Jeremy Warner: G20 communiqué gives some reason for optimism
Friday 03 April 2009
The $5trillion fiscal stimulus is achieved merely by pooling together every fiscal measure from around the world which might conceivably be described as a "stimulus" and then arriving at this reassuringly large and suspiciously rounded number.
Similarly, the $1.1trillion of additional resources is largely a regurgitation of pre-agreed measures, such as increased finance for the IMF. Much of the rest of the communiqué is predictably woolly stuff, which allows each nation to interpret it whichever way they want for domestic consumption. On the regulatory agenda and much else besides, there is much detailed work yet to be done.
The communiqué is perhaps more notable for what it didn't say than what it did. Where was the international agreement to embark on a further fiscal stimulus worth 2 per cent of GDP? Where too was the common approach to treatment of toxic banking assets, or mention of the precise powers and responsibilities of the new Financial Stability Board?
But none of this is to belittle the achievements of this summit, which as Gordon Brown says has commanded a degree of consensus across a wide range of previously divisive issues which would have been thought inconceivable only a few years ago.
Nations have been united in adversity, rather than, as so often happened in the past, torn apart by it. The communiqué is littered with the word "unprecedented". That it isn't. Compared to the Bretton Woods agreement of 1944, which established the post-war financial order, this series of initiatives doesn't come anywhere close. Yet this is undoubtedly a breakthrough moment which should begin the process of healing that the world's financial and economic system so desperately needs.
Stock markets are not easily impressed, especially in today's still- volatile conditions, but across the globe they soared yesterday, rounding off what looks as if it is going to be one of the best ever weeks for equity gains. So does this renewed mood of optimism mean that economic growth will soon be resumed?
It's still too early to be confident, but, if evidence of green shoots is still painfully thin on the ground, at least the snowfall seems to be easing. The world's financial and economic system has suffered a profound collapse in confidence, which has poleaxed economic activity and trade. The London summit is an important staging post in helping to rebuild that confidence.
The degree of consensus achieved on regulatory reform is also impressive and means if we didn't know it already that banking and finance have been changed for ever. A lower-risk, lower-paid and lower-return age of finance is about to dawn. The main elements of Lord Turner's review of financial regulation seem to have been adopted more or less as he suggested. Meanwhile, the summit has confined tax havens and banking secrecy to the dustbin of history. International sanctions will in future be imposed on uncooperative offshore centres.
As I say, it's easy to be cynical, but the summit has also achieved something genuinely impressive, which may presage international cooperation and policy coordination across a much wider range of issues from climate change to arms control. For the first time in a long time, there's reason for optimism.
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