THE G20 summit is over. The dust has settled, the acrimony subsided — and the hopes of all and sundry more or less dashed.

The summit didn`t contribute significantly towards bringing about any substantial change in the nomenclature of the global financial system nor did it sway the pendulum of `isms` to any extreme degree. Capitalism is still the way to go.

Looking over the G20 communiqué, one can`t help but notice the point about how 80 per cent of global economic power, represented literally by 20 nations, in that very trite 80/20 formula, is to boost the overall kitty supply available to emerging and developing economies — the amount would be to the tune of $1.1tr via the International Monetary Fund and its far-reaching tentacles.

The view is that while such economies have greater scope to grow, the opposite is also true in that they are that much more brittle and thus more susceptible to collapse. Of course, the developed world needs these nations as global trade rules. It needs to buy cheaper stuff from them so it lowers the cost of production and therefore it behoves them to support the developing economies` structures to keep their factories open. In a way, it also helps them to tame inflation as the resultant goods, finished up locally with little, if any, value-added, are available at affordable prices.

Thus, the proverbial Walmarts of the world not only survive but actually do quite well. One sees a little of Ayn Rand here in the developed nations` initiative to support the less privileged countries. It`s all good as long as it works for them at the end of the day. And, if by chance and in the process thereof, it actually helps out the poor, it can`t be all that bad.

A line or two on the modus operandi of the IMF in the last few months is necessary. Unlike in the past when conditions of an IMF bailout were all but assumed, the agency has tapered off a little. Since 2008, the IMF`s chief Dominique Strauss-Kahn has been urging nations to spend more rather than less to offset the recessionary pressures, thus building up voluntary debts, much to the chagrin of the deficit-averse Germany and France. The US and Britain have been marching in lockstep and the pre-G20 analysis focused much on how the summit could simply disintegrate with such diverse orientations among the G7, let alone G20, participants.

There is an example of this change in the Fund`s attitude. When the once-smashed `begging bowl` of Pakistan was reliably repaired and made over to be presented to the agency for help in buoying up foreign-exchange reserves that had depleted to a mere two months` worth of imports, and in reducing the cost of insuring its sovereign debt against default which had become astronomical at 10 per cent, the IMF relented when it felt the political risk to be incalculable.

The discount rate in Pakistan was a bone of contention. While the agency was first insistent on a 10 per cent increase in its discount rate to fight inflation, it settled for an eventual two per cent jump to loan $7.6bn as the government stayed adamant to not totally concede. With the recent empowerment bestowed by the G20, the IMF should begin to sift through its long list of responsibilities with care.

The G20 communiqué also mentioned the much-discussed counter-cyclical measures to boost capital reserves. In simple terms, this means building up a higher level of capital in good times to keep afloat during bad times.

It sounds good except that when the boom comes, one tends to keep just the appropriate level for reserves as adding to it cuts into one`s profitability.

Similarly, when times are bad, as they are now, there is an indication from the market, which reigns supreme in our system, to allow more capital to be held, rather than less. Politics and policies move in unison, and there is little undoing of any political pressure to allow for more or less what the markets warrant.

The macro-prudential regulation idea is another one that seems impractical for the world as a whole. It aims to have a centralised council, the Financial Stability Board, overseeing the goings-on in the world in consultation with the IMF. Not only is it impossible to regulate on a global level, given the differences in the various playing fields, it is very hard to be able to spot problem areas much in advance to avert future disasters.

With the gloom the banks have gone though — and still are — try telling them a year or so down the road to restrain their operations and forego their profits. That`s an opportunity cost that bankers understand better than most. Besides, it`s the markets that provide such opportunities and it is almost counter-intuitive to ignore them. This measure would pacify the two most vocal pro-regulation nations in the summit, France and Germany.

Now that we are past it, what are some of the takeaways from the summit, apart from the fact that China will have a greater voice in the new economic order? The areas of real focus ought to relate to growth. The governments and respective central banks must act in concert to shun deficit-risk when the peril of inaction is far greater. Because of the very global nature of the economy, steps have to be taken for a coordinated effort to spur consumer and institutional spending. If some companies are too big to fail, they are probably too big anyway. This is where effective regulation comes in with anti-trust laws interpreted to avoid such behemoths.

The writer is a consumer banker and adjunct faculty at the Golden Gate University, San Francisco.

mohsinhafeez@yahoo.com