G20 ends Anglo-Saxon era

April 2, 2009

Paul Taylor Great Debate

— Paul Taylor is a Reuters columnist. The opinions expressed are his own —

Thursday’s G20 summit may not mark the end or even the beginning of the end of the global recession. It did mark the end of the ascendancy of the unfettered, Anglo-Saxon model of capitalism.

What comes next is far from sure, but it will be different from the headlong dash for individual enrichment, short-term profit and financial acrobatics that began with the dominance of U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher in the 1980s. The widespread acceptance of increased regulation would have been anathema for U.S. President Barack Obama‘s predecessors.

“The old Washington consensus is over,” British Prime Minister Gordon Brown declared after chairing the London summit. It was a clear acknowledgement that the deregulation that allowed casino capitalism to flourish on Wall Street and in the City of London, the world’s two biggest financial centers, had failed and will be fundamentally overhauled.

Brown’s role in brokering a bigger-than-expected G20 deal on refinancing and reforming the International Monetary Fund and World Bank, extending the scope of regulation and providing new finance for trade and the poorest countries was a personal success. But it may not help him much at home, where many recall his 1997-2007 decade as a “light-touch” finance minister who claimed to have ended the cycle of “boom and bust.”

The $1.1 trillion in funds for the IMF, the World Bank, trade finance and development which he announced, even if it is not all new money, may begin to restore market confidence that countries will not default, and to revive trade flows.

But Brown and Obama did not achieve their initial declared objective of persuading countries with balance of payments surpluses such as Germany and China to give a bigger fiscal stimulus to the world economy.

Nor did they come up with a solution for disposing of banks’ toxic assets, which continue to impede a recovery.

Indeed, they were upstaged by French President Nicolas Sarkozy and German Chancellor Angela Merkel, who appeared in lockstep on the summit’s eve to hammer home demands for tougher regulation of all markets and financial institutions, and for the naming of shaming of tax havens.

“We have taken an important step toward creating order in an area of the world where there was previously no order,” Merkel told a news conference. Sarkozy said the world had turned the page on “the Anglo-Saxon model.”

The Franco-German couple, so strained since the hyperactive Sarkozy’s election in 2007, achieved almost all its objectives. The French leader’s pre-summit theatrics of threatening to leave an empty chair may have been an empty threat, but it played well back home and may have put his host on the defensive.

Obama, who was more of a listener than a leader at his first global summit, made clear that while he believed in the free market, executive pay and rewards would have to be changed to encourage long-term performance instead of quick profits.

Other winners at the table included Chinese President Hu Jintao, who was courted by Obama and Sarkozy and magnanimously contributed $40 billion toward the IMF war chest to help countries in financial trouble. In return, Hu was promised a reform of IMF seats and votes in 2011 that will give his emerging economic colossus, which now has no more say than Belgium or Switzerland, far greater power.

That redistribution will also benefit India, Brazil, Mexico and Indonesia, and should reduce the traditional U.S. and European dominance over international financial institutions, symbolized by their carve-up of the top jobs.

Agreement to publish a list of tax havens that use banking secrecy to deny cooperation with other countries about suspected tax cheats and money launderers came only after countries such as China and Brazil had been assuaged about the fact that it was compiled by the Organization for Economic Cooperation and Development, a largely Western, rich countries’ body.

Russian President Dimitry Medvedev was also among the winners, enjoying a fresh start in relations with the United States despite his country’s continued military presence in breakaway regions of Georgia following last year’s war.


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

This all sounds like a repeat of history that gave us the USSR, Nazi Germany and on and on. Come worship at the feet of the Almighty State instead of Almighty God. If the State confers all your rights, it’s a no-brainer, then it also can take them away.

Posted by Kathleen Scharlau | Report as abusive

“unfettered, Anglo-Saxon model of capitalism”? That makes it sound like we Anglo-Saxon’s have had free market capitalism all this time. Nobody on this planet has lived under an “unfettered” anything. And did obama really say he believed in the free market? That would be a less than truthful statement. If we were in a true unfettered “free market” the economy would be the least of our worries and if he believed in it he sure would hate what has been done. The individual and their right to choose is worth much more than the state.

Posted by jason | Report as abusive

I think this article is an excellent review of the summit and the current situation. The death trap of the anglo-saxon model in the end was the greed – with all its symptoms: tax evasion in tax havens; ridiculous salaries, boni and pensions of executives throughout all industries; hedgefonds and similar products with incredible risks and profits. All this was addressed at the summit and by the way approved through Obama’s expressed modesty. Because modesty is the weapon to fight greed. Assisted by control and discipline it will hopefully succeed.

