G-20 focuses on regulation, stimulus
TEXT OF INTERVIEW
Kai Ryssdal: This was a bad day to be a British banker. In London today the Bank of England and the Royal Bank of Scotland took the brunt of the protests at the G-20 meeting. Thousands of demonstrators took to the streets. They overwhelmed London police, they trashed bank offices, burned bankers in effigy and carried signs calling today Financial Fools Day. Never mind that the meeting they’re protesting — leaders of the world’s 20 biggest economies — doesn’t even get started until tomorrow. And it’s not at all clear what will come of the get together anyway.
Marketplace’s Stephen Beard is at the European Desk in London. Hello, Stephen.
STEPHEN BEARD: Hello, Kai.
Ryssdal: In an ideal world, Mr. Beard, what would we know tomorrow that we don’t know already about this summit?
BEARD: Well, this summit has been somewhat optimistically billed as the summit to save the global economy. The aim is to agree on a plan of recovery and reform, a course of action that will get the world out of recession and then prevent the banks and other financial players from getting us into this kind of mess again. Those are the aims, but of course it’s the ways and means to achieve them that’s the big issue, and there have been some big disagreements about that.
Ryssdal: Along the lines of regulation versus stimulus, right?
BEARD: Indeed.
Ryssdal: OK, so let me ask you the stimulus question, then. And a lot of it has been about that. We here in the United States prefer more direct stimulus. The Europeans are saying, “Wait a minute. We don’t need to spend more money because we have all these social safety nets.” Doesn’t that, though, sort of get to the same place eventually, whether it’s direct government spending or social-safety-net spending?
BEARD: That’s the European argument. I mean, if you tote everything up, the U.S. is doing a lot more at the moment to stimulate its economy than the Europeans are. But you’re right, the Europeans say as the recession here deepens Europe’s more generous welfare system will come into play. And that will mean European governments will be stimulating their economies like crazy. In fact, some economists suggest that by next year Germany will be pumping in more public money proportionally than the U.S. Again, the American argument would be, “Shouldn’t you be pumping the money in before people lose their jobs.” But that’s basically the divide between continental Europe and the U.S.
Ryssdal: The German Chancellor Angela Merkel and French President Nicolas Sarkozy had a joint press conference today in which they said we hope to work things out with the Obama administration, but you know, you never know. Are people making too much of the European-American split in this whole thing?
BEARD: I don’t think so. I think this is a genuine fault line at this summit. With the U.S. and the UK on one side, and France and Germany on the other. The French and the Germans are sick to death with having been lectured by the Americans and the Brits over the years about their sluggish, inflexible economies. For the French and the Germans this summit is payback time. This is the chance for them to say, “Look where your deregulation and your liberal markets got you.” And they’ve been using the run up to the summit to push very hard for much tougher controls on bankers bonuses. And that’s where a lot of the tension has been, the argument about how far these countries should go in regulating their finance industries.
Ryssdal: You know, Stephen, this is called the G-20. And let’s see, we’ve got the Americans, the Brits, the French and the Germans. If you do a little math, that’s 16 other countries at least. There are some others who have invited themselves. What about, though, some of the bigger developing economies. The Russians and the Chinese specifically.
BEARD: This actually, clearly, is a big moment for them. And especially for the Chinese, a chance to punch their weight on the world stage. And in fact, the Chinese appear to regard this not so much as a G-20, as a G-2 summit, since in their view it’s only the U.S. and China that really matter anymore. But this gathering absolutely, as you say, does show the shift in economic power, the growing importance of countries like China and India. But again, because there are so many delegations involved, it does mean that it’s a lot more difficult to agree anything that is meaningful. And the big danger is that the communique which emerges after tomorrow’s summit will be rather too vague to have any real impact on the global downturn.
Ryssdal: Stephen Beard, at the European Desk in London for us. Thank you, Stephen.
BEARD: OK, Kai.
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