Nov. 13 (Bloomberg) -- President George W. Bush today will urge leaders of the world's biggest industrial and developing economies not to abandon principles of free-market capitalism as they seek an escape from the international financial crisis, calling it the ``best system'' for delivering growth.

In a speech in New York before weekend talks among leaders from the Group of 20 nations, Bush will say policy makers ``should fix the problems we have rather than dismantle a system that has improved the lives of hundreds of millions of people around the world,'' according to a statement released by the White House.

The G-20 leaders, who oversee close to 90 percent of global gross domestic product, will begin a summit tomorrow in Washington to coordinate responses to a financial meltdown that threatens to hurl the world economy into its steepest fall in almost three decades. The Organization for Economic Cooperation and Development today predicted the economy of its 30 rich member nations will contract 0.3 percent next year.

Leaders including Australian Prime Minister Kevin Rudd and French President Nicolas Sarkozy have used the crisis to demand greater government control of markets and to attack the U.S. for failing to rein in investors and speculators. Under debate are policy proposals ranging from curbing executive pay and regulating hedge funds to raising capital requirements for banks and subjecting credit rating companies to stiffer oversight.

Ignore Government

``In recent years, investors could broadly speaking ignore the role of government when thinking about markets,'' said Alex Patelis, chief international economist at Merrill Lynch & Co. in London. ``That period is now over.''

For all his defense of markets, Bush this year extended the reach of government by backing bailouts of American International Group Inc., Bear Stearns Cos., Fannie Mae and Freddie Mac. His administration is also implementing a $700 billion financial rescue program which U.S. Treasury Secretary Henry Paulson yesterday shifted toward relieving pressure on consumer credit, scrapping an effort to buy devalued mortgage assets.

Differences over how to respond to the crisis -- and the coming end of Bush's administration -- have analysts questioning how much the summit will deliver in the way of policies to strengthen markets and reinvigorate the global economy.

`Limited Ambitions'

``There's very limited ambitions in terms of actual policy change,'' said Steve Schrage, a former trade and economic adviser in Bush's administration now at the Center for Strategic and International Studies in Washington.

In his speech, scheduled to be delivered at 1:55 p.m., Bush will outline why markets should be subjected to greater transparency and appropriate regulation, while urging international financial leaders to strengthen cooperation, the White House said. He will also review how the crisis began and how markets are more interconnected than in the past.

In a sign the administration doesn't accept full responsibility for the world's woes, Paulson said yesterday that while the U.S. is ``well aware and humbled by our own failings,'' it wasn't alone in making mistakes. The ``lack of consumption and accumulation of reserves in Asia and oil exporting countries and structural issues in Europe,'' also hurt the global economy, Paulson said.

Blame the U.S.

Officials overseas have heaped blame on the U.S. and the notion of unfettered markets promoted by Bush for sparking the crisis. German Chancellor Angela Merkel last month attacked ``greed, speculation and mismanagement'' and criticized the U.S. for ignoring her call of last year for stronger market regulation. Rudd said ``the root of this malaise'' lay in the ``twin evils'' of greed and fear that went unchecked because of ``obscene'' failures in oversight.

While defending capitalism as the ``most efficient system ever created,'' Sarkozy has described as ``over'' the view that ``everything could be solved by deregulation, free competition and the market.''

Bush administration officials yesterday played down the divisions and predicted the G-20 will take ``specific'' steps to combat the financial crisis and its economic fallout. The Paris- based OECD today predicted the economies of the U.S., Japan and the euro area will all shrink next year.

`Common Ground'

``We are expecting an important and vigorous discussion with some quite concrete results,'' Bush's international economics adviser Dan Price told reporters in Washington. ``There is a lot more common ground among countries who will be around the table than the rhetoric might suggest.''

While Price again dismissed the likelihood the leaders will endorse a ``single global regulator,'' he acknowledged the growing overlap of international markets means changes in how they are managed are needed.

``Regulations are historically national, but we certainly recognize the need to collaborate as much as possible and whenever possible to ensure our regulations are aligned,'' U.S. Treasury Undersecretary David McCormick told reporters.

Other steps that the G-20 may take might include forcing credit-rating agencies to meet a ``higher standard'' when grading companies and having accounting rules aligned to a common standard globally, he said. Financial institutions may be pushed to put more of their activities on balance sheets and ways will be sought to provide greater transparency in the markets for derivatives such as credit default swaps, he said.

Emerging Markets

McCormick also agreed with U.K. Prime Minister Gordon Brown that the IMF may need more resources to let it support emerging markets through the crisis.

The conference may also agree on a pledge to avoid erecting trade barriers, which historians blame for deepening the Great Depression in the 1930s. ``Protectionist rhetoric about walling off markets or companies does not help stabilize markets, but in fact leads to greater uncertainty,'' Price said.

Brazilian President Luiz Inacio Lula da Silva said yesterday he will use the summit to urge reopening the Doha round of world trade talks.

With Bush leaving office in little more than two months and the issue of regulation too complicated to be addressed in 24 hours, G-20 officials are signaling more talks are likely soon after President-elect Barack Obama is inaugurated. Paulson said yesterday that ``this weekend provides an opportunity for nations to take an important step, but only one step, on the necessary path to reform.''

Obama won't attend the meeting and yesterday named former Secretary of State Madeleine Albright and former Republican Representative Jim Leach as his emissaries.

``There is one president at a time in the United States,'' Obama's senior foreign policy adviser Denis McDonough said in a statement.

To contact the reporter on this story: Simon Kennedy in Washington at Skennedy4@bloomberg.netHolly Rosenkrantz in Washington at hrosenkrantz@bloomberg.net

Last Updated: November 13, 2008 08:35 EST