We know already much of what the G20 will produce: a communique that looks very much like the last one (dubious reassurances about the great progress being made along vague dimensions), no progress on fiscal stimulus (as we have been projecting for some time), and promises to clamp down on regulation for hedge funds and the like (fine, but how relevant is this to either what caused the crisis or what can sustain a recovery?)
Almost all the important issues are kept off the table by anachronistic diplomatic niceties: monetary policy around the world, Europe’s impending crisis, and how to escape the overweening power of major banks in almost all industrial countries. The G20 summit has substantially failed even before it begins.
There is, however, one topic worthy of debate that is still on the agenda – the IMF. We need the IMF to have enough resources to help out when small and not-so-small countries get into trouble. Feel free to imagine IMF-less futures, but when the chips are down – as in Europe right now – to whom else can countries turn for money, advice, and the keys to international support? When they go to the EU, the Germans, the Swedes, or any other regional power, they are told bluntly: bring in the Fund.
The G20 therefore has to address the current low level of funding at the Fund – as the world economy and financial flows grew, no one bothered to increase the resources available under global financial emergency conditions. And here there is great tension – as I discuss in a piece at the New Republic online, the Europeans are lowballing (for no good reason), the emerging markets are standing idly by, and only President Obama could potentially rise to the occasion. But with so much else going on in the US financial sector and around the world, can he focus his persuasive powers sufficiently to win the day – particularly on and around a topic as dry as the IMF?
Or will the key issues get punted down to the G7/IMF spring meetings at the end of April? In international economic diplomacy, there is always another summit and another crack at meaningless communique drafting just around the corner.
By Simon Johnson