Those who enjoy the endless rounds of televised high-level summitry that increasingly dominate the world of international diplomacy are in luck this week. First there was the confab of 192 heads of state or government at the opening of the U.N. General Assembly in New York. Then the leaders of 20 major nations could not resist tacking on a 400-mile jaunt westward to reconvene in Pittsburgh for the third G-20 summit. If you add in the July G-8 get-together in Italy, this will mark the fourth time some of these leaders have met in less than a year.
These “G” conferences began in 1974, when the finance ministers and central-bank governors of the Group of Six (France, Germany, Italy, Japan, the United Kingdom, and the United States) met in response to the first oil shock. In 1975, French president Valéry Giscard d’Estaing convened the first G-6 summit, and Canada joined the following year to make it the G-7. When the Cold War ended, the addition of Russia made it a less cozy G-8.
The working group of finance ministers and central bankers was expanded in the late 1990s to cope with the Asian financial crisis. It is now the G-20 and includes China, India, South Korea, and Indonesia; Brazil, Mexico, and Argentina; and South Africa, Saudi Arabia, Turkey, and Australia; plus the European Union (four of whose member states are members in their own right). It held its first summit conference in November 2008 as leaders rushed to deal with the global financial panic. Unfortunately, statist-oriented officials among them (“Never let a crisis go to waste”) are now using the G-20 process in their sometimes creeping, sometimes lurching push toward global governance.
#ad#The most immediate threat to economic freedom at the Pittsburgh summit is likely to involve an effort to create new international bureaucracies. Take the Financial Stability Board, a supranational regulator-in-waiting. It was established this past April, and so far it hasn’t done much. But on its agenda are matters such as “sound compensation practices”: Some members of the G-20 want to set global limits on paychecks issued by private companies. The G-20 might also try to impose global alterations in accounting standards, which could have a suffocating effect on business.
Some G-20 leaders are also pressuring tax havens to stop private citizens from sheltering income and assets from excessive taxation at home. And they’re not talking about places like the Cayman Islands: They mean major players like Switzerland and Singapore. This move, too, would do nothing to help restore economic growth. Indeed, it could slow recovery.
There are actions that the G-20 leaders could take to help restore growth and promote prosperity. They could profitably spend time strategizing how to reduce the many forms of government intervention that helped cause and exacerbate the 2008 crisis. Leading the list of morally hazardous entities: U.S. legislation such as the Community Reinvestment Act of 1977 and the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. The CRA required private banks to make mortgage loans to unqualified applicants (for which they often solicited help from groups like ACORN), and the FHEFSSA required the taxpayer-backed $5-trillion heavyweights Fannie Mae and Freddie Mac to devote a percentage of their lending to this enterprise. Without this government intervention in the marketplace, the 2008 crisis would never have reached such mammoth proportions.
The most important thing the G-20 can do, however, is to reinvigorate the process of trade liberalization and to fight against new strains of the same sort of protectionist virus that worsened the Great Depression.
Since President Obama took office, the United States has become one of the most offensively protectionist members of the G-20. Many of our trading partners were insulted by the “Buy American” provisions in the $787-billion “stimulus” bill and by the killing of the pilot program, instituted under NAFTA, that allowed Mexican truckers to drive into the United States. (Mexico responded sharply, in ways that are hurting U.S. workers.) The most recent (and potentially most grave) protectionist action was the White House’s slapping high tariffs on Chinese tires, which could trigger a full-scale trade war.
Such moves represent a radical departure from the staunch and bipartisan commitment to openness and economic liberalization that had underpinned U.S. economic policy (and prosperity) since World War II.
At the Pittsburgh meeting, President Obama should join other G-20 leaders in reasserting the need for fiscal and monetary discipline in all countries. G-20 members should avoid excessive government interference, further open their economies by completing the Doha trade round, and preserve and protect the free-enterprise system by allowing private markets to self-correct without further wasteful Keynesian stimulus.
Beyond this, President Obama could do us all a favor by insisting that expensive “summits” be held not more than once a year. Furthermore, such meetings should focus on attempting to achieve real solutions to international conflicts — and not just on giving us more photo ops.
– James M. Roberts is research fellow for economic freedom and growth in the Center for International Trade and Economics (CITE) at The Heritage Foundation.