By David Sanger
LONDON — For nearly 30 years, American presidents have arrived at economic summit meetings with nearly identical talking points: The solution to most ailments lies in more economic integration, unleashing free markets, and using a light touch to tame capitalism.
As President Obama landed here on Tuesday night at the start of his first overseas venture as the leader of the world’s largest economy, almost every one of those principles appears up for debate.
Economic integration is in retreat. Some countries have tried to wall themselves off from the troubles sweeping the world, noting that those less tied to the global economy have suffered less. Heavy regulation is back, this time with Washington’s agreement. On Tuesday the French hinted they would walk out of the Thursday summit meeting if other nations did not agree to set up a robust international financial regulatory agency.
For all of Mr. Obama’s early optimism that the rest of the world would follow his lead on big stimulus packages, there is no clear move in that direction. By last weekend the White House was signaling that it would not confront the nations, notably Germany, that resist more deficit spending.
All of this suggests a rebuke of American economic leadership. Yet Mr. Obama is still likely to dominate the discussions here. And there is no clear alternative to his strategy for reviving the world economy.
Many in Europe and Asia who depend heavily on the United States market favor Mr. Obama’s spending, hoping an American rebound will revive their economies — and ease the pressure on them to spend more.
“Here’s the central paradox,” said Jeffrey Garten, a professor at the Yale School of Management and a former top commerce department official in the Clinton administration. “Everyone has lost confidence in the U.S. system because the more that is revealed, the more it feels as if we pursued capitalism in a very irresponsible way. But everyone is now waiting the U.S. to bail them out.”
In fact, Mr. Obama’s biggest challenge may be to persuade the other nations at the meeting that the United States, while committed to recovery, does not envision a return to voracious American consumption.
“The irony,” said Mr. Garten, “is that most of our partners, after berating us for being irresponsible and greedy, want to return to the era when American consumers supported the world, when we spent too much and saved too little.”
Little of this will be said explicitly. No one wants to rattle the markets further by suggesting disharmony, at least during the 36 hours that the leaders of all 29 nations and institutions will be part of the misnamed G-20 summit meeting. A draft of the communiqué that circulated Tuesday and that will be in front of the leaders at the meeting in Britain’s Docklands — not too far from the ports where shipwrecks were once towed in for salvage — commits every nation to make efforts to refloat their economies, but sets no targets.
There will be some agreements, worded to avoid controversial details. For the first time, there will be a broad agreement about the need to regulate hedge funds and to force tax havens from the Caribbean to Switzerland to meet some global standards. Mr. Obama will arrive pledging an overhaul of the United States’ patchwork of regulations, which left institutions like A.I.G. without adequate supervision. (The American delegation will also be fending off pressure for international oversight of American regulatory actions.)
The meeting’s host, Prime Minister Gordon Brown, has been jetting around the world to encourage a veneer of broad accord. But the frictions are clear.
At the last G-20 summit meeting, participants agreed to resist protectionist tendencies. Few have. By several official counts, 17 nations — the United States included — have taken at least preliminary actions to limit imports or make sure that their stimulus money is spent at home.
“This is a classic case of countries bending to domestic political pressure because it is too difficult to make the political argument that if everyone restricts imports, everyone loses,” said Charlene Barshefsky, who served as the United States trade representative in the late 1990’s, boom years for globalization.
“You would think that leaders would get religion from the fact that global trade this year could be down by 10 percent, precisely the trend that happened between 1930 and 1933,” she said. “But try making that argument at home, in front of lawmakers who say we’re not going to be spending government money to buy someone else’s products.”
The size of the G-20 contributes to the chafing. Its membership, of necessity, includes a broad swath of the world economy, about 85 percent of global G.D.P. Few doubt that its meetings will eclipse the annual meeting of the G-7 nations — Britain, France, Germany, Italy, the United States, Canada and Japan.
At G-20 meetings, with China and India in the room, and with countries as diverse as Indonesia, Saudi Arabia, Brazil and Turkey represented, there is no shared assumption that economic interdependence is necessarily a good thing. In fact, China has expressed its worries about its American investments in surprisingly blunt terms, and is watching its industrial cities closely for signs of unrest now that millions of Chinese factory workers are being laid off.
Inside the European Union, the richest nations of Western Europe do not want to spend heavily to bail out their poorer eastern neighbors — a task they want to leave to the International Monetary Fund. Treasury Secretary Timothy Geithner has committed the United States to boosting its contribution by about $100 billion, or a fifth of the needed $500 billion. But getting that amount through Congress, at a time Mr. Obama is seeking more aid for countries like Afghanistan and Pakistan, will be an enormous challenge.
Mr. Obama has promised a new form of engagement. His aides have been debating how to mix expressions of humility with the exercise of influence. It will be a delicate dance, made more difficult by the fact that the broad goal of remaking the world’s economic architecture has given way to each nation trying to avoid the equivalent of domestic foreclosure.
“In any international meeting, other leaders are going to want to hear that we understand what went wrong in the U.S. and abroad, that we care how it affects them, and that we are working to fix it,” said David Lipton, the special assistant to Mr. Obama for international economic affairs. “It is hard to imagine a meeting with a foreign leader who isn’t interested in those questions.”
