The Newest Global Religion

“The world economy with its multiple crises is a frightening place. To confront our fears, we have a new global religion. It developed slowly over the last couple decades, based on the sacred writings of the world’s leading shamans. The shamans have been releasing a new scripture of prophecy and comfort every year after secluding themselves in a remote location for several days of prayer and reflection.

There used to be only seven of these shamans, and they were known for short as the G-7. As of their latest retreat to the Burgh of Pitt last weekend, the number of shamans has grown to G-20.

This year’s scripture, called The Communiqué, was the longest in G-ism history at 15 pages. It offered prayers of healing for many different ailments, from the pestilent OTC Derivative Contracts to the noxious Gas Emissions. It condemned the unholy Excessive Compensation in the Financial Sector as well as the evil Non-Cooperative Jurisdictions.

One of the greatest attractions of the G-ist religion is its concern for the poorest among us. G-20 reserved their most fervent prayers of comfort and restoration for those who newly suffer, such as those who now hunger when they did not before. There are 90 million more who go hungry than at last year’s G-shaman meeting, after the Great Backsliding of 2008, whereupon “the financial crisis followed close on the heels of a global spike in food prices…{when} even before the crisis, too many still suffered from hunger …{and} recognizing the crisis has exacerbated this situation.” G-20 offer to feed the hungry with GPAFS, CAADP, UNCFA, IDA, ADB, NGOs, FAO, IFAD, and WFP, using the holy mysteries of “coordinate efforts,” and “country-led mechanisms,” and “complement and reinforce other existing multilateral and bilateral efforts” (page 11, verse 39 of The Communiqué).”

William Easterly, “The Newest Global Religion”, Aid Watch Blog (29 September 2009).

http://blogs.nyu.edu/fas/dri/aidwatch/


William Easterly is professor of economics, New York University, visiting fellow at The Brookings Institution, author of The White Man’s Burden, a book about development policy, and a former World Bank economist.


It is difficult to take seriously the increasingly vapid scripture emanating from the international meetings such as the G-20. The G-20, after all, is now supposed to be the most important international economic policy-making gathering of the world’s major heads of state. In some sense it has taken over the world problem-solver role formerly carried out by the G-7, which is to say, by the United States. You would think it would say something significant, and if not significant at least believable.

Here are the opening paragraphs of the G-20 communiqué:

PREAMBLE

1. We meet in the midst of a critical transition from crisis to recovery to turn the page on an era of irresponsibility and to adopt a set of policies, regulations and reforms to meet the needs of the 21st century global economy.

2. When we last gathered in April, we confronted the greatest challenge to the world economy in our generation.

3. Global output was contracting at pace not seen since the 1930s. Trade was plummeting. Jobs were disappearing rapidly. Our people worried that the world was on the edge of a depression.

4. At that time, our countries agreed to do everything necessary to ensure recovery, to repair our financial systems and to maintain the global flow of capital.

5. It worked.

6. Our forceful response helped stop the dangerous, sharp decline in global activity and stabilize financial markets. Industrial output is now rising in nearly all our economies. International trade is starting to recover. Our financial institutions are raising needed capital, financial markets are showing a willingness to invest and lend, and confidence has improved.

The arrogance of the opening statement saying that this assembled congeries of political misfits, malefactors and miscreants is turning “the page on an era of irresponsibility” and adopting “set of policies, regulations and reforms to meet the needs of the 21st century global economy” is so absurd as to be laughable. Almost without exception, the assembled “world leaders” are running unprecedented deficits in their national budgets, pushing for ever higher spending and taxes, promoting protectionism, and presiding over rampant political corruption and the growing influence of special interests, especially financial interests, on their political systems. Their irresponsibility more than matches their predecessors.

To say that “Our forceful response helped stop the dangerous, sharp decline in global activity and stabilize financial markets” is an exaggeration. No, more honestly, it is a delusional fantasy when the world economy remains mired in a deep recession, global unemployment continues to rise, inflationary pressures are building, and the IMF is reporting that not even half of the write-offs required to restore the health of the financial sector have been undertaken. The situation remains extremely precarious. It is not just that we have a long way to go to restore the stability to the world economy; it is the fact that the main policy challenges remain ahead and cheerleading about the tiny progress made to date blinds us to the challenges we now face. Their blindness to their own inadequacies and the shortcomings of their own policies also more than matches their predecessors.

Past communiqués from G-7 meetings were more than cheerleading documents and statements of intentions and aspirations that contradict the current policy stance of the very countries issuing the document. In that sense, Professor Easterly is right. G-20 communiqués have become prayers of comfort and restoration calling for leaders to act responsibly rather than policy guidelines setting forth the actions they really intend to take. Their statements have become sermons exhorting the world to following their leadership when their policy actions belie their spoken words.

As an aside, I mention that the political significance of the G-20 statement can be found in the words “We designated the G-20 to be the premier forum for our international economic cooperation”. During the 33 years of the G-7 forum, the United States played the key role of setting the world’s economic agenda and taking the responsibility for coordinating and implementing, such as it was, common approaches to dealing with the world’s short- and medium-term macroeconomic problems. The United States has now abandoned its leadership role to the G-20. It is fair to say that U.S. leadership waned as its international economic position eroded under the weight of growing problems at home and mounting international imbalances in its external accounts.

It would be a mistake to think that this change will necessarily improve international policy harmonization. The political configuration of the G-20 is far more diverse than the G-7 and the national fiscal and monetary priorities of this group is also far more diverse. As a group, G-20 policy priorities will now shift to emphasize longer-term problems such as the impact of globalization, overcoming global poverty, addressing what is perceived by many to be climate change, and emphasizing global lawmaking in the areas of financial flows and banking regulations. In my view, it is far more likely that needed coordination on short-run macroeconomic policy concerns will be weakened and that collective leadership will prove unable to find common approaches to dealing with the longer-term structural problems that now appear on its agenda.

The march of the United States from the center of the world stage continues in both the political and economic arenas. This will test the limits of collective leadership at the global level with unknown consequences to all.