03:27 pm
London Calling
If you believe the hype, the G-20 summit in London on Thursday could make or break the global economic recovery. Last week, George Soros told the Senate Foreign Relations Committee that “[u]nless [the G-20] comes up with practical measures to support the countries at the periphery of the global financial system, markets are going to suffer another sinking spell.
Such anxieties may be legitimate, but not merely because less developed countries don’t have a seat at the table. Proposals to triple the funds available to the International Monetary Fund remain in limbo, in large part because China and other export-oriented governments want concessions on how the IMF is governed. In addition, the EU strongly disagrees with the Obama Administration’s contention that further fiscal stimulus can reignite global consumption, preferring instead to focus on greater regulation of hedge funds and other highly speculative financial instruments.
But even those disagreements are little more camouflage for the real conflict. Export-oriented governments — most notably China — appear to regard Obama Administration’s efforts to stimulate consumer spending as little more than an attempt to recreate the consumption bubble that drove global economic growth over the past two decades.
The end result is that export-oriented governments may decide that they no longer can depend on the U.S. consumer to drive their own prosperity. As Sherle Schweninger noted in The Nation, they may choose to sustain their own export-driven policies in the mistaken belief that it will sustain their own growth. Instead, it may spark a new global depression.
To put it another way, the real threat of neo-Hooverism is not from the Republican Party, but rather from China and other export-oriented (and low-consumption) economies. Americans may all (or mostly) be Keynesians now, but we have yet to convince the rest of the world that they should be as well.