Britain has as its Prime Minister a master of political illusion. He may not be much of an orator, but there is no one better at dressing up old money as new. If the G20 nations wanted to fake progress, to spin a $1.1 trillion figure while committing no new money at all, then Gordon Brown is their man. “This is the day that the world came together to fight the global recession, not with words but with a plan,” said our Dear Leader. Well, let’s have a closer look at this supposed plan…
1) “Making available an extra $1 trillion”. Ahh, those Brown verbal tricks. What does “make available” mean? Is it guarantees, promises, statement of intent? Real spending? Not a penny of cold hard cash has been pledged by anyone. The sum is concocted by taking the IMF’s pre-existing $500bn target for its bailout fund (a target it still hasn’t met), adding another $250bn to the target. And, then, we add a $250bn fund which the IMF would create by printing its own special money.
2) IMF Funds “treble to $750 billion”. Very fishy. We heard from the IMF on Valentine’s Day that it wanted double its rescue fund to $500 billion – then it said it wanted even more. So where has the extra $250bn come from? Who has stumped it up? No one, it appears - it's just a target. And then the IMF will print its own money, in its own pretend “currency” (called Special Drawing Rights or SDR), and then allow its members to swap this for real money. The idea was once rejected by US Congress, but Obama thinks he won’t need congressional approval now the limit is kept to $250bn. But to be clear: no one has stumped up any new cash. It’s a little quantitative easing for the world – aimed, I suspect, at Eastern Europe. China will be happy as it wants SDRs to replaced the US dollar as a reserve currency.
3) Old pledges dressed as new. Brown gave a breakdown of who had stumped up: Japan, he said, contributed $100bn to the IMF. Yes it did: in January. The EU has agreed to contribute $100bn, he added. We know: this was announced at the last EU summit. Brown said China has chipped in just $40bn, and this appears to be new. But given the size of Beijing’s $2 trillion piggy bank, that is a rather derisory amount (and won’t buy it a seat on the IMF board). The Brazilians had thought China was good for $100bn.
4) Double counting. The Dear Leader has good news. “We are going to act decisively to kickstart international trade” But how? “We will ensure availability of at least $250 billion over the next two years." Note that “over two years” means that this is $125bn, double counted. Why not make it four years, and whack up an extra $1 trillion? It’s just a joke. Nor is this real cash – it comes from trade insurance schemes to protect importers and exporters. It’s not money being spent by governments. Pure Brown-style fiscal conjuring.
5) Tax havens. “We have agreed there will be an end to tax havens that do not transfer secrecy on request.” This is a piggybacking on the long-running OECD campaign against tax havens – this is not a G20 initiative. Brown solemnly announced the OECD would publish a list of non-compliant nations, as if this were a breakthrough. It has been doing this for the last year – here is a list of the most recent such announcements.
6) “The Washington consensus is over”. A curious aside from Brown – and a dog whistle to the Soros/Naomi Klein school of economics. The so-called “Washington Consensus” doesn’t refer to any formal economic protocol. It is used by the likes of Soros to denote what he calls ‘free market fundamentalism’. The academic who coined the term talks about its abuse here.
7) Ban on new trade barriers. Yeah, right. They agreed this in November and, since then, 17 of the 20 countries have increased trade barriers.
8) Brown’s gold advice: “I’ve been proposing this to the IMF for ten years”. He was certainly proposing in 1999 that the IMF sold gold – then priced at $278 an ounce. Luckily, the IMF ignored Brown and gold is now $890 an ounce. Shame he didn’t take the IMF’s advice when it was warning his borrowing would end in tears.
9) “For the first time, we have come together to set principles for the global finance system.” As far as I can determine, all they have agreed is that banks and hedge funds should be regulated – but don’t say how. Ergo, it’s meaningless.
10) No fiscal stimulus. It’s mentioned twice in the 3,080 word document – there wasn’t one. Both Brown and Obama wanted the world to contribute new money. They failed. There was none of the big agreement that Brown led us to believe. There was a split, as evidenced by the Franco-German minority report yesterday. But still it’s a big summit, a deal was done (albeit a fairly nebulous one) and the threatre was fine.
On a presentational basis, this his has worked out well for Brown. I suspect the G20 will be written up well tomorrow, just as his Budgets are always written up well – “2p tax reduction!” – before we all realise we’ve been swindled. So look out for triumphant declarations of “$1.1 trillion to save the world” in tomorrow’s papers. Listening to Brown today, it was as if he were giving a Budget for the world. And I suspect the world is about to learn how illusory a Brown promise really is.