It is easy to be cynical about what global summits and communiqués can achieve. But what happens in London's Docklands on Thursday matters. It is an opportunity to send out a clear message, backed with firm commitments, that international resolve exists to tackle the global crisis and to help people affected, here and now.
The recession, and financial crisis that caused it, has put to rest the Tory philosophy of laissez-faire isolationism. It is only through global governmental action that we can move forward, and that is why the decisions made on Thursday matter so much. Whether you are a Chinese villager looking for work in the city, a construction worker in Leeds where building has come to a halt, or a homeowner in negative equity in Virginia, we are all intricately and unavoidably linked in the ups and downs of the world economy.
Despite scepticism from most of the press about the 'substance' of any commitments, there will be firm measures announced - including a doubling in the size of the IMF, strict sanctions for tax havens that continue to withhold information, and a global structure for financial regulation (including bringing hedge funds in to the realm of the regulated). It might even happen that an international agreement on bank pay and bonuses is agreed. The importance of such measures should not be underestimated - they will bring an end to unbridled capitalism and greed that got us to where we find ourselves today.
A lot has been said about divisions regarding fiscal policy. I strongly believe that more needs to be done to get cash circulating in the economy again, and that the costs of doing nothing (and enduring a long and drawn out recession) are greater than targeted, temporary fiscal stimulus. But, the divisions between France and Germany on the one hand and the US and UK on the other are overplayed. Germany, for example, has already announced a fiscal package larger than ours - despite their accusations of 'crass Keynesianism'. Moreover, the larger welfare states in Europe will automatically increase budget deficits in recessions resulting in less need for discretionary packages unlike in the US - which is precisely why US emphasis on fiscal packages is rightly greater. So, while all governments must play their part, they will do so in different ways.
Barack Obama was spot-on in his FT interview today when he called on world leaders to "deliver a strong message of unity" for the sake of the world economy. Although ministers are understandably trying to downplay what the summit can achieve to avoid over-promising and under-delivering it is not an exaggeration to say that Thursday is a pivotal day for the world economy.
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Three broken windows and a couple of coppers sprayed with red paint.
We need more days like these.
Ay???
Unless it was a parody of course.
Could you elaborate further on what 'laissez-faire isolationism' is please in the context of the global economy?
Also, you have only covered one aspect of 'crass Keynesianism'.
I will elaborate on this for you.
Since 1997, this government has conducted itself and encouraged in others an unprecedented consumption splurge. In a world of benign price inflation (a battle largely won during the 1980 and early 90s), it has exploited that to breaking point with unbridled government and consumer spending.
Any semblance of monetary constraint (old-fashioned sound money) was abandoned, savings ratios were allowed to decline as this government actively sought to reduce the incentive to save.
A total failure to tackle any of the supply side economic factors, one example, house building. A means to house price stability - this government totally failed maintain any semblance of maintaining an adequate supply.
This government, not the Americans, not the bankers had the power to stop it. The bankers were merely playing the rules and regulations set out by the government.
Otherwise they go to jail, a lack of prosecutions suggest they actually didn't do anything wrong.
Labour's economic policy was centred on one industrial sector, the other were allowed to rot. Labour has demonstrated a determined and calculated action to hive off as much tax as possible from the financial sector (at the expense of every other) to fund New Labour's spending plans.
This recession has come because of the atrocious mismanagement of the UK economy. The money supply, so long a measure of performance and also long-term inflationary pressures has been allowed to get out of control.
Alarm bells should have started ringing several years ago when the money supply was growing at 10-15% a year.
Why? It was fuelled by the release of loans on the back of assets and no-one was watching how highly leveraged these banks were.
This debt was not managed at all, no single regulatory body was watching this. The Bank of England used to have an oversight brief (pre-independence) on banking debt and had the powers to ensure that banks held sufficient deposits to cover them.
They lost this power to Gordon Brown's reforms and this was Gordon Brown's idea.
You can blame the hedge funds all you like, this is not their crisis of their making. The recession in the UK has been amplified to be many, many times worse by Gordon Brown.
The Opposition warned him in 1997, the BoE stated that a loss of debt management powers could have severe consequences at the same time. In the years between then and now, the IMF have warned him several times, the OECD have warned him several times, the Opposition have warned him several times.
He turned a deaf ear to all the warnings. He told us he never saw it coming, then he told us he saw it coming but didn't act.
He cannot even admit his culpability, he cannot even say 'sorry'.
This is not a problem that can be 'fixed' by a global solution, the solution starts here in the UK. This is a debt of this government's making with its ineffective regulation, loose economic policy and mismanaged recovery strategy.
'You cannot spend your way out of recession' should ring in the ears of ever Labour members after the Winter of Discontent.
