What a pantomime. Black Range Rovers, fancy frocks, the Queen dwarfed by the Obamas, the obligatory gaffe from the Duke of Edinburgh, Sarko being unfashionably late. The official engagements at the G20 were much weirder than the anarchist street parties outside, which have developed a kind of formality of their own. The massed ranks of Metropolitan Police performing the traditional truncheon display after the ceremonial trashing of RBS windows. They should put it on the social calendar.
But what were we all supposed to make of these shiny happy world leaders at their dinners and receptions? I was reminded of the film, Titanic. The unsinkable ship was a kind of metaphor for Edwardian society before the First World War. In the state lounges and dining halls, the great and the good carried on with their elaborate social rituals unaware that they were heading for an iceberg. They continued to go through the motions even as the ship went down.
The G20 managed to rearrange rather more than the deck chairs, but did nothing to solve the fundamental design flaws. It was an exercise in collective morale boosting, keeping spirits up, a group hug. But as they tucked into Jamie Oliver’s Scottish Salmon, world trade was sinking beneath them faster than at any time since the second world war. The IMF last week doubled its forecast of losses from the US banking crisis to $2.2 trillion. Three thousand jobs losses were announced in Britain alone on the day of the official G20 communiqué – and the UK recession has hardly begun.
Of course, we shouldn’t wallow in negativity. One trillion dollars from the richest nations will help. Though it is mostly going to the IMF to provide loans to countries in Eastern Europe that are falling like skittles – and perhaps to Britain which is wobbling alarmingly. Tax havens will become more transparent, and there is help for exporters. But this was no comprehensive solution to the global slump and to be fair none of the participants pretended its was. The only really significant intellectual contribution came from the Chinese who proposed a new international reserve currency to replace the dollar. In terms of Geopolitics, the G20 did mark a watershed with the Asians looking beyond the era of American economic and military hegemony.
As an event, the G20 was a presentational coup for Gordon Brown, perhaps even the CV for his next job. He is surely up for a plum role in international banking after this display, and it may not be long before he’s on the job market. Expectations were carefully lowered in advance of the summit so that almost any agreement could be hailed as a triumph. The threatened ‘walk out’ by the French if Anglo-Saxon capitalism wasn’t curbed was pure theatre badly acted.
The truth is that no one really knows how to curb Anglo Saxon globalisation, because regulation takes place within national jurisdictions. There is as yet no international body capable of reining in the trillions of dollars that flow uncontrolled around the world financial markets. Similarly, a “whatever it takes” fiscal stimulus was being proposed by the countries least able to afford one: Britain and America. The idea of massively increasing debt in order to solve a crisis caused by debt is simply untenable. Obama and Brown must know this, so they were probably quite glad to have their ‘hands tied’ by the Europeans.
The smiley world leaders returned home to industrial closures, mass redundancies and mounting public and private debt. The banks aren’t lending, and the G20 will do nothing to change that. National governments have handed hundreds of billions of public funds to irresponsible and unreformed financial institutions through various schemes to buy their toxic assets. And the state-funded banks already up to their old tricks – incredibly using public money to buy up their own toxic assets; still paying dividends and bonuses; ignoring the environment. RBS, which is 80% state owned, has used £10 billion of the £30 billion it received from the UK taxpayer to invest in fossil fuel projects.
Somehow the world has to create an international financial governance with the power to regulate the international banks and curb speculation. A reformed International Monetary Fund could have the responsibility of overseeing the creation of a true international currency unit, against which all others will be measured. This is a big ask, but by no means impossible. . If Europe could introduce the Euro, then the world can introduce Bancor – which was what Keynes proposed to call the international currency in 1946. A common global currency is the only way to address the problem of currency chaos and financial anarchy.
The £250bn in Special Drawing Rights agreed at the G20 are a move in the right direction. An international currency would not only bring stability and permit international regulation, it could also be used to generate loans to the African continent and other parts of the non-developed world. This is a matter, not of charity, but of self-interest for the West because the development of Africa will create new markets and new wealth to replac what is being lost in the global depression. After spending trillions rescuing insolvent banks, America and Britain can never again say that the money isn’t there for this global stimulus.
The other international priority is of course climate change which hardly got a mention at the G20. Again, this is in our global interest- we don’t want to fry – and also in our economic interest, since it could be the biggest engine of job creation in history. The development of renewables, the scrubbing and storage of carbon, the rebuilding of the housing stock, extending public transport and researching nuclear fusion could create new markets and investment opportunities.
Capitalism both destroys and creates. It has created greater material prosperity than ever in human history, but it has entered a destructive phase of the cycle as the excesses of the debt boom are swept away. It is also destroying the environment because the impact on the planet is not costed. However, capitalism goes where it is allowed to go. International regulation and specific climate goals could provide the foundation for another global economic boom, based on creative entrepreneurialism and sound finance.
This is not visionary or futuristic. Most people who have looked at the problem, from Sir Nicholas Stern to George Soros, have come to the same conclusion. The problem is simply getting from here to there. A small step was taken along the road in London this week. We can only hope, as Mao said, that the journey of a thousand miles begins with one step.