Thanks to Reuters’ MacroScope blog for noticing:
Keith Hennessey, a former top economic adviser to President George W. Bush, saw this one coming. He rightly predicted that the Group of 20 would drop a key word from its communique at the conclusion of the London Summit: Free.
Here is my original post from Wednesday: A quick guide to the G-20 summit.
Here is the key paragraph from the November summit, hosted in Washington by President Bush. Thanks to President Bush’s negotiators, led by his “Sherpa,” Dan Price, and Treasury Under Secretary for International Affairs Dave McCormick, the following text is incredible. Last November, I wrote about this paragraph: Let’s look at some important wins in the actual text of the declaration. Formerly Communist China and Russia (along with all the other participating nations) agreed to the following text.
12. We recognize that these reforms will only be successful if grounded in a commitment to free market principles, including the rule of law, respect for private property, open trade and investment, competitive markets, and efficient, effectively regulated financial systems. These principles are essential to economic growth and prosperity and have lifted millions out of poverty, and have significantly raised the global standard of living. Recognizing the necessity to improve financial sector regulation, we must avoid over-regulation that would hamper economic growth and exacerbate the contraction of capital flows, including to developing countries.
Let’s parse it a bit:
- “a commitment to free market principles”
- “rule of law”
- “respect for private property”
- “open trade and investment”
- “competitive markets”
- “and efficient, effectively regulated financial systems.”
- “we must avoid over-regulation that would hamper economic growth and exacerbate the contraction of capital flows”
Now let’s examine yesterday’s text:
3. We start from the belief that prosperity is indivisible; that growth, to be sustained, has to be shared; and that our global plan for recovery must have at its heart the needs and jobs of hard-working families, not just in developed countries but in emerging markets and the poorest countries of the world too; and must reflect the interests, not just of today’s population, but of future generations too. We believe that the only sure foundation for sustainable globalisation and rising prosperity for all is an open world economy based on market principles, effective regulation, and strong global institutions.
Parsing this new language:
- “a commitment to free market principles” has been replaced by “based on market principles.” Note that the word “free” is nowhere in the document.
- “rule of law” is nowhere in the document
- “private property” is nowhere in the document
- “open trade and investment” has been replaced by “open world economy” (This one is fine, I think.)
- “competitive markets” and the word “competitive” are nowhere in the document
- “efficient, effectively regulated financial systems” has been replaced by “effective regulation, and strong global institutions.”
- The over-regulation caution is gone.
What makes this so disappointing is that all G-20 nations agreed to the November text. It should have been an extremely easy lift for negotiators from capitalist countries to insist that this leaders’ declaration merely repeat what the leaders agreed to last November.
Wednesday I wrote, In the short run, it is easy to see how a negotiator might give this up for a more concrete immediate objective. In the long run, few things are as important.