It was always unlikely that this week's G20 meeting would achieve much. Sundry anarchists will take the opportunity to strut around London making a nuisance of themselves. Gordon Brown will take his opportunity to strut in front of the cameras, exaggerating both his own role and the Summit's achievements. But the Prime Minister will have to be careful. The other leaders are not coming to London merely for a bit part in a Brown party political broadcast. Most of them want a share in the limelight to further their own domestic political agendas; some of them nurse resentments.
Less than three years ago, Mr Brown was delivering condescending lectures to the Germans about the superiority of his way of doing things. Frau Merkel has not forgotten. She did not agree back then; she is even less in agreement now. She is in no mood to buy an ill-thought-out fiscal package from the man who patronised her. Like a lot of people, she might prefer an apology. As for fiscal stimuli, the German economy will receive one anyway, from the increased cost of unemployment benefits for the workers who have been laid off because American and British mismanagement of their banking systems has led to a downturn in global demand.
The German Chancellor has two further problems. First, she has an election in September, so this is hardly a propitious moment to alarm her voters with expensive recovery packages devised by the British and Americans. Second, German officials assume that because the IMF is low in funds, they will have to deal with the eastern European banking crisis which has still not reached its peak. Austria, Hungary, Romania, Ukraine; we do not yet know the scale of the banking systems' interlocking liabilities, but we do know that even if we are talking Ireland rather than Iceland, they are probably too large for the domestic economies to sustain.
So the German government will have to find a lot of money while coping with two different sensitivities. The German public can hardly be expected to surge with enthusiasm at the thought of vast new liabilities. It will need to be reassured that this is not just throwing good German Euro-bonds after bad lending; that Germany will regulate as well as rescue. Time for the Germans to start lecturing? One can imagine how well that would go down in eastern Europe. Gratitude for the assistance could quickly turn into grumbling about bank-anschluss and bank-krieg.
Yet there is one contribution which the G20 could make. Two weeks ago, the World Trade Organisation predicted that global trade will contract by nine per cent this year, the largest peacetime fall since the 1930s. We do not want to be breaking economic records from the Thirties. One way to ensure that this does not happen is to eschew any return to the protectionism of that era, which spread through the world economy like a virus.
If this week's communiques included some robust rebuttals of protectionism, this would help to protect the world economic order, especially if words were reinforced by actions.
If that were to happen, the G20 exercise would have been worthwhile, even if Mr Brown might not agree. Thanks to Chancellor Merkel, the Gilt markets and the Governor of the Bank of England, he will not meet his political targets. That is a good outcome, because he did not deserve to. They depended on intellectual dishonesty. Mr Brown would have liked to make two bogus claims. First, that he had the right policies, whereas the Tories had no answers except a tax cut for the very rich. Second, that the banking crisis was all the fault of Sir Fred Goodwin and his pension.
Mervyn King torpedoed the first one. Although the Governor did not explicitly agree with the Tories, he implicitly endorsed their argument that the current problem is monetary, not fiscal. There is no shortage of money, but it is not circulating because the banks are not lending. As the Tories' national loan guarantee scheme should correct that, it would be infinitely more useful than a fiscal package whose details were vague – probably because they had not been thought through – whose immediate effect might be minimal, and whose future costs would be horrifying.
At the last election, the Tories proposed a £1.7bn tax cut for pensioners. On television, Alistair Darling shook his grey locks and announced that this would leave a black hole in the national finances. In those days, it amounted to one day's public expenditure. Today, Mr Darling should have a better understanding of financial black holes. After all, he is presiding over one which threatens to swallow the entire country. But he and the PM would still like to pull another black hole stunt at the next election and insist that the Tories' plans for inheritance tax would cripple the national budget.
That is why David Cameron has refused to reject Labour's plans for a 45 pence top rate. He is not going to fall into a black hole trap. Messrs Brown and Darling would like to spend half the election campaign pitching into the Tories for a couple of billions in tax cuts, thus distracting attention from the vast budget deficits and the soaring national debt. Mr Cameron has upset some Tories. But it was a shrewd move.
Poor Fred Goodwin. When his bank bought ABN-Amro, it was widely assumed that he had demonstrated his Master of the Universe credentials. Certainly, he was taking an optimistic view both of his own powers and of world economic conditions. But the same was true of Gordon Brown, as the Germans well remember. Sir Fred has excuses, unlike Gordon Brown's friend and supporter, Sir Victor Blank.
By the time he agreed that Lloyds should buy HBOS, everyone knew about world economic conditions. Everyone knew that it would be madness to buy a bank without knowing what you were buying. If you agree to override caution just because the Prime Minister sweet-talks you at a cocktail party, you end up with an arsenic and cyanide cocktail. That is what Lloyds shareholders are now drinking, yet Sir Victor has held on to his job. Given the choice, a wise shareholder would prefer Sir Fred.
The Government cannot be accused of inciting mob violence against Fred Goodwin. It can be accused of shameless cynicism. At one stage, Sir Fred was Labour's favourite banker, which is why he received his knighthood. He took his fateful decisions in the same way that Gordon Brown borrowed huge sums of money in the wrong phase of the economic cycle. Both men forgot that what goes up will eventually come down. Sir Fred has now learned that lesson. It will soon be Mr Brown's turn.