IMF Says G20 Could Do Better
As if further evidence is needed of the sheer parochialism ritually on display here on our media in ‘Little England’, I woke up this morning to hear a BBC reporter warbling on and claiming that President Obama had thrown his support behind David Cameron’s deficit reduction plan. For good measure, he went on to pay a glowing picture of Cameron’s macho prowess that had been on display at the Toronto G20 Summit. For Cameron had not only been jogging, he had gone swimming in a lake and to round it all off, there was another touch of bloke-ishness. Cameron took time out from the Summit to watch Germany thrash England in the World Cup. Italy’s Prime Minister, Silvio Berlusconi, not to be outdone, had himself pictured in swimming trunks. Let’s hope they weren’t Speedos. Why do a bunch of male, middle aged politicians have to keep on trying to persuade us that they are super healthy?
Frankly, I am not in the slightest interested in whether David Cameron can cycle or swim. The British taxpayer didn’t send him to Toronto to go on a sports outing. And I’m sorry, but shouldn’t he be getting on with trying to save our collapsing economy, rather than watching the football? What is important and what does matter is what his rupture from the previous Government’s growth centred economic policy means for the rest of the G20. Here, I am not talking about Britain’s economic clout, which is limited, but what throwing the whole policy into reverse might mean for other countries that are either doing the same, or indeed resisting it.
President Obama is hardly likely to say that he is in complete variance with the new British Government. His aides are conscious of the need to be a little more attentive to David Cameron than they were to Gordon Brown when he first came to town. While there is a recognition that Britain does need to begin to cut her deficit, the overarching US concern is that the deficit reduction plans across Europe do not damage the chance for growth and push Europe back into recession. Obama and his aides are particularly concerned at what the mighty German economy may do, now that Chancellor Merkel and her shaky coalition seem to have got it in mind to take an axe to public spending. For a start Germany does not have a real deficit problem, and the other key issue is that by depressing demand in Germany, there will be less scope for Germans to buy American goods.
And all of this at a time when the United States economy is beginning to recover, as Robert De Neufville has suggested elsewhere on ‘Big Think’. Manufacturing output is rising, and so with it the United States ability to export. Obama, like Roosevelt before him, is showing that it is possible to spend your way out of a crisis. Roosevelt’s New Deal was a very big deal indeed, and got America out of the Depression, just as US Marshall Aid re-built central Europe from the ashes of the Second World War.
Had Gordon Brown, another architect of the post banking collapse, global pump priming plan, still been Prime Minister, I suspect that he and Obama would have issued a joint statement and had a photo call. They would have had just cause to clap each other on the back, and say ‘had it not been for us, we would have been in a much more serious situation. Now we are on the global road to recovery, this is not the time to pull on the reverse gear”.
Instead what we had that really did matter was a final communiqué from the IMF, who in my youth I was wont to castigate along with the World Bank for being wreckers, not builders, with their ideas of ‘shock therapy’ and ‘economic stabilisation’. Not anymore.
The IMF have been as forthright as it has been possible to be, and say that the G20 countries economic plans carry “serious downside risks” for the global economy, and their leaders could do more to promote growth and employment. “Downside risks” are these; global output could be down by 3% on current forecasts, shaving $2.25 trillion from World trade, while an extra 23 million jobs could be lost.
I would only dispute the IMF’s choice of adjectives to describe the mess that we are being dragged into by those whose grasp of economics is pretty shallow. No wonder David Cameron likes to swim in lakes, but if he carries on like this over the next eighteen months, he will soon be drowning not waving.