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British prime minister announces 'new world order' after G20 summit 2009



G20 has little impact on global economics

A day after Gordon Brown declared the G20 summit had created a “new world order”, economists and policymakers agreed the results of the London summit were useful but stopped short of endorsing the British prime minister’s vision. It may be too early to tell.

Meeting in Brussels, finance ministers from eurozone countries rushed to endorse the G20 communiqué with Jean Claude Trichet, president of the European Central Bank, expressing the hope that the consensus reached “is an important element of confidence”.

A final verdict on the summit’s outcome, however, comes across an age-old problem for economists that the success or failure depends on the time period of comparison, prior expectations and what would have happened had the G20 never agreed to meet in London.

To this there can be no definitive answer. But it is apparent the world economic order was very little different on April 3 compared with April 2, since much of the International Monetary Fund’s resources, the main achievement of the summit, had already been agreed.

Since more will be needed, says professor Charles Wyplosz of the Graduate Institute, Geneva, the inflated rhetoric and declarations of a new world order “lessen the pressure on governments to work harder... It would be a tragedy that the summit ends up encouraging complacency.”

Compared with six months ago when the preparations were set in motion, the achievements are greater. Quite a big fiscal stimulus has taken place across the world, monetary policy is looser, protectionism has crept higher but not ex-ploded, the world has converged on tougher banking regulations and international organisations have been given the necessary firepower.

To claim a triumph for the G20 on the basis that such agreements have been struck is too charitable. Logically it suggests countries would have sat idly by and done nothing as the crisis raged and that their long-standing commitments to give adequate funding to international organisations such as the IMF were not worth a candle six months ago.

The London summit does not mark the end of the world financial crisis or the recession that has resulted, economists note. Morris Goldstein, of the Peterson Institute for International Economics, graded the summit “a solid B”, saying it was “good but not great”.

The main success economists were praising on Friday was the increase in IMF resources. None was particularly impressed by Mr Brown’s decision to add up the numbers into a $1,100bn (€818bn, £743bn) total.

Professor Arvind Subramanian, of Johns Hopkins University and a former senior IMF official, argued that the figure was “spin”, with much of the money already in the pipeline.

He also complained that new money for the IMF would help the world’s economy only if countries needed to use it. “The real obfuscation is to compare this $1,000bn with the fiscal stimulus of $5,000bn they have already provided – in cricketing terms, one would say that the leaders bowled a googly, or for baseball fans, they threw a knuckleball,” he said.

The same criticism applies to the $250bn increase in IMF special drawing rights, 60 per cent of which go to industrialised countries that do not need it.

Nevertheless, the increase in IMF resources is welcomed for the additional firepower it gives the fund if the crisis spreads.

Countries have pledged to make more funds available for trade finance but economists remain unconvinced that such a move would boost global trade.

Writing on the World Bank’s crisis blog, World Bank economist Simeon Djankov says there is “no evidence [trade finance] is a real bottleneck to trade”.


SOURCE

Financial Times, "G20 has little impact on global economics", 3 April 2009.
http://www.ft.com/cms/s/0/ca15da64-2090-11de-b930-00144feabdc0,dwp_uuid=60a3db68-b177-11dd-b97a-0000779fd18c.html?nclick_check=1

"The Insider" mailing list article, 08 April 2009.

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Tags: New World Order, Gordon Brown, G20, summit, London, 2009, G8, meeting, UK, Britain, NWO, , conspiracy theories.

 
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