No matter what their organizers and participants want us to believe, economic summits aren’t the remedy for an increasingly dysfunctional global economy. President Obama’s call for countries other than the US to carry more of the burden of sustaining world economic growth is likely to fall on deaf ears, just as Europe’s call for massive budget cuts won’t resonate with countries on this side of the Atlantic. And China, though now allowing its currency to rise, will find less and less need to finance the US’s debt.
In short, everybody will be heading to the upcoming G20 summit in Toronto with conflicting agendas, in much the same way that they came to the environmental summit on global climate change in Copenhagen a few months ago. And, like that environmental summit, the economic summit in Toronto will have just as negligible an impact.
For starters, if no one can agree on points of substance, why bother holding these extravaganzas in the first place? Particularly when host countries like Canada are paying absurd sums in security bills for the privilege.
What makes economic sense for the European Union may not make sense for America, let alone China, India, or Brazil. And even the notion of the European Union is an illusion, since the economic interests of its member countries are no more aligned than are the interests of the broader group with those of China or the US. The fiscal imbalance between the north (Germany, France) and the south (Greece, Spain, Portugal) and the subsidies its countries draw are pulling the EU apart, putting even the euro at stake.
Of course, that won’t stop President Obama from trying to talk Europeans into even greater fiscal imbalances. But the urgency of his call for increased spending and deficits beyond the US is only because he can no longer raise his own. With the deficit at a postwar high, Congress is now insisting that the US do some cutting of its own. But if Washington applies its own fiscal brakes, America’s economic growth rate may soon start to resemble Europe’s.
The real imbalance in the global economy is that those countries that have room for further fiscal stimulus are precisely those whose economies don’t require it, while the economies that are in desperate need of it don’t have the budgets to pay for it. China, for example, has a budget deficit less than a third of that of the United States in relation to the size of its economy. However, economic growth is so strong, both there and in other rapidly industrializing economies like Brazil and India, that their central banks are already starting to tug at the monetary reins. But that imbalance is as much about the shifting of economic power as it is a statement of the lack of global synchronicity.
If world economic growth looks unbalanced today, it is likely to be even more so tomorrow. With so many national economic agendas out of sync, it’s time to abandon our search for global solutions, and to start looking for local ones. And those, unfortunately, won’t be found at any G20 meeting.