As the financial meltdown continues, the good news has been President Bush's call for a leaders' G-20 meeting on November 15 in Washington. Don't we have enough such meetings already? Yes, but not necessarily of the right kind. 'Black September' underscored that we live in a globalised economy. The subprime crisis that started in Wall Street spread as wildfire to the rest of the world, and the glee and Schadenfreude with which it was first received by many abroad was quickly dispelled as stock markets and currencies crumbled. Tens of trillions of dollars have been lost. Solutions are nowhere in sight.

The financial sector is about five times the size of the real economy, yet, the enormous financial imbalances that exist in today's world are unregulated and are at least one source of the financial havoc we are witnessing. More broadly, this reveals the deficits in global governance

The G-7 was established in the late '70s to search for a measure of macroeconomic coordination among the world's leading economies. Formed by the United States, Germany, Japan, France, the United Kingdom, Canada and Italy, its yearly summer meetings became one of the key exercises in summitry. Its selectivity made it effective, as leaders from the rich countries exchanged views in an informal setting, which eschewed formal speeches for more productive give-and-take. In the '90s, in the one gesture made by the West to post-Soviet Russia, the latter was invited to join, thus becoming the G-8.

'Asian crisis'

Yet, 20 years after its initial founding, it became apparent that these countries represented a shrinking share of the world's product, and, with the 'Asian crisis' of 1997-1998, an expanded version of the G-7 Finance Committee was launched, a G-20, which added many key nations from the developing world, whose finance ministers thus joined these deliberations.

In the end, though, certain decisions can only be made at the highest levels. It is time to get serious. For several years two Canadian think tanks, the Centre for International Governance Innovation and the Centre for Global Studies, have pushed for a Leaders' G-20 meeting as a way of breaking global deadlocks and making progress not just on international financial regulation, but also on issues as varied as climate change, international migration and agricultural subsidies. Many simulations and "shadow meetings" around the world of this 'Breaking Global Deadlocks' project have shown the fruitfulness of it. Extant tools to cope with such issues are either obsolete or not working. As United States Treasury Secretary Henry Paulson has said himself, "If you look at the global financial architecture, I don't think it reflects the global economy."

Current arrangements are unfair and unrepresentative. Unfair, because they are based on a set of rules, based on northern preferences and convenience - not just on the composition of the G-8. The cozy arrangement whereby the two leading international financial institutions (IFIs), that is, the International Monetary Fund and the World Bank are always led by a western European and an American, respectively, although they deal largely with the developing world, has become unacceptable.

financial mismanagement

Moreover, the unwillingness of the IFIs to actually hold northern countries accountable for the same financial mismanagement they relish in accusing developing countries of has deprived them of credibility. What has the IMF to say about the ballooning, US$500 billion fiscal deficit, US$10 trillion public debt and current account imbalances of the United States?

One can always argue about who else should be on it (Spain is making it clear it would like to be invited). But the G-20 is an informal body that already exists.

There has been much talk these days about whether this market collapse signals the end of capitalism as we have known it. In response, many have waxed eloquent about the supposed virtues of private enterprise, individual initiative and unfettered supply and demand. This is to miss the central issue. The crisis started in the United States partly as a result of deregulation run amok. But, its quickly spreading to the rest of the world, affecting many countries that have been a model of fiscal and financial prudence, showing that the real crisis is not so much of capitalism but of globalisation.

US Treasury Secretary Henry Paulson wanted blanket authority and a blank cheque.- File

Globalisation (that is, the steady expansion in the flow of goods, services, capital, cultural products and information across the world) has expanded at a fast clip over the last three decades. Yet, the institutions that needed to cope with it have not kept pace. This is not dissimilar from what happened in 19th century Europe after the first industrial revolution, when the inexistence of a suitable institutional framework led to such rampant abuses as the seven-day workweek, child labour and the absence of the most elementary safety standards in the workplace.

After the third industrial revolution (that is, the one that started circa 1980 with the information technology and telecoms breakthroughs) that has made the world into a global village, proper rules and regimes are needed to cope, not only with financial meltdowns, but also with issues such as climate change, nuclear proliferation and global pandemics. A Leaders' G-20 has the advantage of putting a set of heads of government around a table to address them - either on an ad hoc basis (as need arises) or more systematically.

we are all in this together

Capitalism might not be in its last throes, but the northern hubris according to which the answers were to be found in Washington, London or Paris and all the rest of the world needed to do was to follow instructions emanating from these capitals certainly is. The rich countries' club has opened its doors, realising that we are all in this together. President Bush's calling of the Leaders' G-20 meeting might be the single most forward-looking initiative of his eight years in office.

Jorge Heine holds the chair in global governance at the Balsillie School of International Affairs and is a distinguished fellow at the Centre for International Governance Innovation in Waterloo, Ontario. He serves currently as vice-president of the International Political Science Association.