G20: The bottom line

I like Steven Pearlstein's commentary in the Washington Post very much and I agree with him more often than I disagree, but not this time. He gives the G20 higher marks than it deserves.

International economic summits deserve to be regarded with skepticism: The most important decision to come out of them is usually the call for yet another meeting.

But yesterday's G-20 meeting in London was an exception. While President Obama may have overstated things a bit when he declared it a "turning point" for the now-shrinking global economy, the meeting did manage to boost the confidence of financial markets, inject another trillion dollars into the financial system and provide needed political cover for world leaders to take unpopular actions back home.

Here's my own take on the summit [link expires in a fortnight]:

The usual declarations in support of cooperation, open markets, and judicious regulation nestled alongside affirmations of previous commitments and paragraphs of self-congratulation for what has already been done. On coordinated fiscal stimulus, no agreement has been found, and none is likely this week, this month, or this year.

It would be wrong to call the event and the activity surrounding it a waste of time...  A big increase in the IMF's ability to lend unconditionally to prequalified governments is in the works, and long overdue. In general, in fact, the IMF's hour has come. An institution that you would think was ideally placed to play the lead role in supervising international finance and managing the global crisis was recently drifting without direction and pushing staff into early retirement. If it can be refreshed with extra resources and a new sense of purpose, this will be money well spent.

In the longer term, it matters even more that the governments of some huge and (until recently) fast-growing economies, such as Brazil, China, and India, are being given a bigger voice...

Valuable as entrenching the G-20 and reviving the IMF may be, though, the most urgent need at this summit was to deal with the immediate danger of a worsening global slump. Designing a coordinated fiscal stimulus to expand global demand, keep people at work, and relieve the pressure for competitive devaluation and new trade restrictions -- the means by which governments traditionally try to export their unemployment -- was the prize that mattered most.

Concerning "affirmations of previous commitments and paragraphs of self-congratulation for what has already been done", see this crisp summary of the numbers by the FT's Chris Giles. He is even harsher than I was. The bottom line:

When all the sums are added together, rather than $1,100bn, the new commitments appear to be below $100bn and most of those were in train without the G20 summit. While the inflation of relatively small and old commitments into an enormous number does not render the summit a failure, the desire to produce large headline numbers as the main result of the gathering suggests the divisions and spats on other issues were considerable.