G-20: Working For The Weekend

For the most part, international summits are well-staged political theatre. Any agreements, concessions, or terms set to come out of such proceedings are all but finalized before the meeting even begins. Once the foreign dignitaries arrive, ceremonial handshakes and signatures bring some closure to weeks or even months of behind-the-scenes negotiations. Over the years, these summits have been adopted a clear diplomatic strategy: prevent any surprises.

This weekend's G-20 meeting in Washington carries the same political traditions. That is to say, one can fairly expect a slew of photo opportunities, media engagements, and political hand-wringing, without much progress on substantive issues. Absent some miracle, the leaders of the world's largest economies will produce little more than economic platitudes about coöperation and transparency.

The main problem is that since the onset of the economic collapse (say, September 15 when Lehman Brothers filed for bankruptcy) national governments have been unable and unwilling to work in concert. The piecemeal approach to shoring up individual banks has failed to address the global financial contagion. One of the most remarkable themes of the credit crisis has been the reëmergence of statism. During boom times, financial markets were thought to render national borders irrelevant. In the face of growing hardship, however, officials in the US, Europe, and Asia are responding with introspective policies, which foremost address domestic pressures.

As a consequence, each members of the G-20 arrives in Washington with a particular self-interest. The Asian states, Saudi Arabia, and Australia are all looking for a greater voice in setting the global economic agenda. European officials (led by French Prime Minister Nicholas Sarkozy) want to reshape the regulatory framework of global finance. For its part, the United States is represented by a man whose political capital is rapidly approaching zero. Nevertheless, President George Bush is reluctant to make any moves that would undermine capitalist forces or forfeit America's primacy in global economics.

It is extremely difficult to see how much good could come of this summit. With the euro area officially in a recession and American markets closing the week in a nosedive, investors will need concrete reassurances. Speculation about a global stimulus package is appreciated, but will still take precious time to implement.

Under these circumstances, President-elect Barack Obama will gladly keep his distance from the summit. He has sent two surrogates, in former Secretary of State Madeline Albright and Republican Congressman Jim Leach, to meet with various delegations. Neither Ms Albright nor Mr Leach is expected to hold a significant position in Mr Obama's administration.

As much as a G-20 meeting might hold the potential for economic recovery, the very spectacle is a considerable risk. As many analysts note, an unsuccessful summit is far worse than not having one at all. Chances are Monday will be a gloomy day for markets the world over.