Amy Farber, New York Fed Research Library
These days, one way that leaders of the major economies can help prevent and resolve financial crises is by informally crafting solutions with their international counterparts. These high-level meetings are known by a shorthand title such as “G20 summit,” where “G20″ stands for the “Group of Twenty”—the number of countries participating in the meeting. In this post, we look at the earliest of these gatherings, in which the heads of government of the six largest economic powers (the G6) met at the Château de Rambouillet in northern France, on November 15, 1975, in response to a global spike in oil prices and the financial turmoil arising from it.
For a description of the effects of the oil shock that began in 1973, see the caption under a photo of Italian citizens on bicycles.
The G6 summit attendees were President Valéry Giscard d’Estaing (France), Chancellor Helmut Schmidt (Germany), Prime Minister Aldo Moro (Italy), Prime Minister Takeo Miki (Japan), Prime Minister Harold Wilson (the United Kingdom), and President Gerald Ford (the United States). See www.g20-g8.com for photos of the discussion table and a portrait of the meeting attendees.
The summit’s proceedings were recorded in Memoranda of Conversation from the first session of the Economic Summit at Rambouillet. President Ford’s remarks begin on page 3, and parts of his statement on page 6 sounds eerily like our situation today:
There are also steps that we can take at this meeting to aid in rebuilding confidence. We must ensure that the current world economic situation is not seen as a crisis in the democratic or capitalist system. While there are problems of a structural nature, these need not prevent strong recovery. . . . In light of our prospects, and the policy actions we have already taken, we are able to publicly reaffirm our confidence that, although the response to stimulative policy measures is slower than most in the post-war period, recovery from the present recession is well underway.
Prime Minister Wilson’s comments include this passage on page 9, which points to the interconnectivity of countries:
The world recovery seems to be getting underway. But what I want to ask of you at this table is that you have policies of flexible response. We do seriously fear the possibility of a hiccup in the recovery now underway. We fear the possibility of a relapse into long periods of stagnation and decline. OECD prospects are pessimistic. There are countries here whose economies have a major influence on world trade. I hope they will be ready to act quickly if there is any signal of a lack of adequate recovery.
The U.S. State Department’s Office of the Historian has posted a large amount of archival documentation about this summit on its website, although the documents lack the crossed out “SECRET” stamps that help make the above Memoranda document visually striking.
Today, the main forum for countries to communicate about international economic issues is the G20—which was formed in 1999. The members of the G20 are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, and the European Union. These countries represent 85 percent of the world’s output and about two-thirds of its population. Meetings are held at many levels, including those for finance ministers with central bank governors.
The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.