It is one man playing King Canute (No more boom and bust) with the lives of every single man, woman and child in this country who he has indebted for a generation, playing out old lost arguments and creating the same old Labour economic mess on a record scale.
Labour has spent taxpayer hard earned money on the most unproductive parts of the economy and taken so much, he has starved the productive parts with the money they could have invested.
As for the 'international consensus' that Gordon Brown was leading, well, it's clear what our international partners think of Gordon Brown's recovery plan.
You cannot spin the simple fact that Gordon Brown's calculated actions over the last 12 years have put in this mess is the person to sort it out.
This was not 'unbridled' capitalism that got us here, it is simple economic mismanagement, it is a failure to apply the economic fundamentals that are universally agreed the world over.
Labour will pay a heavy price for their folly.
Dan,
That, in itself made me read that post all the more closely. Mr Thomas has pretty much summed it all up? Or do you disagree?
Rudy.
world economy. Derivatives must be banned going forward, but this by itself will not be
sufficient. The ultimate goal must be to wipe out and neutralize the existing mass of .5
quadrillion in notional values of toxic derivative instruments. Some governments may be
able simply to decree that derivatives be shredded, deleted, and otherwise liquidated, and
they should do so at once. Virtually all governments should be able to use their
emergency economic powers to freeze derivatives and set them aside for at least five
years or for the duration of the crisis, whichever lasts longer. Legal issues can be settled
over the coming decades in the courts. Humanity is in agony, and we must act against
derivatives now. Going forward, we must ban the paper pyramids of derivatives in the
same way that the Public Utility Holding Company Act of 1935 banned the pyramiding
of holding companies.No more cash for trash,We need a New Deal for the People,Money for the many, no more Hot Cash for the looser Banks.
I wonder when Derek will be publishing his long-awaited line-by-line Hannan rebuttal?
I wonder why I am bothering writing this?
First you say that the decisions taken on Thursday will be pivotal, then you claim to know already what will be agreed.
Then you say that the press is sceptical over the substance of what will be agreed, before going on to say that Ministers are understandably downplaying what the summit can achieve.
And then you say that differences over fiscal policy are overplayed, before saying that different countries will do things in different ways.
In short, I think your ascent as a Labour politician is assured and I look forward to your meteoric rise to the (opposition) front bench after the next election.
ps. got a little inconvenient fact you seem to have overlooked: it's actually been LABOUR in charge of the alleged laissez-faire isolationism for the last 12 years, NOT the Tories....
As for accusing the Tories of doing nothing, this will probably turn out to be a wiser course of action than saddling future generations with a massive debt burden. Moreover, the laissez faire policies you so decry were a result of Brown setting up the FSA and presiding over a record increase in consumer credit. This bust was caused by Labour.
It may also have escaped your notice that businesses continue to go bust ay an ever increasing rate; soon it will be the turn of the public sector no matter how much Brown and Darling pretend otherwise.
Wanna bet that it will be forgotten by Monday?
Stop sending clear messages. We don't care a toss for them any more.
DO SOMETHING OR GET OUT OF MY WAY. Stop spending MY money sending out messages. Your messages are never followed up by any meaningful action.
Is there another way I can say this? Probably not. But I'll try anyway: people don't expect their government to "send messages". They expect the government to do something about the problem. And just spunking our money out on "messaging" isn't what we expect.
However, this event is a small step in that process. Many of the regulatory measures could have been enacted in this country years ago and by setting an example we would have done much for the world and for ourselves.
The public is well aware that the FSA, created and regularly boasted about by Brown in the past, has proven to be an enormous failure in the light of the collapse of a significant part of our financial system. The idea that he is the man to create a new global financial system of regulation is laughable.
Why would you want someone who has already failed in a major way setting up a new system?
I just hope all those politicians are paying for their own porn.
The problem is that you lot keep bailing out bad businesses.
Imagine being CEO of Skipton, a well-run Society which has avoided problems. Now it has to compete with State-controlled zombies like RBS, Northern Rock etc for business! It may have to sell assets to protect its core business 'cos the Government is hell-bent on hosing money at everyone. Does that seem fair?
Government spending is out of control, because the P.M. cannot control his Socialist Utopian ideals, which will bring much harm before he is finally removed from office.
Just do the right thing G20, "IT REALLY ISN'T ROCKET SCIENCE TO FIX" just common sense and goodwill can have a confidence boost and the need for banks to work for people rather than profit.
The only "strong message of unity" that will be displayed is the ability of the attendees to stand the company of each other long enough for a photograph to be taken.
What we need are more unemployed spikey-haired tofu-wearing lentil knitters wandering the streets shouting "what do we want - more state handouts - when do we want them - now".
The solution to all our ills.