World leaders must be congratulated for successfully coming together to combat the biggest global economic crisis in generations. Six months after leaders from the world’s leading economies joined hands at the G20 meeting in London, the global economy is slowly but certainly emerging from the slump, led by the resurgent economies of Asia.

This is a remarkable achievement in many ways. For the first time in the modern era, countries with diverse political ideologies and at different stages of economic and social development have made common cause to tackle the world’s first truly global economic crisis and prevent a repeat of the Great Depression of the 1930s.

As a result, China is recovering from its most severe slowdown in decades to report a 7.9% growth in the second quarter from a year earlier, up from 6.1% the previous quarter. India has reported a 6.1% growth in the same quarter. All the major Asian economies have returned to growth, including Japan. Even Germany and France, the Eurozone’s two biggest economies, are back on the growth path.

Yet, this is no time for complacency. The US economy, the world’s biggest and still the main engine for global commerce, remains in recession —- its deepest and longest since the 1930s. Companies are still shedding jobs, mainly in the US and Europe, and millions of people in the developing world have been forced back into poverty.

Meanwhile, financial institutions worldwide, after writing off more than $1.6 trillion of credit losses, are still cautious about making loans and investments.

These red flags should provide enough reason for global policy makers to carry on with the well-orchestrated fiscal and monetary stimuli embarked upon less than a year ago.
Indeed, the follow-up G20 meeting in Pittsburgh couldn’t have come at a better time.

Global leaders must know that the ongoing global recovery will remain fragile as long as rising unemployment in the US, Europe and Japan is reversed and until consumers in those economies start loosening their purse-strings after repaying some of their debts and rebuilding their savings.

Any move at this stage to tighten monetary and fiscal policies, especially in the developed world, risks the world economy repeating Japan’s mistakes during the 1990s when a hurried rise in tax rates, without a simultaneous loosening of monetary policy, triggered a financial crisis and eventually led Japan into the path of quantitative easing for five years beginning 2001.

Policy makers gathering in the US manufacturing heartland must also reflect on all that has been achieved so far in unwinding the global imbalances that led to the crisis in the first place.

Paving a consumption-led growth path for Asia is essential, but it will take years to implement. It will require Asian governments to provide social safety nets and healthcare guarantees for its citizens so that consumers do not have to save excessively for the rainy days. It will also require Asian governments to carry on with economic reforms to create jobs and increase overall efficiency and productivity.

It will require deepening and broadening of the region’s capital markets to prepare them to absorb large amount of capital generated by the region’s own savers. It is clear by now that the West will take a long time to repair the damage to its economies caused by the financial and economic crisis and return to a sustainable growth path.

The onus for engineering a relatively quick recovery now largely rests with China, India, Korea, Indonesia and the other large emerging markets. These emerging economies, increasingly aware of their responsibilities, have played their new roles with aplomb so far. China’s unprecedented 4 trillion yuan fiscal stimulus was the cornerstone of the global economy’s recovery this year.

India’s free-trade agreements with Korea and Asean in recent months are laying the foundation for greater trade and investment flows within Asia.
Asia’s biggest economies have also pledged to further the Doha round to give a much needed fillip to world trade.

What’s more, China and India have pledged to play a constructive role in limiting the damage caused to the environment from their growing economies at the UN climate change talks in Copenhagen later this year.

Japan and Korea are already thinking of innovative ways to share their advanced technology and to finance their use in the rapidly developing countries of Asia.All these are signs that the emerging powers are keen to play a leadership role in reshaping the global economy.

One of the biggest achievements of the April G20 meeting in London was the agreement by the developed nations to share major economic decision making powers concerning the global economy with the emerging economies such as China, India, South Korea and Indonesia.

May the Pittsburgh meeting be remembered as a congregation that furthered this trend.
The need of the hour is to maintain the pro-growth fiscal and monetary stimuli; keep working at restoring confidence in the financial markets by reducing complexity and leverage; and fixing the imbalances that caused the biggest economic turmoil in our lifetime.

Only a gathering as inclusive as the one assembling in Pittsburgh can take on such a demanding task.