Posted by Eckard | Report as abusive

“This all sounds like a repeat of history that gave us the USSR, Nazi Germany and on and on.”

Please stop listening to the hysterics of Glenn Beck. No, anything other than lassiez-faire capitalism does not automatically equal Nazis.

Posted by Reginald Hopkins | Report as abusive

The only place with an “unfettered” economical system is Somalia as that country has no official government. Incidentally it shows that if zero regulation leads to most economical gains, Somalia should be wealthier than Switzerland.

Nevertheless USA and UK have never been completely “unregulated”…

Posted by jjoensuu | Report as abusive

Yes the world is changing, just like the British Empire at the beginning of the last century, the American Empire will become less dominant as time goes on. Hopefully an new era of global co-operation will emerge rather than some new “Super Power”.
As for economic policy, I think its interesting that the 2 western countries that have best survived this crisis are economic/political hybrids, part european socialist and part anglo/american capitalist.
There are 20 AA rated banks left in the world, (“ANZ, NAB, Westpac, CBA, Toronto Dominion, Bank of Montreal, Royal Bank of Canada, Bank of Nova Scotia”), MUFG, SMFG, Mizuho, ING, UBS, Credit Suisse, Banco Santander, HSBC, Standard Chartered, Bank of Singapore, DBS Bank, IOCI Bank. 8 thats nearly 1/2 are from Australia and Canada. That says something.

Posted by John Schmitt | Report as abusive

I have to disagree with the former poster. It was not the ‘regulation’ that pushed the people into these dictatorships and planned economies, but the inequality and inequity of the ‘un-regulated’ free market capitalism. In this day and age a certain amount of oversight is necessary. And that is what they will try to achieve. No one is talking about abolishing capitalism and going over to planned economies, but just create a more responsible system. Not only to protect the people, but the bankers themselves. Forget about ‘the road to serfdom’ and look around in the world. The ideology of the past 30 years, while not causing much damage to the western societies, has harmed most other countries. A real change is necessary.

Posted by daniel | Report as abusive

Maybe it is the official born of a new Global economical system.
Since the globalization started maybe that new system started too. Emmerged in the crisis and is developing with the G-20 new agreements.
What name to put to this new system it is a matter of creativity, but it is important because it is rooted by the concepts of balance and order for the future rule of the markets around the world. I hope this new rules can avoid risks of irresponsability and excess.
The populations of the world are waiting the voice of the leaders to be released and healed from this nefast crisis that is a form of human suffering.
In this new system the care of population is a matter of importance….a dream ? I think it is here only we have to try to see it in a panoramic global economic overview by the leaders of the G-20.

Posted by maria | Report as abusive

What does personal freedom mean to you? Our Constitution is being trampled. Bit by bit, the vision of America’s founding fathers has been erased. I simply cannot understand how ANYONE thinks that government knows best. Our children’s future is being squandered. I wonder what people will call our generation in 50 years….

Posted by alan | Report as abusive

Unfettered capitalism has never existed anywhere. Capitalism is not anarchy; it requires private property rights, the rule of law and sound money to exist, which are the proper limited roles of the state. All other regulations are left to the market, where the fear of naked risk tempers the destructive forces of greed. Today’s crisis is the result of an overextended state, an immense Ponzi scheme that has eroded property rights, obfuscated the rule of law and destroyed currencies. Thus, it is not Anglo-Saxon capitalism that is over. Rather, it is the American and British governments who are bankrupt, while their private sectors remain largely intact. These prudent stewards of inalienable rights and wealth wait patiently by the auction blocks as the final curtains close on the failed modern state.

Posted by Boon Grant | Report as abusive

A real American President would have left the meeting early. American wealth and generosity has developed and enriched the world. How ’bout a little international payback finally for defeating Imperial Japan, Nazi Germany, and Soviet Russia… not to mention saving the French and the Italians from themselves. We didn’t colonize Latin America, Asia, or Africa but have invested trillions in those places. And we are the last power who has any possibility to defeat China when push comes to shove.

