Outlook There is not much to remember fondly about the panic in the financial system that swept the world during the final few months of 2008. But we should at least applaud the way in which governments and central bankers around the globe put aside their differences as they sought to deal with the crisis. Not only was the bail-out of the banking sector co-ordinated on a global scale, but it was followed by an equally united fiscal response, which prevented recession becoming depression.
This consensus could not last. Two years later, as the representatives of the world's major economic powers arrive in Washington for the annual meeting of the International Monetary Fund, they still publicly talk the language ofco-operation. In private, however, they are busy calling those left at home, instructing them to pursue the national interest at all costs.
In an ideal world, this IMF meeting would serve as a peace summit for the protagonists in what Brazil's finance minister recently described as a "global currency war". However, there appears to be precious little goodwill on either side. Those nations which are determined to keep the value of their currencies depressed in order to protect their export industries – and it is far from only China that plays this game – are continuing to intervene in the foreign-exchange markets in one way or another. Those who worry they are being disadvantaged by such policies are upping the rhetoric. It is every man for himself.
The collateral damage in this war is the threat to the still-vulnerable global economic recovery. But although Dominique Strauss-Kahn, the managing director of the IMF, voiced exactly that concern yesterday, the Fund seems unwilling, or unable, to play the role of peacemaker or peacekeeper. Mr Strauss-Kahn warned that "the mood" was not in place to strike a deal at this meeting.
What a pity. When the threat of meltdown was immediate, the IMF's members felt able to act in unison. Now that the threat has receded, they have abandoned the collegiate approach, even though this failure to address the huge imbalances in the global economy will, sooner or later, precipitate another crisis.