Less Than Meets the Eye


When you read the fine print of the G20 agreement, it shouts 'heroic hypocracy, unreliable sums, weak promises, meaningless language and self-serving commitments' according to the City financial analyst Miles Saltiel in a briefing paper for the Adam Smith Institute.

The hypocrisy is signalled by the communique's call for 'propriety, integrity and transparency'. It's hard to take that seriously when at the same meeting, China and Russia signed up to open markets, and Saudi Arabia agreed to family-friendly employment policies.

As for the sums, the headline '$1.1 trillion of financial stimulus turns out to be more like just $25 billion of new money. The IMF's '$500 billion' and the '£250 billion' in Special Drawing Rights are just an underwriting commitment, with no new cash. The '$100 billion' fund for the world's poorest is largely all announced already, and will come from private rather than government sources. The extra '$250 billion' for trade finance is also mostly a re-hash of old commitments, with less than $25 billion of new money to subsidize trade finance. The '$6 billion' to be raised by selling the IMF's gold reserves boils down to a $2 billion trickle over three years.

Promises to the poorest countries, and commitments to free trade, look weak when the Doha trade round lies derelict. And despite some fine language, there is no clear solution to the problem of toxic bank assets. Meanwhile the proposed international unification of accounting rules is, says Saltiel, 'about as likely as the Second Coming.

"The G20 leaders are more concerned about their domestic problems than their international responsibilities," concludes Saltiel. "They turned up in London for a photo opportunity. Their talks convey a sense that there is little they can do to change events. And they are right. Eventually, the world economy will trade its own way out of the current confusion, as it always does."

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