projects in Saudi, and that the $400 billion he pledged in support of the international financial rescue plan would be spent in its entirety within Saudi Arabia, on international companies from the G20 states and others to enable them to benefit from “participating” in such [Saudi development] projects for the mutual benefit of all parties.

This response reflects the new reality for the [financially] exhausted countries in the changing world economy. The world is now closely watching the prospective regulations and control which are expected to be announced in order to manage the markets, companies and banks in order to avoid a repeat of what happened. When issued, this legislation will be tantamount to a completely new financial archetype.