Having analysed the details of the last communique, the most striking thing about the latest one is how little has changed. One year on, and the main difference is that there is a sense of greater panic in the new version, but the solutions remain the same. Furthermore, there is no indication that any of the points in the last communique have made any difference whatsoever to the direction of the world economy.
Having erroneously analysed the last communique instead of the recent one, I find myself at a loss to actually analyse this communique. I suggest a reading of my first erroneous post, as many of the points remain the same. The actual substantive differences are largely elusive. There is an element of crowd pleasing measures, such as the crackdown on tax havens, and some witless discussion of a 'green' recovery with no substantive backing behind them, and chatter about millennium development goals. None of this is of any significance to the world economic crisis.
There are the same calls for a more global regulatory system, with the same problem of mixed messages on international cooperation and national systems, and many discussion of many actions that are already in process. There are the same calls for stabilising the financial system - which simply serve as a reminder of how much money and for how long the money has been poured into the financial system, only to still see it remain in a state of dysfunction.
This is not to say that there is nothing new, but rather it is largely reactive to measures that are already in place. Many of the proposed actions are actually a recording of what some of the governments have already done, rather than commitments to new action. Furthermore, I have recently seen elsewhere that many of the figures for various stimuli are simply double counting....
Perhaps the first difference that first struck me was the language of Gordon Brown seeping through the text. A typical example is as follows:
...that growth, to be sustained, has to be shared; and that our global plan for recovery must have at its heart the needs and jobs of hard-working families.There is much more similar fluff, to which I will devote no further attention. However, the level of fluff appears to have increased, and this is perhaps a signifier of how little change there really is. Returning to the meat of the communique, there is a difference in tone, but no substantive difference in the broad intent in the proposed solution/s. There is a stronger emphasis on a 'global solution' but this was the underlying intent of the last communique. The way that this 'global solution' takes shape can be found in the following key points (quotation):
- 'restore confidence, growth, and jobs;
- repair the financial system to restore lending;
- strengthen financial regulation to rebuild trust;
- fund and reform our international financial institutions to overcome this crisis and prevent future ones;
- promote global trade and investment and reject protectionism, to underpin prosperity; and
- build an inclusive, green, and sustainable recovery.'
However, there are a few points worth in the detail worth highlighting. The first of these is one of the most important, and that is that there is a commitment to not use devaluation of currency as a way out of trouble. However, the ongoing expansion of the money supply in countries in the US and UK might reasonably be seen as just one kind of such devaluation. The Chinese government have stressed their ongoing concerns at the risk to the $US of lax fiscal and monetary policy, and they might be seen as potential 'devaluers' themselves as their export machine comes to a halt.
The policies of printing money do get some attention in the following passage.
We are resolved to ensure long-term fiscal sustainability and price stability and will put in place credible exit strategies from the measures that need to be taken now to support the financial sector and restore global demandThis is a coded way of suggesting that the means of pulling the money supply back from the binge of money printing is vital, and is clearly aimed at those who have already turned on the printing press. However, once again, there is no substantive measures, just vague suggestions.
Overall, whilst highly embarrassed at analysing the old text, I am actually quite relieved that I did so. It has allowed me to see two key points in the latest communique. Firstly it is really, with a few exceptions and difference in detail and some additional fluff, a policy of 'more of the same'. The second point is that the first dose of the same medicine has done nothing to reverse the ongoing decline. Where there are any shifts in the underlying substance, such as the policy of recovery from money printing, there is absolutely no way to account for whether an individual government might be acting within the intent of the communique.
Overall, this appears to be a communique aimed at crowd pleasing, rather than offering anything which will significantly alter the current state of the world economy. As in the 2008 communique, it is possible to see a disregard of the underlying causes of the crisis, though this time there is even less discussion of the imbalances in the world economy, perhaps reflecting the increasing influence of China.
In short, it really is more of the same. The 2008 communique offered much the same message, but it is difficult to see that the previous G20 meeting led to anything that helped resolve the crisis, and little reason to believe that this current agreement will lead to anything that will make any new impact. Most of it is simply codifying what has already been agreed/taken place.
It is, quite simply, a piece of theatre.
Note 1: Once again I would like to restate my apology for the fundamental error in my last post. I have taken considerable care in this blog to try to use sound references and information. In this case I failed to do so for a simple error of not checking the date on the article. On the upside, it is a lesson I doubt that I will need to re-learn. Another upside is that I have some of the best editors that can be found - you the readers. The only trouble is that this is retrospective. Once again, thanks Tiberius for (so politely) pointing out my error.