If nothing else, the leaders’ communique from the weekend G20 meeting was rousing in its commitment to growth. Leaders declared they were “united by our continued commitment to work together to strengthen the global economy … Strengthening growth and creating jobs is our top priority and we are fully committed to taking decisive actions to return to a job-rich, strong, sustainable and balanced growth path.”
Wait, sorry. That was St Petersburg last year. Here’s what they said yesterday:
“We are united in our resolve to promote growth and jobs. Since we last met, the global recovery has continued to face a number of challenges. Financial market tensions are high. External, fiscal and financial imbalances are still prevalent, having a major impact on growth and employment prospects and confidence. … We will work collectively to strengthen demand and restore confidence with a view to support growth and foster financial stability in order to create high quality jobs and opportunities for all of our citizens.”
Oh, bugger, that was Mexico in 2012. Look, OK, here’s yesterday’s declaration:
“Raising global growth to deliver better living standards and quality jobs for people across the world is our highest priority. We welcome stronger growth in some key economies. But the global recovery is slow, uneven and not delivering the jobs needed. The global economy is being held back by a shortfall in demand, while addressing supply constraints is key to lifting potential growth. Risks persist, including in financial markets and from geopolitical tensions. We commit to work in partnership to lift growth, boost economic resilience and strengthen global institutions.”
You can bet next year’s meeting in Turkey produces the same stuff yet again. Jobs. Growth. Full commitment. High priority. There is nothing wrong with the sentiment, but there is also nothing new. It’s so uninspiring, someone within the government actually thought it worthwhile to leak that there would be an additional 0.1% added to the growth target.
The world economy has a total nominal GDP of around US$75 trillion (give or take a few billion), so, barring another slowdown, there should be more than US$350 trillion of nominal GDP in the next five years. The Brisbane Action Plan says it will add “more than $US2 trillion” to the world economy. Big as the US$2 trillion sounds, it’s not all that much when viewed against the total global GDP figure. The bottom line from these plans is that it’s all about back of the envelope (or spreadsheet) estimates masquerading as something more substantial.
And some of the country commitments border on the ridiculous. Italy, where 10 of the last 12 quarters has seen negative growth, committed to “reform of the public administration and of the justice system” promising “a fast-paced justice system that is accessible and produces high-quality and reasonably foreseeable outcomes is a prerequisite for attracting [foreign direct investments].” Well, everyone knows that the Italian legal system makes that of Kafka’s The Trial look simple, but there’s nothing about what, specifically, the Italians will do to achieve it.
Russia committed to “creation of high-productive quality jobs and increase in labor productivity”, again with no explanation of how it will be achieved (more jobs in your army doesn’t count, Vladimir). In any event, the Russian economy is currently being crippled by Western sanctions and the collapsing oil price; indeed, Putin’s early departure could serve as a ready symbol of how a renewed Cold War over Ukraine has the potential to not merely seriously damage the Russian economy, but further deepen Europe’s woes. The Germans specifically committed to budget surpluses — when lack of German spending is one of the key problems causing the eurozone depression. They did commit to 5 billion euros of new investment in infrastructure — but that would be a pittance in a country half the size of Germany’s US$3.6 trillion economy.
And then there’s that nasty thing called politics. The US has presidential and Congressional elections in less than 24 months. If the Republicans win the White House, then anything President Barack Obama has signed up to will be forgotten. Japan could have an election as soon as next month. Canada goes to the polls next year, as does the UK, and the Conservatives could leave the EU. France goes to the polls in a couple of years, Germany has three more years of Angela Merkel, and Germany is running what can only be called a “beggar our neighbours” policy by not boosting spending and reforms to drag in more imports and spark growth elsewhere in Europe. Brazil and Mexico are unstable, with their leaders now under growing pressure from corruption charges, as is Argentina, where there will be a change of president next year.
None of this is the fault of Tony Abbott and Joe Hockey, even if Australia’s growth commitments feature idiotic ideas like starving the unemployed. Whatever his problems politically, Hockey is continuing Labor’s stimulatory fiscal policy while plotting a sensible path back to surplus, while the Reserve Bank runs a similarly easy monetary policy. If you ignored the rhetoric, the government was well-placed at the G20 to lead a push for growth. But without a global financial crisis to focus leaders’ minds, the G20 is indeed now the talkfest that Abbott correctly wanted to avoid.