Adrian Hamilton: Don't look to China to save us from ourselves

World View

Adrian Hamilton
Thursday 03 November 2011 01:00
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In the heady days of the financial crisis of 2008/9 (can it really be only three years ago?), expanding the G8 group of leading industrial nations to the G20 to include the rising powers of China, India, Brazil and others was hailed as the way to a future of global economic governance.

And so it seemed at the time. As the financial meltdown threatened virtually every country, rich and poor, the G20 produced a sense of cohesion that did much to calm the panic.

Not any longer. Instead of bringing the world together, the eurozone crisis and the coincidental slowdown of the US economy have simply served to exacerbate the differences between a West unable to grow and an East still thriving at a hectic pace.

The French President, Nicolas Sarkozy, as host of this gathering of global leaders over the next two days, is furious about what the Greeks have done. But then what was he hoping for? That China would graciously accede to his request to pump money into the eurozone bailout fund and let him take the credit? France wouldn't have done it so graciously if the boot had been on the other foot. Why should China? That is the problem with the expansion of G8 to G20, as indeed the similar belief in the need to expand the UN Security Council to include India, Brazil and South Africa.

The West has seen it essentially as a means of co-opting the new rich into supporting the old industrial nations. The rising powers, however, see it as taking their rightful place in the order of things and pursuing their own interests just as the West has traditionally done to their disadvantage. Charity to the West doesn't fit its vision of a changed world.

Looked at from Paris, Washington or London, this is a crisis for the whole of the globalised economy, and China's insistence on controlling its currency is an obstacle to reviving western economies to the benefit of all. China, in their view, should let its currency rise, shift its economy from export to home consumption and, together with the oil-producing countries, use its foreign reserves to help out the Europeans in their difficulties. To Beijing, as to Pretoria and New Delhi, the stagnating economies of the US and Europe are products of the West's own making, with its obsessive pursuit of free-market economics and its low standards of political leadership. The latest fun and games in Athens is just a further example of a region which simply can't get its act together.

Even before the Greek Prime Minister decided to astonish the world and infuriate his partners by announcing a referendum on the austerity package, there was something unrealistic as well as humiliating in the way that President Sarkozy was going cap in hand to President Hu Jintao this week.

That doesn't mean that Sarkozy will be rejected out of hand. Beijing, as with the other newcomers to the G20, is perfectly well aware of its own interest in seeing a proper solution to the eurozone crisis and a resumption of growth in the US. But it is not going to, and sees no reason why it should, change its own internal policies to suit the West. The Chinese are ready to offer comforting words about the eurozone crisis. They will say, and mean it, that they are anxious to see the euro develop as an alternative reserve currency to the dollar, with all that this implies. But they won't agree to sink their funds directly into sovereign bonds or loans if they might lose money on them.

Any hopes that Beijing will allow a free float of the remimbi or encourage domestic consumption at the expense of exports is illusory. Beijing is too concerned at its own strains of inflation and urban jobs to look outwards.

And in that, it must be said, it's no different from the West, where politicians, for all Sarkozy's huffing and puffing on the summit stage, have equally turned inwards to domestic concerns.

Nowhere is this truer than in the US. The most glaring gap in global governance, especially on economic matters, is the withdrawal of Washington into itself. For all the talk of the rise of the Asian powers, the US remains by far and away the biggest economic presence in the world. Yet its politics have become parochial.

Don't look to the G20 to save us from ourselves. If the West wants to sort out its problems, it needs to do it itself.

Two cheers for Greece and its Prime Minister

It's hard not to feel a sneaking admiration for George Papandreou, the Greek Prime Minister, for raining on the eurozone rescue parade. You can, as the French, German and British governments all have, regard it as totally irresponsible. But at least it brings a note of political reality into a rescue plan that was being increasingly seen for what it was, all smoke and mirrors.

Papandreou is a democratic politician facing a public that has lost faith in the austerity plans he is implementing and a parliament that may well vote him out of office tomorrow. He may have all sorts of survival calculations in mind in calling a referendum, but asking for the public to decide on a question as important and contentious as the austerity plan is a perfectly proper thing to do. It's a contrast to the Dutch who seem to have decided not to take the plan to parliament for fear of losing the vote.

If governments are to get these programmes through without popular support, the only way they can do it effectively may be through governments of national unity. That, one feels, may well be the course in Italy as in Greece.

a.hamilton@independent.co.uk

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