A communique of breathtaking blandness

The trek to the foothills by the sherpas - the officials who prepare economic summits - is over, and now the world leaders can scale the peak. But what in practice will the Group of Seven achieve when they meet in Halifax during the next three days? Very little, according to the draft of the final communique that was leaked last week. Even by the now modest standards expected of G7 meetings, we are apparently promised an agreement of breathtaking blandness.

This is nothing new. The trouble with the G7 is that when it has achieved concrete results, these have more often than not backfired. This has eroded the willingness of the nations present to swallow their differences in joint initiatives. On top of that, the G7 has only really worked when the US has been willing to put its back into it, something that it is less and less prepared to do.

The G7 took shape in the Seventies to create an informal forum for the management of the world economy after the collapse of the Bretton Woods system of fixed exchange rates. Perhaps its most concrete achievement was the 1978 Bonn summit, when a reluctant German government acceded to American pressure to act as a "locomotive" to a flagging global economy. However, that stimulus was subsequently blamed for triggering the renewed upsurge in world inflation and the second rise in oil prices.

The G7 fell into abeyance in the early Eighties, partly as a result of the ill-feeling engendered by the fall-out from the Bonn summit together with the go-it-alone spirit of the first Reagan administration. But in the mid Eighties it revived with a vengeance in concerted efforts to manage exchange rates.

The key to this new lease of life for the G7 lay with the Americans, who decided they wanted to pull the dollar down from the crazy heights it had scaled in the early Eighties. The result was the Plaza Agreement of September 1985, under which central banks intervened with heavy sales of dollars in the foreign exchange markets. The plan appeared to work too well for its own good as the greenback then went into freefall. By early 1987, the finance ministers were at it again, this time seeking to stabilise the dollar with the Louvre Accord.

Once again, however, the concerted effort was subsequently judged as counter-productive. The Louvre Accord was seen as paving the way for the bubble economy of the Eighties, from which Japan is still recovering. It was also blamed for the stock market crash of 1987.

Since then, the G7 has adopted a lower profile in international economic management. This year, for example, there has been no attempt to redress the exchange-rate fluctuations of the past few months that have forced the yen up by 15 per cent since January. Instead the G7 has limited itself to bromides against budget deficits: the key to resolving international imbalances is now held to lie in the correct domestic policies rather than through co-ordinated international action.

The loss in effectiveness owes much to the atrophying of US leadership - both the capacity and willingness to offer it and the readiness to accept it. As the world's biggest debtor nation, the US is no longer in a position to call the shots to creditor countries. Even if it wanted to, an inward looking, protectionist mood shackles the Administration from taking anything other than the unilateralist posture manifest in its declaration of trade war against Japan.

The central problem with the G7 system is that only the US was able to make it work - and the US no longer can or so desires. The reduction in G7 influence thus mirrors the declining role of the US as an international leader. The US is big enough to rock the boat, as in the trade dispute with Japan. But it can no longer take the role it played for most of the post-war period.

If international leadership is necessary for the health of the world economy, as the eminent economic historian Charles Kindleberger maintains, then that is a cause for great concern. The trouble is there is no obvious way in which economic leadership can be restored to a multipolar world. Into the vacuum flood the all- pervasive financial markets - for better, for worse.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
The cartoon depicts the UK (far left) walking around a Syrian child refugee
newsIn an exclusive artwork for The Independent, Ali Ferzat attacks Britain's lack of 'humanity'
Life and Style
tech
Arts and Entertainment
film
Sport
footballManager attacks Sky Sports pundit Jamie Redknapp after criticism of Diego Costa's apparent stamping
News
video
Life and Style
food + drink
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Administrator

£14500 - £16000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Infrastructure / Development Support

£20000 - £30000 per annum: Recruitment Genius: Fantastic opportunity to join a...

Recruitment Genius: Partnership Relationship Manager

£35000 - £45000 per annum: Recruitment Genius: A Partnership Relationship Mana...

Recruitment Genius: Mobile Developer - Xamarin

£45000 - £60000 per annum: Recruitment Genius: This software development compa...

Day In a Page

Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness
Homeless Veterans appeal: Homeless in Wales can find inspiration from Daniel’s story

Homeless Veterans appeal

Homeless in Wales can find inspiration from Daniel’s story
Front National family feud? Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks

Front National family feud?

Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks
Pot of gold: tasting the world’s most expensive tea

Pot of gold

Tasting the world’s most expensive tea
10 best wildlife-watching experiences: From hen harriers to porpoises

From hen harriers to porpoises: 10 best wildlife-watching experiences

While many of Britain's birds have flown south for the winter, it's still a great time to get outside for a spot of twitching
Nick Easter: 'I don’t want just to hold tackle bags, I want to be out there'

'I don’t want just to hold tackle bags, I want to be out there'

Nick Easter targeting World Cup place after England recall
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore