Opinion Don’t just do something,sit there

Of all the G-20 summiteers,only the United States and China have committed themselves to spending programs big enough to put a dent in our proto-depression. Germany,the world’s largest exporter and biggest proponent of fiscal discipline,remains adamantly opposed to countercyclical spending. If this were a normal recession,its opposition to deficit spending might make some sense. The Germans argue that their more social form of capitalism already mitigates much of the economic distress that we Americans experience when our economy goes south. In good times,the German government puts revenue from payroll taxes and employers into a special fund that it deploys in hard times to boost the incomes of workers whose hours have been cut back. Depending on how you look at it,this is socialist flummery or an application of Joseph’s advice to Pharaoh to set aside resources in the seven fat years to get Egypt through the seven lean ones. Either way,it’s an effective countercyclical program. So if Germany is providing us models for countercyclical spending,isn’t it doing enough? Not if a projection by Commerzbank — that Germany’s economy will decline by a stunning 6 to 7 per cent this year — comes to pass. As the world’s largest exporter,the Germans are excruciatingly vulnerable when other nations can no longer afford to buy their goods. They need to boost their economy so they can buy more of their own.

If continental Europe isn’t keen on meeting a global stimulus target,neither is the US keen on setting up global regulators for global finance. In an interview with the Financial Times,Treasury Secretary Tim Geithner admitted that national reforms would not work “unless we are able to bring others along with us.” He added,however,that “we are not going to give anyone else the responsibility for deciding what balance between stability and efficiency is right for our markets.” In a pre-global economy,Geithner’s caveat would be unexceptionable. But in a world where banks such as Citigroup or Goldman Sachs operate in scores of nations,uniform standards of leverage are both prudent and necessary. At a time when the global economy needs global rules,Geithner’s anti-globalism is nothing less than a new form of protectionism.

But neither global rules nor global stimulus is likely to emerge from this week’s G-20 summit. This generation of world leaders has a rendezvous with inadequacy.

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