The G-20 summit held in Washington, D.C., to plot a way through the global financial crisis closed yesterday with the adoption of a joint declaration. Leaders diagnosed the cause of the crisis and agreed to common principles for financial market reform. It is worthy of note just that the leaders of 20 countries with differing interests arrived at such an agreement. But they agreed only in principle, and it is regrettable they did not come up with specific regulatory methods for dealing with the current financial system.

The crisis is a global one, and it is not going to be solved without international cooperation. It is significant in and of itself that the leaders of the 20 countries that lead the global economy got together to pool their ideas and explore solutions. It was an important accomplishment to decide to strengthen regulations against the speculative finance market that caused the financial crisis, and to improve supervision. Investment banks in the United States and other advanced nations have been operating with essentially no government regulations and have been going after big profits with complicated new financial products. These investment banks were living in a blind spot as far as supervisory actions were concerned and it was their speculative business practices that brought this crisis about, so it is only a matter of course that there be stronger regulatory and supervisory measures in place.

The 20 leaders failed, however, to devise a concrete regulatory system. An example of this would be how they were unable to agree on the creation of the kind of supranational financial supervisory organization that European countries have been calling for. Global financial markets are already integrated enough that there are limits to what can be done with regulations by individual states. The situation means there is an increasing need for a supranational organization that can effectively regulate and supervise the international financial market. It is regrettable that the leaders were unable to agree to the creation of such a body, largely because of opposition from the United States.

Also, one wonders how effective the agreement to pursue an appropriate currency policy for stimulating domestic consumption and a proactive financial policy will be. Countries will implement specific policies according to their own economic conditions, making it hard for there to be effective international cooperation.

This summit meeting suggests a lot for Korea. The leaders agreed, in order to achieve financial market reform, to the common goals of improving financial regulation and supervision and to increased transparency and responsibility. Despite this, the Lee Myung-bak administration still wants to have the “Capital Market Integration Act” in effect next February, and is posturing to push ahead with its policy on softening regulations related to the separation of financial and industrial capital. This is something that is out of step with the global trend. Instead of big talk about international cooperation, genuine international cooperation would be adjusting Korea’s policies to fit the times.

Please direct questions or comments to [englishhani@hani.co.kr]