Three weeks ago, Washington and the world were contemplating British Prime Minister Gordon Brown’s ‘Global New Deal,’ and expectations were rising that the G-20 summit in London on April 2 would produce a comprehensive, job-destroying deal on global financial regulations.
But inflated expectations always burst – ask the Obama administration – and as of late, the most interesting reporting on the summit has focused on how many lunatic fringe anti-freedom activists will attempt to disrupt it. Former British Cabinet Minister Stephen Byers is now criticizing Brown, saying that he is responsible for damaging the economy and the Labour Party by putting forward “An exhaustive agenda . . . that tries to do too much.”
Oxford Analytica now refers, in its latest assessment of the summit, to “a patent lack of progress” and blames splits in Europe and inside the Obama administration for the retreat from any “grand bargain.” It still looks for changes to the role of the IMF – which it describes as “futile” – and predicts that any implementation of internationally harmonized financial rules will proceed slowly.
Oxford Analytica is certainly right about the international disagreement. In a column published worldwide today, Obama urges world leaders to take “bold, comprehensive and coordinated action” to end the recession. According to him, everyone else should follow the U.S.’s lead by borrowing and spending lots of money. That is precisely what the Europeans do not want to do. As the Prime Minister of Luxembourg put it on Friday, “the G20 meeting in London should focus on financial regulation … we told the Americans that we are not ready to increase stimulus packages.”
And it’s not just the Europeans and Americans who are splitting. The Europeans had harsh words last week for China, which Jose Manuel Barroso, president of the European Commission described as “the main problem” because it does not “have the culture of a common setting of rules.” Given that what Europe wants is an “an end to pay and bonuses which encourage excessive risk-taking,” that criticism sounds like praise. A global authority that would decide what of pay encourages “excessive” risk-taking is the kind of culture of rules we can do without.
But the Chinese are talking up an even worse idea. Zhou Xiaochuan, governor of the People’s Bank of China, the country’s central bank, stated in a notice posted on the bank’s website that: “The crisis call[s] again for creative reform of the existing international monetary system towards an international reserve currency.” This call bears no relation to China’s actual economic policies, or to economic reality. But it does point out that China, like Europe, will not hesitate to use the financial crisis to advance its own interests. That alone will prevent them from falling in line behind Obama’s appeal.
And thank goodness for that. Indeed, if we’re lucky, the American-European-Chinese disagreements will result in a summit that produces no endorsement of either stimulus packages or global financial regulation. An agreement that gave everyone what they claim to want would be almost too horrible to contemplate.