G20 dinner in WashingtonWritten by Uln on November 16th, 2008
This weekend the leaders of the most powerful countries in the world met up in Washington to discuss how they are going to pull us out of the big economic mess where we are stuck deeper day after day. After a refreshing dinner in the white house including quail, lamb and Vermont brie, the leaders were in a position to promise “vigorous efforts” to fight against the crisis.
Looking at the the reactions from within and without the Summit, it is surprising how peaceful it has been compared to others in the past. No protesters on the streets, no colourful accusations of irresponsibility, nobody even remembered to mention Irak or bash the French. The leaders of the world have understood that the time is not for funny gags. The financial crisis is looming on each of our countries, and we have to stand united. Are we turning the page into a new phase of collaboration in the international community?
For the moment, these are the main points agreed upon:
- Stabilize banks and boost growth - This includes bailouts and Economic “stimulus”. There is no more than a general statement in this Area, no commitment by any of the States.
- Better Regulation of Financial Markets - Supervision of banks and credit-rating agencies, scrutinize executive pay, tighten controls on complex derivatives, etc. This one was pretty obvious.
- IMF Reform - This is were China and the other developing countries put pressure to have a voice in the exclusive US-EU club. It is likely that they will succeed, and IMF will gain some credibility from that (but gain in efficacity does not not necessarily follow)
- Commitment to an open global economy - Free market, no barriers to trade or investment. A point that all countries big and small have agreed upon. Hopefully their policies will remain consistent with this statement.
In conclusion, nothing to write home about. What with all the Bretton Woods II measures that where going to change the economy of the XXI Century? Not yet. There will be a follow-up meeting in April 09, and by then some specific plans may be ready for discussion. There hasn’t been time to mature any serious ideas. And anyway, he who shall be in charge of leading the effort could not join the party this weekend.
Indeed, together with the Brie cheese and the lamb, there was a hot potato served for dinner last Friday. And one that nobody is eager to open up, but rather roll on swiftly from plate to plate until it gets to its final destination, president elect Obama. The minute he steps into his office in January it will be there waiting for him, wrapped up in Christmas paper.
In this sport of potato rolling, the Chinese have long been masters. Their words are measured and dictated by wisdom. Thus spake President Hu Jin Tao:
- Reform [of the international financial system] should be conducted in a comprehensive, balanced, incremental and result-oriented manner.
- A comprehensive reform is one that has a general design and includes measures to improve not only the international financial system, monetary system and financial institutions, but also international financial rules and procedures.
- A balanced reform is one that is based on overall consideration and seeks a balance among the interests of all parties
- An incremental reform is one that seeks gradual progress
- A result-oriented reform is one that lays emphasis on practical results.
This sounds very much like Deng’s “Groping stones to cross the river”, an approach which was very effecive to tackle a delicate process of transition like China’s, but not necessarily to avert a crisis. Some famous analysts have long been speaking against this kind of solution.
And then, one wonders how this fits with the aggresive stimulus package that was supposedly launched last week. That was certainly not an incremental announcement. But who knows, it is not for us mortal bloggers to understand the ways of the Popular Repubic.