by Thomas Walkom
Last week’s G7 meeting in Japan was an opportunity missed.
The leaders of seven important countries, including Canada, had a chance to do something that would rekindle the sputtering global economy. Some, including Japanese Prime Minister Shinzo Abe and Canada’s Justin Trudeau, tried to convince the group to do just that.
Abe and Trudeau urged their fellow leaders to foreswear austerity and, among other growth-inducing measures, spend money to stimulate the world economy.
They failed. Italy’s Matteo Renzi was on side with Canada and Japan, as were France’s FranÁois Hollande and U.S. President Barack Obama.
But Germany’s Angela Merkel and Britain’s David Cameron insisted that debt and deficit control were more important than fiscal stimulus.
The final communiquÈ from the two-day session said essentially that each nation would continue to do what it thought best.
There would be no attempt at overall economic co-ordination.
Given that the G7 was devised in 1975 specifically to encourage the world’s major capitalist economies to co-ordinate their actions, this was a signal failure.
Sometimes, attempts at international economic co-ordination have worked. The most notable example occurred in 2008, when an expanded version of the G7, known as the G20, agreed to run deficits in order to bring the world out of recession.
Even Stephen Harper, who at the time was Canada’s very fiscally conservative prime minister, signed on to that pledge. And it succeeded.
But there is no agreement now, either among the 19 nations that make up the G20 (the 20th member is the European Union) or among the seven who met in Japan on Thursday and Friday.
As a result, the global economy just slogs along. It’s not weak enough to push the world back into recession. But it’s not strong enough to deliver jobs and adequate income.
Even Canada, which has done relatively well, isn’t exempt. The Bank of Canada predicts this country’s economy will shrink slightly in the April-June period, in part because of the Fort McMurray wildfire.
A Conference Board survey reports that Canadian manufacturers expect to reduce capital spending by almost 11 per cent this year.
The International Monetary Fund, which exists to backstop nations in financial trouble and which has never been a hotbed of radicalism, headlined its April update of the world economy: “Too slow for too long.”
The IMF has been urging world leaders to do exactly the kind of things that Trudeau and Abe called for
last week in Japan.
So what do we make of the G7? In some ways, its time has passed. It no longer represents the world’s major economies. China is conspicuously absent. Russia, briefly a member of what was then called the G8, was summarily expelled in 2014 for the sin of annexing Crimea.
For a while, the hope was that the G20 (which does include China and Russia) would handle economic matters, leaving the G7 to ponder weightier questions, such as international security.
But the G20 seems increasingly bogged down. Its bright lights – the so-called emerging economies, such as Brazil, Russia, India and China – have dimmed.
Brazil is in political chaos. Russia has been hammered by falling oil prices. Even the Chinese economy is not as stellar as it was.
Meanwhile, the G7’s attempt to focus on security has been hamstrung by the gradual re-emergence of Cold War politics. Beijing is at daggers drawn with the U.S. and Japan over who controls the South China Sea. Russia and NATO are remilitarizing the border between Eastern and Western Europe.
When the pro-West G7 does pronounce on such matters – as it did again last week – it does so with little moral authority.
John Kirton of the University of Toronto’s G7 Research Group routinely grades summits. He gave this one a B-/C+ grade overall, largely because of what the leaders said about security. I thought he was being kind.
But Kirton gave the summit a failing grade, F, for its approach to the global macroeconomy. I thought he was being kind there as well.
Copyright 2016 – Torstar Syndication Services