Saturday, March 10, 2012
Who's in Charge Here?
Posted by David Smith at 06:00 PM
Category: Thoughts and responses


I'm tempted to say that Alan Beattie has written an entertaining little book on the crisis and the uselessness of politicians in it. But, to be strictly accurate, this is not a book but a Penguin Short available for digital download, here. It is, however, hugely entertaining. This sums it up:

"At every stage since the crisis hit, two things have become clear. One is that the governments, central banks and international institutions charged with safeguarding the world economy have had almost no idea about the severity of what was coming. The second is that official reactions have for the most part been slow and inadequate within countries and disjointed and uncoordinated between them.

"At each turn, the international response to the successive attacks of financial contagion has been hobbled by complacency, misplaced ideology, a failure to coordinate and a lack of political will."

If there's a criticism, it is that Beattie goes a little easier on central banks than politicians. Maybe Mervyn, Jean-Claude, Ben and Co will get another volume. But that is a minor point. And the virtue of this electronic book is that it is written by somebody who was there: waiting (you always have to wait) for the politicians to show up at their press conferences and trot out their inanities.

He pulls apart Gordon Brown's moment of greatest triumph, the G20 summit in London's Docklands in April 2009:

"‘The Trillion-Dollar Summit’ was the headline Mr Brown wanted, and by and large he got it. He claimed to have achieved a $1.1 trillion boost to the world economy, including $500 billion for the IMF’s war chest, a $250 billion boost for trade and a $250 billion increase in the global money supply. The Guardian newspaper, a habitual cheerleader for the Prime Minister, ran its story under the millenarian headline ‘Brown’s New World Order’, and even less slavishly loyal papers were enthusiastic.

"The reality was less impressive. The $500 billion for the IMF was very welcome, as the institution had already started to eat into its reserves with a string of rescue loans for Eastern European countries in late 2008. But some of the money was already in train – Japan had offered a $100 billion loan the previous year – or would not be agreed until months after the summit, and an increase in the future firepower of a crisis lender was not an immediate boost to the world economy.

The $250 billion support for trade was more like $4 billion: it was a subsidy for the provision of trade credit (a basic form of finance that had been in short supply during the credit crunch) and the $250 billion was a highly optimistic assessment of the amount of trade that subsidy might help support over three years. The $250 billion boost to the world’s money supply was an issuance of ‘Special Drawing Rights’, a form of asset that governments could add to their foreign exchange reserves and use if they chose to. As it happened, most chose not to.

"The standard view of the G20 among most commentators is that it started well, in Washington and London, but thereafter achieved little. In reality, only the second half of that is true."

There's also a wonderful spoof report, writen by Beattie while waiting for some press conference or other to start:

"An ineffectual international organization yesterday issued a stark warning about a situation it has absolutely no power to change, the latest in a series of self-serving interventions by toothless intergovernmental bodies.

‘We are seriously concerned about this most serious outbreak of seriousness,’ said the head of the institution, either a former minister from a developing country or a mid-level European or American bureaucrat. ‘This is a wake-up call to the world. They must take on board the vital message that my organization exists.’

"The director of the body, based in one of New York, Washington or an agreeable Western European city, was speaking at its annual conference, at which ministers from around the world gather to wring their hands impotently about the most fashionable issue of the day. The organization has sought to justify its almost completely fruitless existence by joining its many fellow talking shops in highlighting whatever crisis has recently gained most coverage in the global media.

‘Governments around the world must come together to combat whatever this year’s worrying situation has turned out to be,’ the director said. ‘It is not yet time to panic, but if it goes on much further without my institution gaining some credit for sounding off on the issue, we will be justified in labelling it a crisis.’

Great stuff, and worth £1.99 of anybody's money.