Hamish McRae: The real summit has been between China and the US

The theatre gets in the way of the substance. The G20 summit has all the correct dramatic elements. There are of course the characters, including the new male lead, the Mr Nasty, the ageing roués, the former top model and so on. There are the props: the helicopters, the motor cavalcades, Air Force One. And there is the plot, with the staked-out positions of the different players, the staged rows between them with threats of walk-outs and, finally, the dramatic conclusion when the show will be declared a success and everyone can go home.

But this show does matter. The overriding rule of economic governance should be the Hippocratic Oath, "first, do no harm". The world economy is unusually fragile at the moment and it is perfectly possible for the major players to cause harm in the coming months. If at the margin this summit can inhibit that possibility then it will have done something useful.

The big issues are not the staged rows. There is some difference of emphasis on the appropriate size of the fiscal boost, with Germany and France urging caution at home and the US, UK and Japan wanting them to borrow big. You could call this a row and, from private conversations, I know that there is a sharp difference of view between Germany and the UK in particular. You can see, too, why Japan is so anxious to get other countries to boost demand. Its own exports have halved, yes, halved, over the past year, and it needs consumers in other countries to buy more of its goodies fast.

But none of this is vitally important. At the margin it matters, of course, but only at the margin. It is not reasonable to believe that it is crucial whether the German budget deficit in the coming year will be 5 per cent of GDP or 7 per cent. Or the UK one 10 per cent or 12 per cent? Or the Japanese... no, let's not go there. After 15 years of stagnation, Japan's total national debt is now some 200 per cent of GDP, nearly as high as Britain's after the Second World War. If it goes to 220 per cent, then that mercifully is their problem, not ours.

Nor really are changes to banking regulation or global financial architecture, whatever that is, that vital – though it is profoundly unfashionable to say so. Yes, of course, the banks have to be better regulated, but that is a five-year task at least. The last time new banking regulation was agreed (very bad regulation by the way because it helped create the present mess) it took 12 years to get the deal done. But it does not matter now because the destruction of the banks' balance sheets that has taken place will inhibit them doing anything stupid for a long time.

As for the changes to the capital and voting powers of the International Monetary Fund, and other issues such as whether the dollar should be replaced as a reserve currency, well, it is all worth thinking about and in the case of the IMF moving reasonably swiftly. But none of this matters right now. To focus on that, or indeed the issue of tax havens and so on, is to worry about the home insurance before you have put the fire out.

The fire, I am afraid, is still raging and it will continue to rage for some months yet. Even those of us who think that when we can look back on this in five years' time, this recession will, at least for the UK, have been no more serious than that of the early 1980s – even we have to acknowledge that the recovery will not be secure until well into this year, and maybe well into 2010.

The months ahead are dangerous because they are the stage of the economic cycle when governments are most likely to do stupid things. As far as the world economy is concerned, top of that list will be protectionist measures. There has been some retreat from free trade already. Even here in Britain there has been "British jobs for British workers", while in the US it seems that companies that get financial help from the taxpayer have to favour US employees. Elsewhere, India has banned the import of Chinese toys, China the import of Irish pork. The list goes on: some two-thirds of the countries in the world have brought in some form of protectionism in the past year.

So far, though, this has not got out of control. We have been here before. Remember how Japan protected its ski manufacturers by banning foreign skis on the grounds that Japan had different snow. (True: I remember sitting in front of an official in Tokyo who patiently explained to me that it was not actually the snow itself, but the snow conditions.)

The danger is obvious. Globalisation, for all the benefits it has brought, not least to the billion people it has lifted out of poverty in Asia during the past two decades, is under threat. You can have a debate about how serious this recession will turn out to be compared with previous ones but there is no debate about the fact that it is the first serious one to happen since China, India and the other emerging economies became fully integrated into the world economy. China will this year become the world's second largest economy, passing Japan. Brazil will probably pass Canada next year, and India may well pass Spain. That is why this is a G20 meeting, not a G7 one.

At the moment most of the big emerging economies are still doing reasonably well. To take some Goldman Sachs forecasts both China and India are expected to grow by around 6 per cent this year, whereas Japan will shrink by 6 per cent, and the US and Europe by more than 3 per cent. It makes the UK, which it forecasts will shrink 2.5 per cent, look not too bad.

The significance of this is power is shifting away from the old developed world. We knew that and we knew that shift is seismic. The significance is that power is shifting even faster as a result of the downturn.

This is the first chance that the leaders of these "new" powers have to meet the leader of the largest of the "old" powers. Keeping global growth moving, not just this year or next, but for the next decade – indeed the next generation – depends first and foremost on the relationship between the US and China. The relationship between the other major players, India, Russia and the EU, matters too of course but not as much.

Those leaders have just had to cope with a disappointing American president. They don't know whether the new one will disappoint too: be another Carter. They don't know whether they can trust him to deliver on what he says. There are practical financial questions such as whether the US will be a safe haven for their savings or should they diversify? There are practical trading questions, most notably will the US remain an open market for their goods? And there will be geo-political questions too.

The parallel is not the 1933 London summit, wrecked by the then new US president, Franklin D Roosevelt, who failed to show up. The parallel is much more the global situation a century ago, during the last great burst of globalisation, when the economic progress proved far more fragile than anyone knew. You don't need to invoke fears of 1914 to want the leaders of today's great powers, new and old, to know that they need to avoid doing harm.

h.mcrae@independent.co.uk