ANALYSIS - G20 switch shaping more local, unpredictable world

By Mike Dolan

LONDON (Reuters) -- Capital taxes, currency controls and curbs and home-tailored bank regulation: after decades of spectacular financial globalisation, the world economy and investment horizon may be turning more local and unpredictable.

As 2009 draws to a close, one of the many legacies of the credit bust has been the expansion of global economic governance from a Group of Seven club of rich nations to a Group of 20 that recognises emerging economic powers.

Many experts say this change -- formalised this year during the G20 summit in Pittsburgh in September -- may well have far-reaching implications for assumptions about global economic policymaking and financial volatility in the years ahead.

At the very least, they argue, it is probably wise not to assume continued adherence to principles such as freely-moving cross-border capital, the primacy of market disciplines and floating currencies and world standards on financial regulation.

With the credibility of the old "Washington consensus" -- advocated mainly by the United States and Britain -- hobbled by the recent credit meltdown, the emerging economic giants appear emboldened in pursuit of alternative policy strategies.

China continues to face down western pressure for greater exchange rate flexibility and Brazil last month felt confident enough to impose taxes on foreign investment.

Other G20 members such as Russia, Indonesia, South Korea are also studying measures to stymie speculative hot money streaming from zero interest rate zones of America, Europe and Japan -- tidal flows that risk destabilising emerging economies with new asset bubbles, inflation and economic distortions.

Whatever the "correctness" of these moves, there is clearly a growing diversity of views on how the world should be managed.