The G20 summit must address the "too-big-to-fail" issue in the banking system in order to avoid a repeat of the financial crisis, said an American economist during an interview with Xinhua here in Pittsburgh, a city chosen as the venue for the upcoming Group of 20 summit.

"The most important change for the United States and many other countries is to eliminate too-big-to-fail in the banking system," said Allan H. Meltzer, a professor of Political Economy with Carnegie Mellon University. He warns if the problem is not appropriately tackled, it will be hard to avoid a repeat of the current financial crisis in the future.

According to Meltzer, the present financial system is one in which bankers make the profits and the public takes the losses. Since the financial systems are too big, there is no enough money in economies to pay for the losses once they fail.

Among other things such as economic recovery and global warming, financial sector reform has risen to the top of the G20 agenda during the two-day summit. Meltzer predicts G20 leaders may form some kind of consensus on the issue.

Meltzer also predicts the economic recovery will occur in this quarter, but the growth will remain at a slow rate, below the average of the last 30 or 40 years. Besides, there will be a period of very fluctuating growth ahead.

"It would be good in the third quarter, maybe not so good in the fourth quarter. It will be up and down but along a very low growth rate," said Meltzer.

Warning against trade protectionism looming in several countries in the world including the United States, Meltzer says free trade has produced more increases in living standards around the world than anything that has happened in human history, so "it would be a shame if the US backs away from free trade."

Pittsburgh is home to the United Steelworkers union, which represents 1.2 million active and retired steelworkers around the country. But that doesn't prevent Meltzer from blaming the head of the USW as a protectionist.

The USW is the key backer behind a recent White House decision to impose tariffs against Chinese tire imports.

Meltzer says the tire companies that are producing tires in China do not produce tires in the United States, so this punitive measure is not going to create jobs in the country. It's just going to create higher prices for US consumers and losses of jobs in China, Meltzer said.

In an interview on Sunday, US President Barack Obama said Pittsburgh was chosen as the host city of the G20 summit to show the world the successful economic transition and to display how America's future rests not just on its most populous cities.

While the city is historically known for its steel industry, it has been transformed into a city largely based on healthcare, education, technology and financial services.

However, the economic transition does not come easy. Meltzer noted the population of Pittsburgh has declined by about 50 percent. There used to be 600,000 to 700,000 people in Pittsburgh. And now there are about 300,000.

Attracting young people to come back and creating more jobs in Pittsburgh are becoming big issues that the local government has to deal with.

As a Pittsburgh resident, Meltzer doesn't seem particularly happy about the summit. He is more concerned about the huge expenditure the city will incur, all kinds of demonstrators the high-profile meeting may attract, and various traffic restrictions residents have to put up with. But he hopes the city could eventually get something from it.

Asked whether he would stay in Pittsburgh during the meeting, he responded with no hesitation: "I will leave. Yes, I will leave."

(China Daily September 24, 2009)