Amid palpable fear on Saturday, October 12, 2008, President George W. Bush made an unplanned visit to the International Monetary Fund.
Global equity markets were tanking--London and Tokyo were down 10 percent in a day, and $2.4 trillion had evaporated from Wall Street since the failure of Lehman Brothers three weeks earlier. U.S. car companies were approaching bankruptcy. Congress had just approved a $700 billion bank bailout.
The IMF and World Bank meetings were taking place during a meltdown that seemed to herald global recession--or worse.
Bush spent a tense forty minutes with the finance ministers and central bankers from twenty advanced and developing economies, promising a quick response to restore confidence. A global plan of action, he said, would assure that banks had liquidity. Credit would be unfrozen, depositors protected.
Days later after hurried visits from French President Nicolas Sarkozy, then-president of the EU Council, and EU Commission chief Jose Manuel Barroso, the White Flouse announced that Bush would soon host a summit of leaders of major economies.
The impulsive French leader suggested the emergency summit be held in New York, where he rightly argued the crisis had erupted. Sarkozy wanted the core participants to be the Group of Eight--Europe's four largest economies, the United States, Canada, Japan, and Russia--whose leaders met each year, plus rising powers China, India, and Brazil.
Refusing to be stampeded and wary of losing the initiative. Bush chose instead to elevate the more inclusive Group of 20, whose economic policy teams he had just consulted at the International Monetary Fund. "We needed something quickly," said a Treasury official. "The G-20 was there and we took it off the shelf."
As a financial entity, the G-20 was the creation of Canada and the United States. In April 1999 in the wake of the Asian and Russian crises, Canadian Finance Minister Paul Martin came to see U.S. Deputy Treasury Secretary Lawrence Summers, who was awaiting confirmation as Treasury Secretary. Martin had long advocated that key developing countries have a bigger say in global economic policy. The two officials proposed that a broad grouping of ministers be formed to share information and monitor global markets.
Martin, Canada's prime minister from 2003 to 2006, recalls that the G-20 list was sketched out on a sheet of paper. Adding to the G-8, they sought to balance economic clout with geographic and ethnic representation.
They selected the three biggest Latin American economies, Brazil, Mexico, and Argentina, Asian powerhouses China, India, and South Korea, Saudi Arabia because of oil, plus Turkey and South Africa. Their final choice was Indonesia. Nigeria, enmeshed in turmoil...