Is this the group to save the international economy?

With world economies reeling from a growing recession and lending crisis that began in the United States, President George W. Bush has convened what some are calling a historic meeting of the leaders of the world's top G20 countries for Nov. 15 in Washington.

Created in response to the Asian financial crisis of the mid-1990s, the G20 is, in large measure, a Canadian invention that groups together the finance ministers and central bankers from established and emerging economies to keep each other fully informed of everything that is going on.

Its members include the large industrialized nations of the G8 — Britain, Canada, France, Italy, Japan, Germany, Russia and the U.S. — as well as Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Saudi Arabia, South Africa, South Korea, Turkey and the European Union, represented this year by French President Nicolas Sarkozy.

Until now, the G20 has been a largely deliberative body of seconds-in-command. But this gathering in Washington of G20 leaders raises its stature considerably and likely moves it along to becoming a decision-making body that, some predict, might rewrite the rules of international finance and regulation for the 21st century.

To gauge the effectiveness of this group and what might be expected from this first meeting of G20 leaders, CBCNews.ca spoke with John Kirton, director of the G20 research group at the University of Toronto.

What should we expect to see from this first meeting of the G20 leaders?

Kirton: We should expect the leaders to set an agenda for further work and to establish some core principles to guide that future work so their ministers and experts can follow up with clear timetables.

But also, I expect them to take some concrete decisions on a few critical items at the core of the current crisis relating to accounting standards, capital adequacy ratios and credit rating agencies — cases where it's clear that better regulations and supervision are required to contain this crisis and prevent it from breaking out again.

The G20 is a new concept to many people, kind of a second-tier grouping. Are there factions within that group that might want certain things?

The G20 was created in response to the Asian financial crisis that culminated in 1999 as a club of finance ministers and central bankers of the most systemically significant countries in the world. Every year they've met as equals and come to consensus on important matters of finance and economics.

At their most recent meeting in Sao Paulo, Brazil, they agreed to transform themselves into a more action-oriented group. So at that level, they are clearly moving toward the central stage.

Because they were constituted as 20 equals — as opposed to the G8 group, which invites selected countries to participate from time to time — there is far less factionalism or differences between rich and poor countries than one might expect.

Emerging economies from the G20 do join together in demanding a bigger voice on some of the older financial institutions, such as the International Monetary Fund. But often their interests are similar to those in the old G7 and G8.

Brazil and Canada stand together in not having had a banking crisis or mortgage industry and in being significant exporters of commodities. Often there is a strong commonality of position and approach.

Does Canada have any kind of special role or interest in this meeting?

Oh, both. Canada was the inventor of the G20 in the person of then finance minister Paul Martin. He has also been the one who has been calling for some years now [for] the very thing that has sprung to life in Washington this weekend — a G20 leaders' summit, not just as a one-off event but as an ongoing process.

At the same time, many of the G20 partners are looking to Canada as a policy model, a country that has done a number of things right and thus avoided a crisis in banking and insurance, housing and the mortgage market as well.

Canada also has much at stake because it is an open, trading economy that knows it can't escape serious credit freezes in international markets and serious economic recession in its biggest customer, the United States.

Is part of this meeting about how to coordinate large-scale economic stimulation so that it is not being done willy-nilly, if you will?

There will not likely be co-ordination in the classic sense, where each of the 20 countries looks the other in the eye and says, 'If you do this, then I will do that.'

It would be unreasonable to think that each of these 20 leaders, many meeting for the first time, would be able to come to the individual kinds of deals that would have to be made.

It's also the case that they have really not come to a consensus on what caused this problem and thus what the right responses are.

It could well be that firing off — even in wonderfully co-ordinated fashion with the classic instruments of fiscal and monetary policy — are really not the right things to do for this new kind of 20th century crisis, which really did start in private sector financial markets.

Is this current crisis being looked on as a largely U.S. problem? 

Some of our friends in Europe cannot resist the temptation to say this all started on Main Street USA. But it really did cross the Atlantic very quickly to banks in England and Germany and whole towns in Scandinavia. So they really do know now that they are all in this together.

American financial institutions originated these complex, opaque financial credit instruments that nobody really understood. But of course it was banks in Europe that bought them, without asking any of the hard questions.

Does this mean we are likely to see in the not too distant future a stronger international regulatory system? Or will it still likely be left to individual countries and central bankers to look after their own financial sectors?

We're very likely to see a stronger international regulatory system in the sense that we could have smarter regulations, ones that deal with the real, globalized, private-sector-driven financial system.

You can't simply have a world where the big banks, like other multinational corporations, operate simultaneously in so many different jurisdictions and leave it to local regulators to try to take care of their bit.

If regulators in one country get it wrong and a whole big bank goes down, that has worldwide implications. So the logic of the move to greater international regulation is overwhelmingly strong.

So are we looking at an entirely new institution to oversee this?

I think it will be one of the existing ones. But there are institutions that were borne for a world not of 1944 but the 21st century that will have a greater role. Like the G20 itself and the Financial Stability Forum.

I think we will see bodies such as those, which treat the systemically important economies as equals, that the world will be looking to in the years ahead.

Have we seen last of the G8 then?

Well, certainly the G20 will be the more important in the field of global finance and governing the global economy. At last two G8 summits, even though many knew an economic crisis was close at hand, the G8 leaders showed that they were either completely unwilling or unable to do anything serious about that.

Which is why the G20 has had to ride to the rescue. And once they've gotten into the game, it is very to imagine they will hand it back to the G8 and say 'China, India, you are no longer equals, you are invited only for as long as we decide you can come to our meetings.'

Are we looking at the beginning of something here then that will take time to develop?

From the start, the Bush administration designed this meeting as the first in a series. Some European countries, however, have laid down some bold claims: 'We need things decided in a hundred days, starting now.'

That would give the new president Obama less than one month to get his act together after he's inaugurated. So I don't think these European ultimatums are going to set the schedule for what we will see.

In fact, I think the one leader who has got it right about how long it will take is Stephen Harper. He said it will probably take two to three years, and I think that is what it will turn out to be.