Hail to the Chiefs

I’m pleasantly surprised—this is not the column I planned on running today. The days leading up to yesterday’s G-20 London Summit showed all the signs of hubris-hampered, every-economic-bloc-for-itself nasty diplomatic failure. It turned out better than expected: Although many worthwhile bottom-up institutional reforms didn’t squeeze through, the six-pronged plan for global recovery proposed by the leaders of the world’s 19 largest economies, plus the European Union, offers at least a small sign of hope.

As the world’s headmen and headwomen arrived in foggy London Town on Wednesday, the horizon appeared gloomy indeed. Merely observing the arrogant behavior of many leaders, one couldn’t help but feel extremely pessimistic. For starters, President Nicolas Sarkozy threatened to walk out if France’s demands for regulation were not met.

As President Obama and British Prime Minister Gordon Brown—fresh off his humiliating trip to Latin America—tussled with Sarkozy and German Chancellor Angela Merkel on the priorities of immediate stimulus versus regulation, Paramount Leader Hu Jintao quietly positioned China as the champion of the entire, unrepresented developing world. Meanwhile, President Lula da Silva of Brazil—the planet’s most popular politician, with an 80% approval rating—explicitly blamed the irrationality of white, blue-eyed beasts of prey for the financial crisis.

Most importantly, fashionably dressed Italian Prime Mogul Silvio Berlusconi, true to form, arrived at the G-20 completely “G’d up from the feet up.”
Smooth teamwork is not the style of diplomacy the world is used to seeing at these meetings. After all, we’ve come to expect deadlock on the most important issues. The last G-20 summit ended with nothing but an agreement to meet again, and the Doha round of international trade talks was a joke.

Over the past few years, as the global political landscape has shifted beneath our feet, the emerging economies have found a voice, and American hegemony has receded into a form of influential leadership rather than outright dominance. Decision-making at the global level has been relatively non-existent. Although yesterday’s summit registered no seismic shift toward solidarity and probably nowhere near the number of institutional reforms needed to solve long-term problems, it at least made a strong tremor of cooperation on the geopolitical Richter scale.

Cooperation was certainly difficult to establish, mainly due to the growing influence of the BRIC countries (Brazil, Russia, India, and China), which are starting to throw a little weight around (though substantially less in Russia’s case). The heydays of the Group of 8 are over, and almost everything proposed at the summit had to get past the emerging economies. Case in point: When Sarkozy proposed a global crackdown on tax-heavens, it was Chinese, not American, opposition that cut down the proposal substantially so it could protect financial centers in Hong Kong and Macao.

Globalization, especially in the wake of the financial cataclysm, presents an interesting paradox. As interdependences and exchanges around the world expand, multiply, and intensify, more and more problems require multilateral solutions. However, as more and more states have a crucial and invested say in these problems, multilateral consensus becomes more difficult to reach. The fact that 20 of the world’s richest economies were able to come to some kind of consensus when there appeared to be giant rifts speaks volumes and provides hope for the future.

There is certainly still much work to be done to change the economic order that brought about the catastrophe in the first place. The upgrade of the Financial Stability Forum to a Financial Stability Board is a huge step. Investment bankers and derivative traders are getting what’s coming in the form of regulated pay and bonuses. Hedge funds will have to disclose their leverage levels to regulators. But deep structural changes in other international financial institutions must occur soon. It’s great that the IMF received funds to aid struggling developing countries, but part of the reason those countries are in the position they’re in is because of IMF advice: The IMF must become more cautious, contextualist, and concerned with sustainability. The same goes for the World Bank.

Still, the commitment to tackle a global problem is an impressive, mammoth feat. This never happened during the Great Depression.

I have no doubt that Paul Krugman or Joseph Stiglitz will sober up my analysis of the summit in the next few days. But, for now, I’m chalking up this one as a small win and my “animal spirits,” to quote John Maynard Keynes, are high. A little more confidence in collaboration is a nice thing to have, and confidence, after all, is what recovery is made of.


Raúl A. Carrillo ’10, a Crimson editorial writer, is a social studies concentrator in Lowell House. His column appears on alternate Fridays.