THE G-20 LONDON SUMMIT: A FURTHER COMMENT
For the first time since the crisis erupted two years ago, global leaders went a few millimetres beyond what was expected of them. The decision by the Group of 20 developed and emerging nations to commit $1,100bn (€816bn, £741bn) in new funds for international institutions is no doubt substantial. It will allow the International Monetary Fund to deal with the current and future torrent of balance of payment crises more effectively. But the London summit comprehensively failed to do what it set out to do. Not one of its resolutions will move the world a small step closer to resolving the global economic crisis.
As world leaders return home, they will be confronted by the reality of the decisions they have not taken. They will return to economies in which bankruptcies and unemployment are about to rise to the highest levels since the Great Depression. They will face an outraged public that seeks to exact revenge on bankers and banks....
The forward looking indicators do not tell us the situation is getting better. US house prices are down 30 per cent, and have further to fall. Countries with large current account deficits are cutting consumption of imported goods. One of the results will be that the combined export surpluses of Japan, China, and Germany will shrink dramatically. World trade has been collapsing faster than during the Great Depression.
The monetary indicators are also absolutely awful. In Europe, both real and nominal growth of M3, a broad measure of money, is falling on a month-by-month basis – with no turnround in sight. Whether you look at this as a Keynesian or a monetarist, you come to the same conclusion: the world economy is in serious trouble....
The G20 summit has ducked the important question of bank rescue beyond a few meaningless and self-congratulatory statements. Instead, our leaders showed more interest in future crises than in the current one. But the probability that another crisis may break out soon, is inversely related to the length and depth of this one. The longer this crisis lasts, the more absurd the G20’s order of priorities will seem.
If the crisis shows no sign of ending in the autumn, our great leaders may gather for another desperate summit, in another city, facing another set of protesters, producing yet another series of desperate but ineffective pledges to save the world economy, embedded in another pretentious communiqué. The London summit has shown us what “We, the leaders of the Group of Twenty” can do, and what they cannot. The G20 has shown that it can fix international institutions, but not the biggest economic crisis in our lifetime.
"The London Summit has not fixed the crisis", by Wolfgang Munchau, 6 April 2009, The Financial Times (http://www.ft.com/).
It is gratifying that ones initial opinion on such an important subject matter as the G20 Summit, is shared by such an eminent commentator as Wolfgang Munchau. As can be seen the G20 was indeed very much a damp squib. And, not much more, except functioning as a photo opportunity for our rulers both in Europe and in this side of the Atlantic. Notwithstanding the fact that as Barry Eichengreen and Kevin O'Rourke has recently pointed out the global economic indicators are drastic if not indeed dire:
"The decline in Industrial production in the last nine months have been as least severe as the nine months following the 1929 peak [of production prior to the crash]....Similarly while fall in the US stock market has tracked 1929, global stock markets are falling even faster than in the Great Depression....Another area where we are 'surpassing' our forebearers is in destroying trade. World trade is falling faster now than in 1929-1930".
Barry Eichengreen & Kevin O'Rourke, "A Tale of Two Depressions", 6 April 2009, in www.voxeu.org
The upshot of this rather frightening situation is that what the world needs and requires are world leaders who can grasp the nettle and lead, and, not merely gather together for purposes which are as ignominious for those who watch as for those who participate. Instead, we saw the liberal-bourgeois, bien pensant idol, the ex-junior Senator from Illinois with the absurd name, settle for the lowest common denominator in a valiant effort to not come a cropper in the public relations stakes. As the American online journal, Stratfor.com, noted in its analysis of the London Summit, it was the new American President, not his European interlocutors who 'blinked' (using the word in the Dean Rusk sense):
"Overall, the G-20 and the NATO meetings did not produce significant breakthroughs. Rather than pushing hard on issues or trading concessions — such as accepting Germany’s unwillingness to increase its stimulus package in return for more troops in Afghanistan — the United States failed to press or bargain. It preferred to appear as part of a consensus rather than appear isolated. The United States systematically avoided any appearance of disagreement".
George Friedman, "Geopolitical Weekly: Obama's Strategy and the Summits," 6 April 2009, in http://www.stratfor.com/
In short: rather than an old Roman triumph, in which the victor deserves to wear the laurel wreath which he has been bestowed, we have one more akin to that in the decadent period of the Roman Empire (think Caligula, Domitian or Caraculla), in which a contrived or bogus victory abroad is invented for purposes of gratifying the mob or the degenerate ruler. I have no knowledge of the morals or lack thereof of the American President: no doubt he is the moral paragon that he appears to be. That however does not obviate the fact that any claims for either the success of the G20 by the UK Premier or his American counter-part are equally nonsensical. The continuation if not the deepening of world crisis is the best (if saddest) proof of this