So its official, the G2 – I meant the G20 – has now replaced the G7 (or was it the G8?) as the central body to coordinate global economic policy. This makes sense as the countries of the G8 make up about 80% of the world’s GDP. Quickly, these countries (and organizations) include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the UK, the US and the EU. (Why does the EU get a seat when its main member countries are already there? Because of the Euro? Either way, Europe cant have it both ways).
The summit in Pittsubrgh is being hailed as a great success, with a surprising amount of agreement. From what I can see, the main topics discussed were as follows:
• Continuing the Economic Stimulus – everyone agreed to keeping the money taps going. No one really answered the question as to when we would return to some kind of normality. In the mean time, we continue to saddle the next generation with ever increasing amounts of debt. Chief villain: the United States which is already knee-high in debt but believes the economy will stall in the immediate term without never-ending spending (or Germany which is most cavalier about near term stability, depending on your point of view).
• Rebalancing the Global Economy – everyone agrees that a few countries cannot keep generating huge surpluses selling to the rest of the world (particularly the US) and then complaining that everyone else is a glutton. This is the biggest long term change the world needs to make. Everyone agrees, but no one is saying how it will be enforced except by “peer review”. This is remarkably lame. Chief Villains: Japan/China/Germany. Japan sounds like it means to take action and it probably does. China is making the right noises but probably has no intention of doing anything whatsoever. Germany isn’t even making the right noises
• Regulating the Banking System – this is not getting the attention it deserves. Most of the world’s banks have not recognized the huge liabilities on their books. We will not get to normality until this is done. They will not just “grow” their way out of the problem. Everyone to blame, though the US seems more realistic on this than the rest. Chief Villain: Europe
• Changing the voting power at the IMF – emerging countries rightfully deserve more say at the IMF. America is for it. Chief Villain Europe says it’s also for it, but actually is not. (Its claims that America should give up its effective veto are nonsensical. America is already underrepresented in voting power relative to its economic weight).
• Banker pay – everyone agrees that excessive risk taking has to be curbed. It cannot be rewarded. But Europe’s excessive zeal for this says more about continental Europe’s reflexive anti-financial attitude than it does about banker pay. Chief villains: France and Germany
• Climate Change – all countries are getting it that something needs to be done about climate change. Europe and now Japan seem most serious about cutting emissions. America is getting there, though the Senate may pose a problem in getting domestic legislation passed. The Chinese have begun to point to real emissions cuts – twenty years from now. India has made fighting this a case of national virility on the grounds that on a per capita basis it is still the West that are the polluters. True – but is this really a helpful approach? Chief villains: everyone
I do not doubt that the new global G20 conference is where the power has shifted. I also do not doubt that within that, it is the relationship between the G2 that will increasingly be what matters. As to how to enforce any of the agreements, which on the whole are good ones, I have no clue.
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