The father of the Group of 20 is standing up for his progeny.
Paul Martin, who used U.S. backing to create a forum where the established powers and emerging markets could meet to talk about economic policy, says there was “substantial” progress made at last week’s G20 summit, a counterpoint to the widespread opinion that the Cannes meeting was a disappointment.
Here’s the kind of commentary that has Canada’s former finance minister and prime minister piqued.
“Last week’s summit proved almost comically irrelevant to the future of the global economy,” Wolfgang Munchau wrote Monday in the Financial Times. “In the previous decade, the old Group of Seven failed to prevent various financial crises. This decade, the G20 is failing to solve them.”
It would have been extremely difficult for the G20 to satisfy Mr. Munchau.
“Bringing an end to the euro zone crisis would require a central bank that acts as a lender of last resort, a common European bond market, and, ultimately, a fiscal union with a high degree of labour and product integration,” he writes. “However, these measures are at present inconsistent with national constitutions, European treaties and political preferences.”
If this is your bar for success, then failure is all but assured. Mr. Munchau is a columnist, so has the freedom to call things as he sees them. But reporters tend to cover summitry in much the same way. With only a few hundred words or a couple of minutes to sum up a myriad of views on dense subjects, nuance goes out the window. Was an obvious problem-solving step taken? No; ergo, the meeting was a failure.
Mr. Martin defines success quite differently.
Italy’s decision to allow economists from the International Monetary Fund to oversee its budget is significant, an example of how peer pressure can result in a positive policy shift, Mr. Martin said in an interview from Montreal. The G20’s decision to strengthen the Financial Stability Board, and make Bank of Canada Governor Mark Carney its head, is another concrete example of progress, Mr. Martin said.
In other words, to expect more than incremental change is to expect too much. The G20 still is too chaotic an institution to do more than keep the world’s major economies pointed in the same direction. No one country dominates the group enough to set the tone, so coming to a consensus is going to take a lot effort. “It’s going to be messy because the multi-polar world is messy,” Mr. Martin said. “It’s a mistake to question whether the G20 was a success or not because it didn’t come up with the ultimate solution.”
That might be letting the G20 off a little easy. The leaders said they were ready to give the IMF more resources, a move that could have calmed anxiety over what might become of Italy if its bond yields continue to rise. Yet the G20 failed – oops, there’s that word again – to put down the cash. Leaders said their finance ministers would figure out how to do this by the time of their next meeting. Those meetings typically are held in February. This crisis is now.
Mr. Martin said leaders should now expect their finely crafted agendas to get derailed. The Cannes summit was knocked off course by the Greek government’s shocking decision to hold a referendum on the European bailout. Last year, the Seoul summit was a victim of the “currency wars.” This argues for a permanent secretariat, or some means to ensure more negotiations take place before leaders actually assemble.
“More than anything, what has to be done is more work prior to the summit dealing with the issues,” Mr. Martin said.
Indeed, some observers suggested negotiators simply ran out of time to sort out how to beef up IMF resources because so much extra effort was required to deal with Greece. There also are reports that G20 finance ministers might hold an emergency meeting by the end of the year to deal with the issue, rather wait until February.
For Mr. Martin, this would be another sign of progress. But one can also imagine Mr. Munchau’s take: Too little, too late.