Monday, June 18, 2012
Controlling the International Economy
I've used a huge ocean wave as my picture, to illustrate what I see as the nature of the problem. The crisis threatens to explode into a tsunami which will sweep destructively through the world. One might expect the great powers to be desperate to collaborate in their collective interest, but Larry Elliot suggests otherwise.
Anybody expecting the G20 to pull another rabbit out of the hat now simply hasn't been paying attention. Leaderless and at odds over what needs to be done, it has taken the G20 less than four years to become as redundant as the G8 it was supposed to replace. Barack Obama's policy horizon stretches no further than election day in November, the Germans feel they are being unfairly branded as the villains of Europe's debt crisis, and Beijing has been having a giant sulk at G20 meetings for more than a year after bridling at the suggestion that an oblique reference to its trade surplus should be included in the Paris summit communiqué of February 2011.
The problem of democratic governments is intense. Politicians are elected to solve political problems and, most importantly, to achieve prosperity. But this crisis is not amenable to solutions offered by individual governments. Collective action is imperative and yet has not been forthcoming. At least in 2008, Gordon Brown was able to seize the G20 and convince them to act collectively. Now Obama seems frozen into inaction and the Chinese unwilling to consider much beyond protectionist measures. What this will do for the standing of elected politicians, especially those seen to be living indulgently, can only be imagined. Elliot suggests three things are necessary:
Three things need to happen to avert the worst. Firstly, there has to be a proper analysis of why the world is in its current state. Secondly, measures have to be put in place to address the problems highlighted by that analysis. Because this will take time, there is a third imperative: short-term damage limitation to prevent another recession causing permanent scarring through loss of skills and mothballing of investment. Thus far, there has been a bit of ineffective damage limitation and not much else. The analysis is not that difficult, even though the conclusions that are drawn from it are uncomfortable.
As the tsunami approaches it is profoundly to be hoped that world leaders finally snap out of their zombie like state and take decisive action.
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