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HONG KONG — It is the best of times because leaders from developed and developing countries have gathered in one place, Washington, to try to rebuild a broken global system, and China and India are at last at the top table.

It is the worst of times because it is an act of supreme vainglory by a lame-duck U.S. president to imagine that in two days (Friday and Saturday) he can fix a shattered system with the help of such an odd assortment of leaders who all have their own agendas.

The best would be for the leaders to agree on ameliorative measures to halt the global economy’s progress from recession to depression and — maybe — to set out the ambitions and a time frame for a new conference to destroy the poisonous spider’s web of problems threatening the global economy.

The tough reality is that President George W. Bush will be ex-president in nine weeks. So, the interests of the world might be better served if the leaders took flight to Chicago to shake President-elect Barack Obama’s hand. They could tell him that the next “leader of the free world” must be aware of the world’s interests, not just those of the United States.

The immediate crisis started as a supposedly local problem of badly judged loans in the U.S. subprime housing market. These loans, packaged as securities by financial whiz kids to promote their multimillion-dollar bonuses, then infected the global banking system. The financial system is supposed to protect and nurture the real economy. When it cracked and broke, it was like Humpty Dumpty falling off the wall — the guts of the real economy began to spill out.

Panicky markets made things worse, sending the dollar and yen higher, the price of oil lower, Asian export orders plummeting, corporate profits into a tailspin and unemployment prospects from the U.S. to China sharply higher.

The ameliorative part of the Group of 20’s job is to shore up confidence — not to beggar a neighbor’s policies — or we’ll all drown together. Reforming the global economic architecture is harder, not least because the U.S. and Europe will have to give up some privileges.

Europe must decide whether it is a union or a mere collection of individual countries. Britain would claim that since it has a separate currency and the influential City of London, it deserves its own euro-seat. But getting France, Germany and Italy to share a single euro-seat while Britain has its own would risk sulking across Europe.

The G20 is the wrong body to replace the Group of Seven: too many members, too many oddballs. A habitual problem for the G7 has been constant squabbling and empty communiques, often when the yen has moved rapidly. Either the Japanese stubbornly resist joint statements to stop the yen’s fall or plead for action to curb its rise, while the others, without saying so explicitly, indicate it serves Tokyo right for not being a good team player.

Twenty is too many voices: 12 to 15 are more than enough. Canada and Italy should leave, along with the European Union. What nonsense to give Europe four seats out of seven plus a separate chair for the EU. China and India should take their places with Brazil, Russia, Saudi Arabia and South Africa, probably Mexico and possibly Indonesia and Turkey. There is little justification for Argentina, Australia or South Korea.

Fixing the global financial architecture is harder. Besides the G7, it includes the International Monetary Fund and World Bank plus the Bank for International Settlements or BIS (12 of 20 members are from Europe with China’s central bank governor a recent addition), the Basel Committee (10 Europeans but no developing countries out of 13 members), the Financial Stability Forum (Hong Kong and Singapore are members but no developing countries), and more than 150 international regulatory bodies covering separate spheres for banking, securities and insurance.

Money, as the financial whiz kids demonstrated, flows more freely than water, crossing continents, above, below and beyond the traditional rules and regulations, just as quickly as the Internet permits. As of September 2008, according to the BIS, a notional $596 trillion in derivative products was outstanding, or 20 times the combined GDPs of the U.S. and Europe.

The problem of global financial reform goes way beyond the petty arrogance of the IMF and what its former chief economist Kenneth Rogoff called its euro-centric political representation or its arcane government-to-government lending facilities. Global government and power today is more multifaceted than in July 1944 when 44 governments and 730 delegates met at Bretton Woods to create the IMF, World Bank and, they planned, an international trade organization. That meeting had British economist John Maynard Keynes and American Harry Dexter White to push through an ambitious agenda. Even then, mastermind Keynes complained of “a most monstrous monkey house.”

Today, there are 185 members of the IMF and World Bank, 192 members of the United Nations, with more deeply painted political passions than rainbow shades. Narrow nationalism and dictatorial tendencies run deep, evidenced by the failure to bring even minimum human rights to Darfur, Burma or Zimbabwe.

In finance and economics, governments are jealous of their sovereignty. Even with their top seats at the IMF, the U.S. ignored the fund’s policy advice, and British Prime Minister Gordon Brown told the IMF to get lost when it warned of U.K. deficits.

This explains why some economists and politicians would rather supply another bandage, another crutch, rather than take the system to hospital for a major operation where surgeons would squabble over both the disease and treatment. Some politicians like Brown basically believe in the common sense and discipline of markets — even though the recent gyrations show that markets do not naturally return to equilibrium. Others like French President Nicolas Sarkozy want greater government controls — even though bureaucrats have been found wanting and national bureaucrats can’t cope with whiz kids and their Internet money games.

The G20 — or the G-14 next year — should have the sense to appoint a group of wise men and women to draw up a new blueprint and then supervise a detailed plan for a 21st-century world. Governments should appoint 20 to 30 people with a broad and independent outlook, then direct their allegiance to their reform colleagues. They should be people like Paul Volcker, Paul Krugman and Andrea Tyson of the U.S.; Robert Mundell of Canada; Howard Davies and Gus O’Donnell of Britain; Amartya Sen and Montek Singh Ahluwalia of India; Stan Fischer of Israel, the U.S. and Zambia; Shengman Zhang of China; and Toyoo Gyoten of Japan.

The sad truth is that the financial Humpty Dumpty cannot be put together with sticky tape after his fall. He needs intensive care and a series of major operations to become slimmer, fitter and faster to cope with a multifaceted world.

Kevin Rafferty edited news reports at IMF/World Bank annual meetings for 10 years before becoming World Bank managing editor.

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