G20 to the rescue!

It sounds like a line straight out of a comic book but the outcome of this weeks G20 summit will have a very real impact on us all. Gorge Soros, one of the worlds most powerful investors, has referred to the G20 summit as a "make or break" event for the world’s economy and that it might be the last chance to prevent a full-scale depression.

This isn’t just a greedy billionaire looking out for his own interests though as he talks about the developing world being the worst hit and therefore in need of the most help. He suggests that the previous economic system needs to be scrapped and the financial system reconstructed from its foundations up. Strong words, but what can the one day G20 summit achieve?

Firstly and quite possibly most importantly, the worlds leaders must show a united front, regardless of what political arguments are being fought behind closed doors. Any signs of discontent amongst the group will drive further fear into an already nervous financial system with dramatic falls in the worlds stock markets the most instant and visible outcome. Investor and consumer confidence around the world must be lifted as a result of this summit if the worlds economy is to continue to function. This can only happen if a consensus emerges with an agreed plan of action, which will be a lot tougher to achieve than it sounds.

Secondly as Soros says, the developing world is suffering the most and a potential quick fix would be for wealthy nations to give their allocations of the IMF’s internal currency, called Special Drawing Rights, to poorer ones because developing countries are not in a position to bail out their own failing banks. These developing countries are the engine room for the global economy and assisting them would help kick-start the worlds economy again. In addition, I would love to see Gordon Brown pushing the ‘Gift Aid’ concept of charities being able to claim back tax paid on donors donations to the remaining 19 leaders as a small step towards a fairer world.

Thirdly, as an accountant for a multinational company I see the problems of a fragmented approach to accountancy rules every day. Companies literally waste millions of pounds a year preparing accounts for each particular country they operate in, governed by that countries own accountancy rules. There should be a commitment from all twenty countries to adopt International Accounting Standards to ensure a consistent approach wherever a company is located. That’s not to say that the existing International Accounting Standards are perfect and they are already undergoing a review of fair value measurement and impairment of financial instruments with a view to improving them further. But we need a unified standard rather than fixing 20 different accounting systems.

Finally, rather than just throwing money at the banks there should be a commitment to invest in major infrastructure projects that will bring long-term economic benefits around the world. Whilst we argue over the need for a third runway at Heathrow, there are countries that are in desperate need of an international airport to open up international trade opportunities. It’s about time the wealthy invested in the developing would without any strings attached. If that’s just wishful thinking, they could at least commit to investing in their own infrastructure to create new jobs which has the added benefit of reducing any unemployment benefit liability.

Exactly what will happen remains to be seen, the only certainty is the eyes of the world will be focused on London this week.

P.S. These are my own opinions and I acknowledge that my opinion is worth no more than the next persons. Feel free to add your own comments agreeing or disagreeing with me, I would be particularly interested to hear what ideas you might have for the G20 summit.