The G20 Meeting

The meeting of finance ministers from the top 20 nations had a split between two different policy proposals. The United States argued for more stimulus spending. Germany and France preferred a focus on stronger regulations. Because neither one of these proposals is aimed towards resolving the underlying problems that caused the financial crisis, neither proposal will actually make much progress in abating the financial crisis.

While the lack of regulation may have driven the actual form of the crisis, the underlying problems were more long term. Simply fixing the regulations will not result in a short term improvement or prevent another crisis in the future that will probably manifest in a different way.

Similarly, stimulus spending alone will not fix the problems with the economy and will just give short term relief while leaving the country worse off when the relief ends. The world economies are suffering from two main problems: the over-accumulation of wealth by the rich and the large current account deficits of first world countries. Stimulus spending by countries like China may help to resolve the current account problem. However, the United States and European nations still need to change their economies so that they produce products that can be sold to countries like China. Additionally, the rich, who have been hoarding wealth and thereby reducing consumer spending and demand, must either spend money or be taxed. Any stimulus package that does not address these changes can grant short term relief at best.