The results from the G7 meeting may not change the way in which our world economy operates. But, several of the “world’s economic and financial problems are solvable” and this meeting “lays a solid foundation” for our economic future.
Class Concepts
Geber states that the G7 meetings goal is to “achieve a desirable level of world economic growth.” The purpose is to avoid one nation taking an unequal burden. This is especially important when a nation attempts to expand their economy. If the country expands too rapidly then the other countries may not be able to keep up with there exports and the nation attempting to expand its economy may be stuck with a surplus.
For a successful world economy all countries must grow evenly and if a country grows to fast others may not be able to keep up with them. In the end the country growing to fast may be hurt the most. The G7 annual meeting in a way is a check and balance system for the world’s economy so that no one of the seven leading economies does not grow to fast for their out good.
Gerber then goes on to say the G7 meetings is a great idea for our world economy but, “the political problem is that there is no international organization capable of arranging a multilateral agreement among nations.” He then adds “countries enter and leave slow growth periods and recessions at different points in time and it is rare that one policy is suitable for everyone.”
Reaction
I felt that the article was very informative. I was very unfamiliar with the G7 meetings and gained a great deal of knowledge from the article. As an American I found the article to be discriminatory because it put America on a pedestal and blamed some of the world economic problems on us. But, the article also stated that America favorable economic position required them to set and example for the rest of the world to follow. I agree with this and think the U.S. must adjust their policies accordingly.
The article did not mention the implications the meetings have on the rest of the world. By looking into the text I discovered that many of the decision from the meetings have little value and are disregarded. But, the article did end with and interesting point and stated that the G7 meetings are simply just a starting point and a way in which to establish the foundation.
The article put a lot of emphasis on the American economy especially the new tax plan. Many feel that the new tax plan would spark a stagnant American economy. However, the G7 meeting acknowledges that the U.S. economy has been growing steadily while others are falling behind. They feel this new tax plan will give America an unfair advantage but, as an American who pays taxes I feel that the tax plan is a good thing that meets American’s need for lower taxes and would not expect anything less.
Article Text
Heads Up, Seven Up
By DAVID MALPASS
The finance ministers of the seven major industrialized countries meet in Paris this weekend to discuss the state of the world economy and ways to improve growth. The U.S. brings to the meeting the bold, values-oriented approach to economic growth that President Bush chose with his tax proposals and State of the Union message. It could be a strong starting point for a broader prosperity initiative to replace the IMF fixation on austerity for the poor.
The war on terrorism adds urgency to our interest in seeing developing countries grow faster in coming years. A discussion of faster global growth should go arm in arm with the planning to help Iraq in the aftermath of a possible war.
New Treasury Secretary John Snow will be a welcome addition to the G7 group. While he probably won't be able to transform the dialogue toward prosperity just yet -- the meetings are in Paris after all -- he is expected to bring a healthy dose of energy and confidence.
Fortunately, the U.S. economy is giving Mr. Snow an assist. Despite rampant negativism, the U.S. grew 2.8% in 2002. January's industrial production, retail sales and commodity prices were strong, signaling reflation underway. The U.S. economy employs 131 million workers, most of them flexible and increasingly productive. The prospect of a cut in the income-tax rate, increased incentives for saving, and the elimination of the double taxation of dividends add further to the growth potential.
Given our economic strength, the U.S. has an obligation to project more vision and economic leadership abroad. Low expectations and fear of growth have plagued past G7 dialogues. Recognizing core U.S. economic values -- sound money, low tax rates, free trade, limited government, and a belief in rising living standards for all -- is fundamental in overcoming these fears and building faster global growth. Part of this will depend on sweeping growth-oriented IMF reform. The IMF controls the economic rules around the developing world, including in key U.S. friends like Turkey, Indonesia, and Pakistan. They suffer impoverishment, with the U.S. getting much of the blame due to our supposed control of the IMF.
Among the countries in need, Latin America deserves special attention. Argentina's debt crisis is festering. IMF-related tax riots and 29 deaths scarred Bolivia last week. Apart from Mexico, most of Latin America is closed off from world capital markets. The IMF's standard program of currency volatility repels capital inflows and means high interest rates across the region. With the added prescription of high tax rates, investment and trade liberalization are unlikely.
Sound money and trade liberalization can also be a growth-oriented alternative for the countries that French President Jacques Chirac has threatened to keep out of the European Union. For pro-U.S. countries in Eastern Europe, including Turkey, to whip their own economies into shape would ultimately offer more economic benefits than joining the E.U.
Another topic certain to be discussed at the G7 meeting is Japan's malaise. In 2002, Japan suffered record deflation. Its GDP shrank to less than $4 trillion. The standard message of structural reforms fails the tests for boldness and effectiveness. This year, the G7 has an opportunity to send an unusually clear message to Japan -- use a stimulative monetary policy to end deflationary expectations -- building on Alan Greenspan's unequivocal December speech about a central bank's power to stop deflation.
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