Last week, G20 finance ministers and central bank governors met in Washington, just a couple of weeks after their last gathering in Cairns. The International Monetary Fund also released its latest World Economic Outlook, telling us everything we already knew (Europe weak, China weakening, geopolitical risks around Russia and the Middle East – who would have thought?). Next month, Australia will host a summit to conclude its G20 presidency, and next year the summit circus will be hosted by Turkey.
The breathless sequence of high-level summits, multilateral talks, weighty policy-documents and economic surveys published by international organisations has become global economic policy routine.
Unfortunately, it is just that: routine. Maybe not quite for New Zealand since we do not usually take part in the G20 stuff. We only did so this year because our Australian friends kindly invited us as guests of their presidency.
But for the rest of the world who take part in these processes, it is not immediately clear how institutions like the G20 and the IMF, let alone the old G7, really change their behaviour, their policies or even their outlook.
You would never get this impression, however, if you took the communiqués, agendas and declarations issued at international conferences at face value. It always sounds grand, elaborate and meaningful when international leaders meet. Take this paragraph from the last G20 finance ministers’ meeting in Cairns:
“We will continue to implement our fiscal strategies flexibly to take into account near-term economic conditions, so as to support economic growth and job creation, while putting debt as a share of GDP on a sustainable path. We agree to consider changes in the composition and quality of government expenditure and tax to enhance the contribution of our fiscal strategies to growth.”
The practical consequences of such summit prose for domestic fiscal policy are precisely zero. Not a single extra dollar, yen or euro will be spent (let alone less) because of this statement. There is no globally coordinated fiscal policy (and a good thing too, one might add) and there will not be one for as long as national parliaments have to pass budgets.
The same Cairns summit also committed to increasing their economic growth – not just generally but by precisely 1.8 percent. G20 members had presented all sorts of individual policy measures (few of them new) that combined would lift growth rates by exactly that much. Next to these G20s economic gurus, old-style communist five-year planners look like amateurs.
What is really funny about all of this is that leading global institutions cannot even point to a particularly good forecasting record. The IMF has been too optimist in every single one of its annual growth forecasts over the past four years.
Nor can our global economic institutions point to a good track record in improving economic growth conditions. Among the members of the G20 we find France, Italy, Japan, Russia, and the European Union. With all due respect, these are not necessarily the countries anyone would readily take economic advice from. If anything, one would wish that these countries had implemented any of the structural reforms that previous G20 meetings had talked about.
Unless there is some intrinsic value in government officials, central bankers and their advisors talking to each other, there is precious little that our global economic diplomacy has to show for. At least one should not expect any concrete outcomes, or even growth creating outcomes from such meetings.
Does that mean we should scrap the global policy travelling circus?
Maybe not. But at least we should not expect too much from it either. Nor should we treat these summits as something they definitely are not: important.