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G-20 in Seoul: real conflict, but not a return to the 1930s

Conferences like last week’s G-20 gathering usually produce bland communiques and not much change. But the Seoul summit took this to an extreme: it involved real conflict which the final statement could barely conceal.

As I recently described in spiked (here), the ostensible issue has to do with currencies and monetary policy, particularly between the austerity/trade surplus countries (China and Germany) and the stimulus/deficit countries (US). The underlying pressure comes from the fact that the major economies have not seen a robust recovery, and countries are pursuing their national interests, defined narrowly.

Promises to address "imbalances" have been made before. The major powers – both the traditional advanced economies of the G-8, and the emerging economies of the expanded G-20 – seemed to speak and act in unison in response to the financial crisis. But signs of fissure first emerged at the G-20 meeting in Toronto in June. After that, leaders promised the work together. The annual meetings of the International Monetary Fund and World Bank in early October were again marked by disagreement, and again were followed by promises – especially from the US – that all would be put right at Seoul. Obviously, that didn’t happen.

The world economy does not stop because the major economies don’t agree on how to intervene. Economic forces always play themselves out, and unsustainable situations resolve themselves one way or another. Ultimately, disagreement at summits like Seoul means is that the major countries are denied the use of a coordinated counter-crisis action.

The question is whether such global intervention is absolutely necessary today. There are a lot of comparisons with the 1930s thrown around, but we are not witnessing a repeat of that decade. For a start, we are not in the midst of a Great Depression. And furthermore, the global conflicts in the 1930s were the result of the exhaustion of internal restructuring: you had a weak ruling class, and a working class that was strong enough to be an obstacle to more thorough restructuring. Today, the elites have plenty of room to reorganize economic relations in their domestic economies: indeed, there is even some popular support for austerity measures.

The Wall Street Journal called the Seoul summit an “embarrassment” for the President and the Treasury Secretary. True, Obama and Geithner did not come out of the gathering looking well, but the Journal is mainly trying to score party-political points. The fact is that none of the G-20 came out of the summit smelling sweet. The tensions between the countries are now out in the open, and things are likely to get worse. But just remember they have awhile to play themselves out, as long as they can make us – rather than each other - pay for any adjustment.

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