I just finished reading a Financial Times article about the likely coordinated global policy solutions to emerge from the upcoming G-20 meeting in Pittsburgh. It does not sound like there is a huge amount of consensus. Indeed, it sounds like there is a lot of finger pointing regarding what the true causes of the financial crisis were.
China expressed scepticism on Thursday about a US and European push to launch an effort to tackle global economic imbalances at next week’s G20 summit in Pittsburgh.
Zhou Wenzhong, China’s ambassador in Washington, said: “People should not focus on only one thing, that is balancing the economy.” The International Monetary Fund should concentrate on doing a better job of monitoring the build-up of financial risks.
Translation: You lot in the West created a house of cards in the financial sector to fund a drunken binge of excess consumption. Your guy Stephen Roach even says so. Clearly, this is where we need to focus future reforms.
Edward here. Don’t take my word for it that this is what the Chinese are saying. Later in the same article, we get the following from Ambassador Zhou:
Imbalances were “certainly not the root cause of the problem”, Mr Zhou said. “The root cause of the crisis is the lack of supervision and abuse of the openness of the market, very risky levels of leverage and too much speculation.”
Unfortunately for Zhou, this is not the interpretation of events being drawn in the West. Western officials are more interested in correcting ‘global imbalances.’
“Global imbalances have to add up to zero, so if the US is going to be less the consumer and importer of last resort then other countries are going to need to be in different positions as well,” a senior administration official told the Financial Times recently.
Britain, France and other European nations are backing a push on global imbalances at the G20 summit. Gordon Brown, the UK prime minister, said this week: “When I attend the G20, I will be putting the case for a global compact for growth and stability for now and for the future.”
Brown and the other Western leaders are not denying responsibility for the global meltdown as directly as Zhou seems to. Nevertheless, you must realise that this is a coordinated effort to re-focus the policy debate on China, its pegged currency, trade surplus and huge accumulation of foreign currency reserves. I call this the Blame Asia meme. I would be curious to hear what the Brazilians, Indians and Russians are saying about all of this.
The question is whether this tiff over who caused the crisis in the first place will impede consensus about coordinated global policy going forward. No one country or set of policy makers covered themselves in glory in the lead up to this panic. Yet, because the same set of individuals is still at the table, we now see greater interest in putting a positive spin on past events than on moving forward in a constructive way.
Correct me if I am wrong. It sure looks like we shouldn’t expect anything substantive to result from the G-20 meeting in Pittsburgh.
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