Posted by JMK | Report as abusive

Those darn white blue-eyed bankers. They are all so evil. I only wish they could be more like the cartel members of OPEC. Maybe the IMF could ask them to return a portion of the Billion dollars/day wealth transfer. I bet a few adjustable rate mortgages wouldn’t have gone underwater if fuel charges didn’t double in one year! The relief now is to little to late for those families. Lower income americans and Europeans were pratically sent over the edge with the higher fuel cost. Nobody likes crooked politicians or greedy financiers, but they’ve been around since the beginning of time. Somehow unfettering modern day capitalism may actually give OPEC the brass, I mean golden ring.

Posted by AlphaHokie | Report as abusive

The only winners are IMF and World Bank. The losers? Middle class in all participating countries! Generations to come will have to pay IMF and World Bank and Central banks for the money they generously lend us now.

Posted by Sherry | Report as abusive

[Today’s crisis is the result of an overextended state] –

I agree, it’s not a failure of Anglo-Saxon capitalism but of the Anglo-Saxon version of democracy, which has morphed into a bullying, arrogant, war-mongering and unrepresentative form of government such as those run by George Bush, Tony Blair and John Howard – the moral bankrupcy of these governments has now, all too predictably, led to their financial bankrupcy. But this, of course, was not addressed at the G20 pollie-fest.

Posted by Tim Bowyer | Report as abusive

I have to agree with the other posters that there never has been ‘unfettered’ capitalism in “Anglo-Saxon” countries. There was a mis-assessment of risk by financial institutions that brought about a global crisis of admittedly large, but not unnaturally large, proportions. That failure has nothing to do with the failure of regulation – the would-be regulators failed to spot what was happening too, just as they will next time. Free market capitalism will survive because when it comes down to it, it is not a model that has been imposed, it is the most successful way we live and do business as human beings. Those who live in that way, no matter where they are in the world and at what time, will ultimately do better than those who do not – even if there are a few more bumps on the way than in a stagnant and over-regulated system, the upside will be bigger too.

Posted by Adam | Report as abusive

I’m just trying to figure out where people ever got the idea there has been an unfettered market. Everywhere you turn there is legislation, bureaucracy and taxes. The Community Reinvestment Act was government intervention that caused the crash. Without that the market had decided credit checks via credit agencies should be used to check a borrower’s ability to pay back loans. We’ve never had free universal trade. If we did then poorer nations would be able to find opportunities and there certainly wouldn’t be nations living under sanctions. So now we’re to accept more government regulation as a cure to already too much regulation because some elements of the media say we have “unfettered” capitalism. When journalists convince readers that freedom is no good for them then it follows that one day they’ll convince readers that four plus four equals five.

Posted by Aron | Report as abusive

There will always be unpaid debts. To date the U.S. and it’s government is the largest debtor nation in history. The premier of China has publicly stated his country’s concerns about the United States ability to repay it’s Treasury obligations.

The rise of totalitarianism is not caused by regulated or unregulated market systems. It is the fruit of usurpation of power into one branch of government and a citizenry’s unwillingness to stop it.

Capitalism will probably not survive as we know it very much longer. Humanity needs solar and wind energy production. Alternatives to fossil fuels are another essential group of needs. TB and other viral diseases are poised to become the next pandemic. The free market response to these pressing issues has always been either anemic or nonexistent.

The state does not confer rights upon the people. People are endowed with “Certain Inalienable Rights”. The people consent to be governed. According to Locke the people can also consent not to be governed or replace the system of governance with something new of their choosing. The cost however is high, the “blood of patriots and tyrants”.

I urge all to read the U.S. Constitution and George Washington’s farewell address to the union. He warned even then the Constitution was being ignored. Alan is right. Our “founding” fathers built a “foundation” of institutions and principals, perhaps lofty ideals with which to build a society. For too long as nation we have shirked our civic duties to oversee our elected officials. The reasons why don’t matter. As a result all that remains now is a shell filled with rot and decay.

If one truly believes we allow our leaders to ascend to power, then collectively we should all be responsible for the actions of our government and the wealthy. If we as a People accept this position then it is up to all of us to make it right. This is how government “Of the People, by the People, for the People is supposed to work.

Posted by Anubis | Report as abusive

Anubis, your words are falling on way to many deaf ears. To few actually write (e-mail) our Congressmen or the White House. To many think the news is what they watch before the weather and bed.

