Leading article: There is still a common global interest

Share
Related Topics

World leaders meet in Canada today for their back-to-back G8 and G20 summits in fractious mood. The climate of international co-operation that was in evidence at the height of the financial crisis two years ago has largely dissipated. Individual governments now seem to be heading off in their own separate directions.

Several European states are rapidly tightening budgets, despite pleas from Washington for them to slow down for the sake of global demand. The German Chancellor, Angela Merkel, has shown this week that she is not in a listening mood when it comes to deficit reduction. And, of course, our own Chancellor has just announced a severe fiscal squeeze.

Co-ordination on banking reform has broken down too. Canada and Japan are opposed to new levies on banks. And European governments are resisting new rigorous capital requirements. One bright spot on the global economic horizon has been China's agreement to curb its currency manipulation. But a question mark remains over how serious Beijing is about moving away from its existing mercantilist policies. Governments are also reneging on their commitments made at Gleneagles in 2005 to increase their aid budgets to 0.7 per cent of GDP. Italy and Japan have actually cut their development contributions in recent years.

In part, this shift is because governments feel the moment of greatest economic danger has passed. The intense pressure for co-operation has receded. Governments are also responding to domestic pressures. Electorates feel bruised by the recession and are inclined to punish incumbent governments. And powerful domestic lobbies are making their voice heard. Self-interest is pushing itself to the fore.

But for nations to turn their back on economic co-operation at this moment would be folly. Unemployment around the world is still high, and the outlook for global growth is deeply uncertain. No one can be sure what will happen as the fiscal and monetary stimulus put in place by states and central banks in recent years is withdrawn. The hope is that the private sector will rebound and fill the gap. But this is by no means guaranteed. Moreover, there is a significant danger in so many nations relying on an export-led recovery. Someone has to buy those exports. Concerns about a collapse in global demand are not idle.

The risk of another global financial shock is also significant. The eurozone crisis is not over, and banks in Europe have been slow to recognise their losses on private debt. The failure of another large financial institution could easily result in Lehman Brothers-type moment for the global economy, or perhaps worse. This underlines the need for co-ordinated regulatory reform of the financial services. Multinational banks are expert at playing states off against each other. Their lobbying needs to be met with a united front from governments.

There is a common global interest in a managed and sustainable fiscal adjustment by indebted sovereign borrowers. There is a common global interest in a rebalancing of trade and capital flows so that emerging countries do not find themselves lending vast sums to rich nations. And there is a common global interest in bringing the skills of the populations of poor states fully into the international economy. Aid flows are one way to do this; liberalising global trade is another.

What world leaders need somehow to rediscover in Canada this weekend is the sense of common economic and financial interest that briefly prevailed in late 2008 and early 2009. But there is a big job to be done at home too. What leaders need to explain to their truculent domestic populations is that, whether people like it or not, in an open, global economy, we really are all in it together.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Senior Research Fellow in Gender, Food and Resilient Communities

£47,334 - £59,058 per annum: Coventry University: The Centre for Agroecology, ...

Senior Research Fellow in Water and Resilient communities

£47,334 - £59,058 per annum: Coventry University: Our team of leading academic...

Nursery Nurse

£7 - £8 per hour: Randstad Education Leeds: Nursery Nurse Leeds November start...

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Day In a Page

Read Next
Fathers should have their statutory paternity leave doubled, a think tank has said  

Extended paternity leave is a baby step towards equal parenting

Louise Scodie
 

There's nothing wrong with 'sexting' - everyone has done it

Natasha Devon
Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker