You have to feel sorry for the poor Canadians. With a right-wing government hell-bent on massive public expenditure cuts, they have to fund not just one grand international summit with the G20 this weekend, but two, with the G8 summit on Friday. And in separate places. The G8 summit takes place in Muskoska, the G20 meeting in Toronto. All the security, the transport and accommodation doubled.
And for what? So that Canada's Prime Minister, Stephen Harper, can play host to world leaders and preen himself on his and his country's continued importance? We're back to the worst years of the G8, when world leaders could parade themselves with an air of importance while achieving very little of economic value, and certainly nothing that couldn't have been done in a few telephone calls between the relevant premiers and their staffs.
The commencement a year-and-a-half ago of summits of the G20 was supposed to change all this. Where the G8 – the US, UK, Canada, France, Italy, Germany, Japan and, later, Russia – was a club of the established economic big boys of the post-war, founded in 1975 in response to the oil crisis, the G20 summits of world leaders are a forum for a much wider grouping, including the major developing countries, begun in answer to the world financial crisis of 1977/8.
The world was now being rebalanced towards the East. The financial crisis represented a global disaster in which all were involved. It was time to recast the international institutions to reflect the fact. Indeed, the G20 as a stage for world leaders was seen as taking over from the G8 within a matter of years.
So went the theory. The practice has been rather different. The financial crisis was a crisis largely in the West, with ramifications elsewhere, and it was, as the French rather pointedly put it, a drama of Anglo-Saxon finance. The US and Europe (with the exception of Germany) were now the debtor countries, China, Saudi Arabia and South Korea were now the creditors.
In the minds of the "old world" of the G8 was the hope that, by widening the group, they could spread the burden of a solution to the financial disaster that had befallen them. Just as with climate change, the old generation wanted the new generation effectively to pay for their sins. And, just as with the Copenhagen Summit, it isn't quite working like that.
The first summits had decided to alter the structures of the IMF and World Bank, to enlarge their funds, loosen its lending criteria and (credit to Gordon Brown where credit is due) to increase substantially the sums in aid and help to the poorest countries suffering most in the financial crisis and the resulting recession.
In the event little has been done to alter the leadership or structures of the international lending institutions. The funds available for lending have gone up but the draw-down has been surprisingly slow. Instead of the G20 uniting the major economies, advanced and developing, the divisions have only increased with the recession, as China and India have recovered and the West remains stuck in – at best –slow growth. Washington has used everything from threats of a trade war to pleading to get China to agree to allowing its currency to float upwards. But it has been very much a bilateral affair. By announcing a fairly modest change in policy Beijing has avoided seeing it as an issue in Toronto. But it is doubtful that this was the reason it did so.
America's other target at the moment is Germany and Europe and its current vogue for cutting expenditure to reduce their budget deficits. The move, argues President Obama in phone calls and letters to EU leaders, will only make the recession worse and, in Germany's case, is entirely unnecessary. If it (and China) want to help the world, they should be expanding their consumption and sucking in imports rather than driving for export-led expansion.
But the leaders of the G20 aren't interested in helping the world. They're interested in managing their domestic politics. Faced with a world of debt and doubt, the German public wants a retreat to financial probity on the part of their government. A maximum deficit is now written into the constitution. The economics of continued deficit financing may be right. They are. But the politics isn't there.
The US administration is no different than any other country when it comes to pursuing its own domestic interests. Faced with rising deficits itself and an appreciating currency, which makes exports more difficult, it would like its potential markets to help it out of its difficulties. They won't. Over time perhaps you can see China, and even Germany, move to a more consumerist society, but not in any dramatic or government-directed way.
When it comes to banking tax reform, the positions are reversed. Washington has become the block to reform, not its facilitator. The US and Canada don't want to harm their revived banking sectors, China and India want to grow theirs, while the politics of Europe demand that even a Tory Prime Minister in Britain seek their punishment.
At the first summit of the G20 in Washington in November 2008 there was talk of a new Bretton Woods; globally-agreed rules to regulate the banks and a brave, re-ordered world of East-West co-operation. Less than two years later, the G20 resembles nothing so much as the old G8 it is supposed to be replacing – a talking shop for premiers to strut the world stage and send messages back home of their importance. As the protesters gather for their annual demonstrations against globalisation and the UN Secretary General makes his regular plea not to forget the poor, all one can feel is a terrible sense of what today's leaders could do and how little they will.
For further reading
'The Stiglitz Report: Reforming the International Monetary and Financial Systems in the wake of the Global Crisis', by Joseph Stiglitz (2010)Reuse content