LONDON — For nearly 30 years, American presidents have arrived at economic summit meetings with nearly identical talking points: The solution to most ailments lies in more economic integration, unleashing free markets, and using a light touch to tame capitalism.
As President Obama landed here on Tuesday night at the start of his first overseas venture as the leader of the world’s largest economy, almost every one of those principles appears up for debate.
Economic integration is in retreat. Some countries have tried to wall themselves off from the troubles sweeping the world, noting that those less tied to the global economy have suffered less. Heavy regulation is back, this time with Washington’s agreement. On Tuesday the French hinted they would walk out of the Thursday summit meeting if other nations did not agree to set up a robust international financial regulatory agency.
For all of Mr. Obama’s early optimism that the rest of the world would follow his lead on big stimulus packages, there is no clear move in that direction. By last weekend the White House was signaling that it would not confront the nations, notably Germany, that resist more deficit spending.
All of this suggests a rebuke of American economic leadership. Yet Mr. Obama is still likely to dominate the discussions here. And there is no clear alternative to his strategy for reviving the world economy.
Many in Europe and Asia who depend heavily on the United States market favor Mr. Obama’s spending, hoping an American rebound will revive their economies — and ease the pressure on them to spend more.
“Here’s the central paradox,” said Jeffrey Garten, a professor at the Yale School of Management and a former top commerce department official in the Clinton administration. “Everyone has lost confidence in the U.S. system because the more that is revealed, the more it feels as if we pursued capitalism in a very irresponsible way. But everyone is now waiting the U.S. to bail them out.”
In fact, Mr. Obama’s biggest challenge may be to persuade the other nations at the meeting that the United States, while committed to recovery, does not envision a return to voracious American consumption.
“The irony,” said Mr. Garten, “is that most of our partners, after berating us for being irresponsible and greedy, want to return to the era when American consumers supported the world, when we spent too much and saved too little.”
Little of this will be said explicitly. No one wants to rattle the markets further by suggesting disharmony, at least during the 36 hours that the leaders of all 29 nations and institutions will be part of the misnamed G-20 summit meeting. A draft of the communiqué that circulated Tuesday and that will be in front of the leaders at the meeting in Britain’s Docklands — not too far from the ports where shipwrecks were once towed in for salvage — commits every nation to make efforts to refloat their economies, but sets no targets.
There will be some agreements, worded to avoid controversial details. For the first time, there will be a broad agreement about the need to regulate hedge funds and to force tax havens from the Caribbean to Switzerland to meet some global standards. Mr. Obama will arrive pledging an overhaul of the United States’ patchwork of regulations, which left institutions like A.I.G. without adequate supervision. (The American delegation will also be fending off pressure for international oversight of American regulatory actions.)
The meeting’s host, Prime Minister Gordon Brown, has been jetting around the world to encourage a veneer of broad accord. But the frictions are clear.
At the last G-20 summit meeting, participants agreed to resist protectionist tendencies. Few have. By several official counts, 17 nations — the United States included — have taken at least preliminary actions to limit imports or make sure that their stimulus money is spent at home.
“This is a classic case of countries bending to domestic political pressure because it is too difficult to make the political argument that if everyone restricts imports, everyone loses,” said Charlene Barshefsky, who served as the United States trade representative in the late 1990’s, boom years for globalization.
“You would think that leaders would get religion from the fact that global trade this year could be down by 10 percent, precisely the trend that happened between 1930 and 1933,” she said. “But try making that argument at home, in front of lawmakers who say we’re not going to be spending government money to buy someone else’s products.”
The size of the G-20 contributes to the chafing. Its membership, of necessity, includes a broad swath of the world economy, about 85 percent of global G.D.P. Few doubt that its meetings will eclipse the annual meeting of the G-7 nations — Britain, France, Germany, Italy, the United States, Canada and Japan.
At G-20 meetings, with China and India in the room, and with countries as diverse as Indonesia, Saudi Arabia, Brazil and Turkey represented, there is no shared assumption that economic interdependence is necessarily a good thing. In fact, China has expressed its worries about its American investments in surprisingly blunt terms, and is watching its industrial cities closely for signs of unrest now that millions of Chinese factory workers are being laid off.
Inside the European Union, the richest nations of Western Europe do not want to spend heavily to bail out their poorer eastern neighbors — a task they want to leave to the International Monetary Fund. Treasury Secretary Timothy Geithner has committed the United States to boosting its contribution by about $100 billion, or a fifth of the needed $500 billion. But getting that amount through Congress, at a time Mr. Obama is seeking more aid for countries like Afghanistan and Pakistan, will be an enormous challenge.
Mr. Obama has promised a new form of engagement. His aides have been debating how to mix expressions of humility with the exercise of influence. It will be a delicate dance, made more difficult by the fact that the broad goal of remaking the world’s economic architecture has given way to each nation trying to avoid the equivalent of domestic foreclosure.
“In any international meeting, other leaders are going to want to hear that we understand what went wrong in the U.S. and abroad, that we care how it affects them, and that we are working to fix it,” said David Lipton, the special assistant to Mr. Obama for international economic affairs. “It is hard to imagine a meeting with a foreign leader who isn’t interested in those questions.”
