The Group of 20 leaders from the developed and developing world gathers in Cannes, France, this week at a critical moment. The global economy is faltering, the European sovereign debt crisis is deepening, and there is rising global unemployment alongside downward revisions in economic growth projections in many countries. Expectations of what the G-20 can accomplish are low.
But G-20 leaders have a choice. They can either work together to resolve the crisis in the eurozone, reverse their own national budget austerity measures and instead invest in quality job creation, and reform key international financial and trade institutions to better reflect the realities of an integrated global economy. Or they can continue to be uncooperative and edge the world closer to a repeat of the financial and economic crises of the previous decade.
President Barack Obama is clear about where he stands. "[T]he crisis in Europe must be resolved as quickly as possible," said the president in a Financial Times op-ed last week. "The European Union is America's single largest economic partner and a critical anchor of the global economy."
President Obama's sentiment is shared throughout the Group of 20. Shoring up Europe's banks and avoiding an unstructured Greek default will be the first and dominant order of business in Cannes. But global leaders can and should go further. In response to the global economic downturn, many nations drastically cut public-sector employment and spending to lower their long-term budget deficits. These harmful austerity measures depress domestic consumption, strain investment, and increase long-term unemployment.
If the G-20 leaders are serious about balanced and sustainable global growth, they will leave Cannes committed to reversing these austerity measures and instead investing in infrastructure, education, and social protection systems to create quality jobs and generate more aggregate demand in their economies. Fiscal responsibility is important in the long term. But it should not be conflated with austerity at a time when the global economy needs a jolt.
The G-20 economies must commit themselves to policies that create "just jobs" complete with appropriate wages, labor rights, and economic opportunity to help grow the global middle class. Access to economic opportunities underpins political and social stability. And a fully employed, productive, and healthy workforce in every nation supports global economic security by expanding markets for goods and services.
