G-20 Needs a ‘Sputnik Moment’ on the Global Economy

The Group of 20 meeting of high-level policy makers in Rome this weekend provides a timely opportunity to assess progress on the four broad policy responses that I have argued repeatedly are vital for the global economy. They hold the key to maintaining a strong and durable recovery that is also more inclusive and sustainable. They reduce the risk that financial market instability will undermine economic and social well-being. And the longer they are delayed, the greater the risk of a self-reinforcing cycle of widespread damage that also undermines the battle against crippling climate change.

Starting off, I have argued for a good six months that central banks, and the Federal Reserve in particular, should use the window of a strong economic recovery and buoyant financial markets to slowly and carefully ease a pedal-to-the-metal approach to stimulus policy that is still in emergency intervention mode. And for most of the last six months, these central banks have felt little inclination to do so, repeatedly stressing that the primary reasons for acting — mounting inflationary pressure and financial instability threats — are either “transitory” or manageable.