A preparatory meeting on the eve of the Group of Twenty (G-20) summit, involving officials from the participating countries, “grew so intense”, reports Reuters, that “officials had to leave the door open to keep the room from overheating”. Even discounting the hyperbole, it should come as no surprise to anybody that the G-20 meeting in Seoul will see most countries disagreeing with each other. The odds of the final statement that will be released on Friday actually indicating a consensus are low; and the possibility that it will speak of some concerted action is almost non-existent.
That wasn’t the case when the G-20 first met in late 2008, two months after Lehman Brothers collapsed, indicating the onset of the global financial crisis that soon snowballed into a worldwide economic slowdown. At that meeting in Washington, as in the second one six months later in mid-2009 in London, the participants seemed more amenable. Maybe it was the seriousness of the problem, maybe it was something else, but the countries acted in concert, pumping money into the system through fiscal stimulus packages. They also acted quickly to impose curbs on banks to address the crisis in the banking system. The jury is still out on the efficacy of some of those measures, especially the fiscal stimulus, but it is unlikely that a similar kind of coordination will be displayed by the participants at Seoul.
That’s because the central issue is the currency war several countries have embarked on, keeping the value of their currencies artificially low in an effort to improve or maintain their edge in global trade (a cheaper currency means more competitive exports). The US, which accuses China of doing exactly this by keeping the value of its currency fixed and low, isn’t actually innocent on the same count—its own stimulus packages have sought to devalue the dollar, encouraging the flow of money out of the country to emerging markets such as India where they can earn better returns.
Several emerging market economies are worried about this capital inflow. And unlike 2008 and 2009, global economic ruin (we’re exaggerating) doesn’t seem a possibility, making it less imperative for the participants at the G-20 summit to agree with each other. Most economies have recovered or are recovering, though at varying speeds, and, with national interests reigning large yet again, a multilateral solution looks distant.
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