I doubt Capitalism will die soon. I have noticed that greed really does not care which economic system is currently active. Personally I like capitalism when the leash is strong and tight. Monopolies and Oligopolies (aka TBTF’s) need to be busted up so we maintain a strong free market with many buyers and many sellers, all in competition. I have no problem rewarding entrepreneurship with profit. I do have a problem with CEO and upper Corporate managers of publicly traded enterprises gouging the stockholders with outrageous compensation packages. Again, if we had a real free market that could not happen. Oil is where it is because we as a people didn’t demand better cars. The goals the government put on the automakers was a joke. We allowed our Congress to be run by whoever has the most money to through around. We allowed our government under the last administration to be manipulated by the military industrial complex and this administration does not seem to be doing well in that category either.

Too much wealth in the hands of unscrupulous individuals around the world is driving international and national policy. I regrettably doubt changing from the “unfettered, Anglo-Saxon model of capitalism” will change much. These unscrupulous individuals will continue to manipulate policy for profit without regard to what the future consequences will be or how many lives it will cost.

Posted by B.Free | Report as abusive

indeed it would be a positive step forward if President Hu Jintao & the ’emerging economic colossus’ were ceded a little shift in the dynamics of power.

China, as ancient history demonstrates, is definitely in the mix for the long haul. if one is still a little shakey in the light of the Cold War era, go back further to the history of the ancients and see the glory of their empire and Magnaminous culture and custom. we could all learn from the ancient charms and philosophies of a noble race of people.

Posted by sweeny | Report as abusive

The Third Way, by Giddens huh?! The guy who wrote it was a good friend of Blairs. It’s the intellectual groundwork for the insideous form of socialist economics we see emerging today.

Here’s how it works…incase you haven’t graced it’s pages.

A govt gets the voters to pay for public works with labor/taxes, then at its highest value sells it off privately to those who can afford it. Then the rich tap the resource and make their money on the essential services it provides. Then when they decide to, or screw it up royally, they pull all the money, then re-nationalises the same asset again. This way we, the voters, pay for the same asset two, perhaps three times. And the very rich make money inbetween, buying then selling at optimal times with the aid of the govt, who they own/are.

Thus resources are generated by our taxes/labor, sold for less than they are worth to the very rich, then bought back by us when they are worthless again, all of which we,our children, our grand-children etc pay for again and again, whilst all the money generated by the process goes overseas to develop less costly resources, by which the whole dirty process can be played again, theoretically until global wages and resources are equalized/exhausted.

Where else can an investment yield the highest dividend? IT’s not going to be in a western country. The rich are global. The poor are local. We are cattle. Marx was right.

Posted by Glen Durrant | Report as abusive

April 2nd, 2009 9:50 pm GMT – Posted by Sherry

The only winners are IMF and World Bank. The losers? Middle class in all participating countries! Generations to come will have to pay IMF and World Bank and Central banks for the money they generously lend us now.

I have to say that’s a very American statement. Not bashing Americans, I am one…

But to say the IMF and World Bank won while the middle class of every nation loses, think about this little inconvenient factoid:

These places hardly have a middle class. They are worried about how they’re going to provide even the simplest food items to their families. And they don’t have any luxuries. I mean if we REALLY need to we can cough up SOMETHING at the pawn shop to get to the next paycheck… and even if you’re absolutely homeless… you’re not absolutely hopeless. There are soup kitchens and shelters and ways (although difficult) to get out of poverty.

Not so in the developing countries that IMF and World Bank and dishing out money to. These people are worried about survival and your worried in a fraction of a percent to a few percent tax hike over the next few decades?

Please. There are serious problems in this world and this is a SMALL step towards fixing them. You don’t want to sacrifice a little to ensure that others have access to food and clean water? Well great, but I am proud to say that I live in a democracy and MOST of the people here (and thankfully now, our government) think it’s important to be a good global citizen.

Not to be combative.

/end rant

Posted by Bryan | Report as abusive

Sherry, there is nothing wrong with charity. But most of the countries where there is poverty, there is a corrupt government to deprive the people. Think India. Think Rwanda. These places don’t have a subsisting impoverished class because their nation is outright poor — it’s because every time the idiots at the UN elect to send food, the food is taken by the government to go where the government wants it… which is the government alone. Everyone else is left in the dust, and the government couldn’t care less. Therefore, it isn’t an issue of what the governments in our first-world nations can supply through generosity, but what our goverments can slowly encroach onto us as they raise the taxes like the temperature of a frying pan on which the frog sits. We’ll be okay with tiny increases year after year, until we give more than half of what we make to the government so they can play around with a few billion more dollars of money that isn’t theirs to begin with. This sort of thinking, letting the government do as it pleases, brought us into this mess.

Posted by Josh | Report as abusive