Euro Zone Crisis

G20: leaders lack force at just another talkfest

G20 Moscow meeting demonstrates the world lacks leadership to tackle the economic, social and environmental problems confronting it

PUBLISHED : Wednesday, 20 February, 2013, 12:00am
UPDATED : Wednesday, 20 February, 2013, 6:21am

The Group of 20 meeting of finance ministers and central bank governors last week demonstrated that the world still has a long way to go in developing the kind of leadership to tackle the immense economic, environmental and social problems confronting fragile, meteor-stricken Earth.

There was little evidence of any idea or contribution from China or India, let alone from Brazil, Indonesia, South Africa, or any of the developing countries now sitting at the supposed international top table, except maybe a suggestion of blocking action on climate change.

The six-page, 26-paragraph communiqué was full of waffle. It said: "Thanks to the important policy actions in Europe, the US and Japan, and the resilience of the Chinese economy, tail risks to the global economy have receded and financial market conditions have improved."

Thanks to the important policy actions in Europe, the US and Japan, and the resilience of the Chinese economy, tail risks to the global economy have receded and financial market conditions have improved

The same self-congratulatory paragraph admitted that a host of risks remain with "global growth too weak, with unemployment unacceptably high …

"Weak global performance derives from policy uncertainty, private deleveraging, fiscal drag, and impaired credit intermediation, as well as incomplete rebalancing of global demand."

Finance chiefs called for stronger economic union in the euro zone, action to "resolve uncertainties related to the fiscal situation in the US and Japan", and boosting of domestic growth in surplus countries. They promised to build a more resilient financial system and promote "ambitious structural reforms to lift growth" and "ensure sustainable public finances".

But instead of offering an action plan or a detailed road map to achieve these reforms, the communiqué deteriorated into a laundry list of pious wishes, promising assessments, reaffirming commitments, welcoming progress and generally reshuffling deckchairs.

The language is often so pompous it is hard to imagine any constructive solutions arriving from this set of mini-leaders.

The plight of the global environment featured in paragraph 26, the final one, promised: "We will voluntarily self-report this year on our efforts to incorporate green growth and sustainable development policies into our structural reform agendas … develop methodological recommendations for and undertake a voluntary peer review process for such fossil fuel subsidies … "

Meanwhile, use of fossil fuels is contributing to unhealthy air and inexorably warming the Earth with unpredictable changes in climate patterns.

One example of the failure of the G20 Moscow meeting is its reaffirmation of "the urgent need" to ratify changes in the quotas and governance reform of the International Monetary Fund. These were agreed nearly three years ago in 2010.

What is holding things up? Who is dragging their feet stopping China and other developing countries from having a bigger say in global governance? The communiqué is silent except for "attaching high importance to securing continued progress in meeting these objectives".

Do taxpayers have to pay for leaders to waste time like this?

Faced with such uninspiring rhetoric, reporters had a hard time finding an interesting topic. Many of them lighted on the promise not to fight currency wars.

Contrary to media coverage before the meeting that Japan was in certain finance ministers' sights for deliberately trying to devalue the yen, the communiqué stated: "We will refrain from competitive devaluation. We will not target our exchange rates for competitive purposes, will resist all forms of protectionism and keep our markets open."

A green light for Japan's Abenomics to continue and sure enough the yen weakened again to 94 to the US dollar, heading to 100, from record highs of 75 a few months ago. It remains to be seen whether the policy will boost Japan's exports and its economy.

The BBC, no doubt prompted by closeness to George Osborne, the British chancellor of the exchequer, highlighted the promise to crack down on tax avoidance by multinational companies which use multiple financial wheezes to shift profits from places where they will be taxed heavily.

Starbucks, Amazon and Apple are among companies that have big revenues in Britain but pay little or no taxes.

France and Germany joined Britain in deploring the practice, but the US was silent. Altogether, US corporations are holding US$1.7 trillion in reserves offshore unwilling to repatriate it and face higher tax rates at home. You might think the cash-strapped US Treasury might join in the crusade for fair payment of taxes, but President Barack Obama is clearly reluctant to start another battle with Republicans over corporate taxation.