The G-20 summit in Washington is over. A weekend of meetings, intense security and motorcades has past. Heads of government and their finance ministers from nineteen other countries left town.
The big questions now are 1) what did their summit at the National Building Museum accomplish and 2) was the outcome of the international conclave a triumph of greater government economic controls over free-market capitalism?
The short answers are 1) very little and 2) very likely—details to follow.
One thing summit-scholars agree on is that the key player who did the most to make the G-20 happen, and then gained the most from it, was Nicolas Sarkozy.
Indeed, George W. Bush may have hosted and presided over the Summit on Financial Markets and the World Economy (the official name of the G-20) but in so many ways, it was Sarkozy’s summit. The French President helped persuade Bush to hold the G-20 summit. As the current holder of the rotating presidency of the European Union, Sarkozy took the unprecedented step of inviting Spain and the Netherlands to the session.
Sarzkozy-watchers in the U.S. say that the goal of the French President was future international economic summits that include many more nations beside the traditional G-8 industrial titans. His secondary goal was to assimilate discretionary bondholders (countries that hold U.S. debt) into the summits. As French Foreign Minister Bernard Kouchner told the Financial Times on the eve of the G-20, "It will be the beginning of a process. We have to transform the G-8 until it is the G-14, with China, India, Brazil, in particular. It is ridiculous to not consider involving half the world’s population."
For the immediate results from the summit this weekend, Sarkozy did get this long-stated desire of a "college of supervisors" for oversight of the books of major financial institutions operating across international borders. Moreover, the world leaders agreed that their systems would submit to periodic review by the International Monetary Fund (whose Managing Director Dominique Strauss-Kahn, former French finance minister who was tapped for the IMF position by—you guessed it!—Nicolas Sarkozy.).
A tougher line by ratings agencies on exhorbitant compensation for executives–either voluntary or regulatory—was called for in the final communiqué of the G-20. Again, this was an issue doggedly pursued by Sarkozy.
With much of the actual work of the summit done behind closed doors, the media has had to rely on reports from anonymous sources on who said what to whom. Relying on such sources, the Washington Post pointed to Canadian Prime Minister Stephen Harper as one who was particularly opposed to Sarkozy’s calls for greater global regulation over markets in sovereign nations.
For many who recall Sarkozy as a "man of the right" in his ’07 race for President, his new role as an agent of regulation and international oversight is disappointing. As one who has read and reviewed Sarkozy’s book Testimony, I find it ironic to find someone who wrote so forcefully of his beliefs in capitalism taking this new route.
But Sarkozy, as colleagues of mine who covered him in Paris recounted, is first and foremost a master politician. He is a leader, they say, who sees his opportunities and takes them.
As Sarkozy and fellow European leaders arrived in Washington, the fifteen-country Eurozone is in a recession. The Gross Domestic Product in Germany (Europe’s largest economy) fell by 0.5% in the quarter leading up to September. Last week, the Paris-based Organization for Economic Cooperation and Development predicted that the entire Eurozone economy would drop by 0.5% next year. Also, according to a just-completed FT/Harris Poll, voters in the U.S. and Europe think very little of the their leaders’ handling of the financial crisis so far. Only 28% of French voters say Sarkozy is doing well.
In fairness, the French President is probably in better political shape than some of his counterparts. British Prime Minister Gordon Brown must call a general election by 2010 and polls show his Labor Party either trailing or tied with the opposition Conservative Party of David Camerson. In Germany, Chancellor Angela Merkel faces an election in early ’09 and pundits agree that the opposition Social Democratic Party (SPD) has nominated a strong chancellor candidate in Foreign Minister Frank Walter Steinmeier.
As Sarkozy arrived in Washington, the opposition Socialists opened their convention in Reims, the party continuing a holy war with itself. Four candidates (including ’07 presidential hopeful Segolene Royal) are waging a zesty bid for party leadership.
So—voila!—enter "Sarko the Statist," seizing the global center stage in the summit and calling, so far quite successfully, for greater intervention in the global market.
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