As I’ve been implying, coverage of the preliminaries of the G20 summit has been distorted through the lens of domestic politics – of the most trivial kind. ABC tv news, tonight, for instance, was obsessed by whether Kevin Rudd’s decision to try to sit next to David Miliband rather than the Chinese Ambassador to the UK at the recording of a BBC talk show was significant.
Yet “jobs” and the other mantras which pollies like to chant are very much at stake in London this week – a global crisis obviously requires global action. Part of the context for the stoush going on with European governments – and of the maneouvrings regarding China I alluded to in my previous post – is the relative decline in US influence. The IMF itself is being touted as a vehicle for global coordination because the power of exhortation from the United States is much weakened – despite the fact that the chief spokesperson for American influence is now Barack Obama.
There’s also that small matter of where the Global Financial Crisis originated. Some European leaders are consciously trying to pin the blame on the American version of capitalism – hence the argument from Angela Merkel and others that fiscal stimulus is less necessary in regimes where there is already significant counter-cyclical public spending through a much more robust social safety net. Hence also Merkel’s reference to the “social market” – a term which astute observers might recall Kevin Rudd made his own in his Monthly article.
One aspect of the crisis is that income inequality was a cause as well as a symptom of the sort of climate where a “market” arose in the first place for sub-prime mortgages – something that hasn’t gone unnoticed in the States where there’s a view forming that the Obama administration is committed to protecting Wall Street above all else. There are a lot of ideological issues at stake which transcend the Keynesianism redux arguments. And the argument about US leadership isn’t just about power politics, but also about what sort of capitalism people would like to see. It’s not entirely clear which side of this divide Kevin Rudd stands on.
That’s worth discussing, as is the whole question of concerted global regulation and action.
If that’s not enough of a conversation starter, the Lowy Institute’s Interpreter again has a post that provides some excellent context.
PS: Amartya Sen on the various models of capitalism and thinking about capitalism is also worth reading for a bit of contextual background.
Update: Planet Money – G19: France says it may walk:
The U.S. and the U.K. want a global stimulus package, with British Prime Minister Gordon Brown calling for a “global new deal.” Other European Union members say they’re doing enough to stimulate the economy already. They want strict new rules to regulate the financial system. Now French President Nicolas Sarkozy says he won’t sign on to any agreement that lacks a strong global regulator.