Heading into the Toronto G-20 summit, what should casual observers and concerned
citizens be watching for? The Wire already covered Tim Geithner's and
Larry Summers's game plan,
laid out in The Wall Street Journal. Priority number one for the U.S. is
facilitating the global recovery, with effective international
financial regulation coming in close second. But how does that square
with the priorities of other countries? What are we likely to see, as
competing policy needs collide? Here are some of the predictions from
- The Big Conflict: Austerity vs. Stimulus The Wall Street Journal's Bob Davis explains that "while all the members of the G-20 industrialized and developing nations say they are working together to sustain global growth and reform financial regulation, the different letters [ahead of the summit] show substantial differences in approaches that can turn into deep fissures if not handled properly." Europe is focused on reducing debt, while the U.S. is worried about a double-dip recession. For both, there are strong convictions involved:
Essentially, the world's two largest economies--the U.S. and the EU--are addressing their biggest current and historical fears. For the U.S., that's a repeat of the mistakes of the Great Depression when Presidents Hoover and then Roosevelt withdrew stimulus too soon, which prolonged and deepened the downturn. For Europe, it's a fear of repeating the mistakes that produced the hyperinflation of the 1920s which gave rise to Nazism, added to the current fear of repeating the problems of Greece
- Not a Conflict If You're a Delusional German 24/7 Wall St.'s Douglas McIntyre notes that "Germany has argued that its austerity program goes hand in hand with growth." He calls this "an odd claim."
- More Generally, a Difference in Approaches and Speeds Finance professor Arturo Bris talks in The Shanghai Daily of fast, major change in the U.S. vis-a-vis financial reform, but some foot-dragging across the Atlantic. "Europe has missed the amazing opportunity that the crisis gave it to become the financial center of the world, after the failure of what President Sarkozy called 'Anglosaxon capitalism.' By the time Europe cleans up the mess, the United States will have established their dominance in financial markets again."
- Yet Without a Unified Front, Expect 'Pain' Timothy Garton Ash writes in the Guardian that the "one clear impression [he's got from conversations] is that one thing that really impresses the markets is determined, large-scale, 'shock and awe', coûte-que-coûte action by a single, serious sovereign--ie, a kind of power that the bond markets themselves can never be. Examples include the US in the financial crisis, China, and perhaps even (we shall see) little Britain today." The E.U. hasn't been able to pull that off yet. What he wonders is, "if even the relatively tightly knit eurozone does not convince, how can a loose, disparate constellation of 20 states?" His conclusion is simple and dark:
I hope for the best at the G20 summit this weekend; I hope against hope. But if I were you, wherever you are, I'd prepare for more pain - and watch out for another avalanche.
- Expect American Political Pain, In Particular Jacob Funk Kierkegaard of the Peterson Institute for International Economics is pretty pessimistic, too. he takes a look at the messy politics surrounding this summit:
congressional dysfunction and haphazard inaction on all fiscal policy matters create the worst of all worlds for the Obama administration right now by both completely undercutting the credibility of any calls for more fiscal stimulus by America’s G-20 partners in Europe as well as potentially undermining the United States’s own economic recovery later this year.
- And Expect Almost No Talk of Climate Change, adds Grist's Jake Schmidt--apparently the only one paying attention to that issue. "Climate change is just barely on the agenda as Canada really doesn't want to talk about it. The host country gets to largely set the agenda for the G20 summits. Canada really, really didn't want to put climate change on the agenda of this month's summit."