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from The Great Debate:
Stubborn national politics drag down the global economy
Four years ago world leaders, meeting in the G20 crisis session, agreed they would all work to move from recession to growth and prosperity. They agreed to a global growth compact to be delivered by combining national growth targets with coordinated global interventions. It didn’t happen. After the $1 trillion stimulus of 2009, fiscal consolidation became the established order of the day, and so year after year millions have continued to endure unemployment and lower living standards.
Only now are there signs that the long-overdue shift in national macro-economic policies may be taking place. The new Japanese government is backing up a "minimum inflation target" with a multi-billion-dollar stimulus designed to create 600,000 jobs. In what some call the “reverse Volcker moment,” Ben Bernanke has become the first head of a central bank for decades to announce he will target a 6 percent level of unemployment alongside his inflation objective. And the new governor of the Bank of England, Mark Carney, has told us that "when policy rates are stuck at the zero lower bound, there could not be a more favorable case for Nominal GDP targeting.” Side by side with this shift in policy, in every area but the Euro, there is also policy progress in China. It may look from the outside as if November’s Communist Party Congress simply re-announced their all-too-familiar but undelivered wish to re-balance the economy from exports to domestic consumption, but this time the promise has been accompanied by a time-specific commitment: to double average domestic income per head by 2020.
The intellectual case for change is obvious. A chronic shortage of demand has developed for two reasons. First, as the IMF announced at the end of 2012, the adverse impact of fiscal consolidation on employment and demand has been greater than many people expected. Secondly, the effectiveness of quantitative easing has almost certainly started to wane. As former BBC chief Gavyn Davies has put it, “the supply potential of the economy is in danger of becoming dependent on, or ‘endogenous to,’ the weakness of domestic demand. ...With demand constrained in this way for such a lengthy period of time, supply potential is beginning to downsize to fit the low level of demand.” It is a new equilibrium that can be reversed only by boosting demand.
But why is there so little optimism when the paradigm shift sought in 2009 is finally starting to materialize? Why do experts continue to downgrade their forecasts for 2013 and even 2014, while discussion so often drifts toward talk of a lost decade? It is, I suggest, because while countries are today adopting national growth strategies, they have missed out on the other part of the 2009 decision -- the necessity of coordinated global intervention. And the big question is whether the momentum for growth can be sustained by national initiatives alone in the absence of global action or will instead melt away once again under the pressure of narrow, self-defeating national policies.
from The Great Debate:
The perils of protectionism
By Gordon Brown
The views expressed are his own.
Next week's 2011 G20 meeting has the power to write a new chapter in the response to the economic downturn. But every day, as nations announce currency controls, capital controls, new tariffs and other protectionist measures, the G2O’s room for maneuver is being significantly narrowed. Already the cumulative impact of a wave of mercantilist measures is threatening to turn decades of globalization into reverse, returning us to the economic history of the 1930s, and condemning at least the western parts of the world to a decade of low growth and high unemployment.
Three years ago when the financial crisis first hit, the G2O communiqués were explicit in warning of the dangers of a new protectionism. Led by the head of the World Trade Organization (WTO), Pascal Lamy, we embarked on a forlorn attempt to use the crisis to deliver a world trade deal -- and were frustrated by an irresoluble dispute on agricultural imports between two countries, India and the USA. But now, in the absence of any co-ordinated global action, member countries have been retreating into their national silos -- and the trickle of protectionist announcements threatens to become a flood. Switzerland led costly action to protect its overvalued currency and has been followed by currency interventions in Japan (with perhaps more to come), India, Indonesia, and South Korea. Brazil, which had itself warned of currency wars, then imposed direct tariffs on manufactured imports -- a hefty car tax designed to protect its own native auto industry against emerging market imports. Other countries are now considering mimicking them. Capital controls are also now in vogue, and of course the U.S. Senate has just voted to label China a “currency manipulator.”
from MacroScope:
The word on Gordon Brown from Cayman
Gordon Brown is truly having a rough time. Rebuffed by the United States, International Monetary Fund and others for floating the idea of a tax on financial transactions at this weekend's G20 meeting, he has now got short shrift from the Cayman Islands.
McKeeva Bush, the veteran Caymanian politican who is now premier of the British Overseas Territory, popped in to the Reuters London headquarters for a chat this week. His main concern was to explain plans for making the islands an easier place for financial services personnel to live in. He would like some of those 8,000 hedge nearly 10,000 funds that are registered there to be more than just brass plaques. But, when asked, he
also had time to dismiss the idea of a transaction tax out of hand.
from MacroScope:
Instant View Video: Rebalancing global trade
Reuters correspondent Sumeet Desai talks about the G20 draft communique and what it means for rebalancing the world's economy.
On the road with Gordon Brown
The Prime Minister is on the move — and I will be following close behind.
I’m Sumeet Desai, Senior Reuters economics correspondent and over the next couple of weeks I will be with Gordon Brown as he travels to New York to the United Nations general assembly and then on to Pittsburgh for the eagerly anticipated G20 summit.
Then it is back to Britain — we will be at the seaside in Brighton for the Labour Party’s annual conference.
from MacroScope:
Live Blogging G20
Finance ministers from the G20 are meeting in London on Friday and Saturday to discuss the next steps in battling the world's worst economic and financial crisis since the Great Depression.
Reuters correspondents from around the world will be at the event, taking you behind the scenes and and providing unprecedented coverage through this live blog.
from MacroScope:
Spot the difference: what the G20 said now and back in 2008
Here are two word clouds of G20 summit statements - the first is of today's London meeting. The second is from the G20's Washington summit in November 2008. The cloud gives greater prominence to words that appear more frequently in the text.
Above: G20 statement after London summit in April 2009
Above: G20 statement after Washington summit in November 2008
(word cloudes are screenshots taken from wordle.net)
On the frontline of the G20 summit
Abolish money. Punish the looters. Eat the bankers.
Ageing 1960s hippies and their youthful anti-globalisation descendants joined in an angry anti-capitalist protest at the Bank of England on Wednesday, waving placards and shouting slogans reflecting a common fury at perceived corporate greed.
With worldwide recession destroying jobs by the week, protesters at the G20 protest in the City of London demanded an end to what they see as a global, predatory system that robs the poor to benefit the privileged.
Michelle sparkles as hostess Sarah plays it safe
Sarah Brown will have had an anxious early morning.
Her husband’s attempt to be the great fixer of the financial crisis and best friend of the United States at the same time was a big ask, but how was she going to handle the visit of Michelle Obama?
This was the first time Sarah had been called upon to host her new opposite number from The White House. And it wasn’t all smiling outside Downing Street either – the pair had to visit a cancer care centre as well and – horrors – meet Her Majesty the Queen.
from MacroScope:
Brown gets helping hand from Obama
He loves the Queen and the British people. Truth be told, President Obama was always going to be a hit on his first overseas trip.
But Gordon Brown probably could not believe his luck. The prime minister just could not stop grinning as he stood next to the new president at a news conference in the Foreign Office ahead of the G20 summit.
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The Wall
