As the Group of 20 summit pandemic spreads from the media, academe and think-tanks out into the political world and into the confused minds of citizens trying to make sense of it all, we have good news. Many of the worst ideas for global governance and policy have already been thrown overboard. By the time the G20 show gets to Toronto, along with the G8 leaders, the latest global-governance effort will likely have ended in a highly desirable state of minimal co-ordination and general indecision and inactivity aimed at taking action some time in the future.
The global bank tax is dead, an achievement in itself. Whether Canada and Prime Minister Stephen Harper can claim much credit is beside the point. A terrible financial reform idea is off the agenda, which means the world will not have to witness the spectacle of billions of dollars piling up in some international slush fund where it would be mismanaged by a cabal of appointed bureaucrats until the next financial crisis, at which time the money would paid out to rescue failed institutions.
Another important improvement in the G20 policy agenda is the abandonment of rampant fiscal stimulus as a cure for economic trouble. Not too long ago, as recently as April, the G20 was calling for continued government spending in Europe and around the world until economic recovery was fully in place. At meetings this past weekend, financial ministers emerged with a new plan: Time to rein in spending and cut deficits.
The sudden turn in fiscal direction follows the Greek sovereign-risk meltdown and growing anxiety about the health of banks and governments across Europe. The G20 fiscal policy turnaround is also a warning on the perils of the G20 itself and the global fantasies of multi-national policy co-ordination. Former Canadian finance minister Paul Martin calls the G20 -- which he helped create -- "the world's steering committee." But if all governments end up steering in the same wrong direction, the effect of co-ordination is collective destruction rather than salvation.
Collective global policy madness is certain to be more dangerous than individual national forms. There are plenty of national ideas out there that the world does not need to have imposed by power-seeking international bureaucrats and populist politicians. If individual nations want to impose executive pay controls, excessive risk prevention, more taxes and paralyzing regulation, there's no need to burden the whole world with the same.
Climate change is another policy area said to be getting thinner at the summits. There is no unanimity in Europe on carbon emissions targets, and the fiscal and economic crises are making all governments reluctant to commit to global targets and programs. There will be no mass rush into cap-and-trade or carbon taxes at the Toronto summits.
If governments are wisely unwilling to sacrifice growth to climate policy, they are also unlikely to want to curb economic activity over financial reforms. According to the president of the Dutch Central bank and chairman of the Basel Committee on Banking Supervision, the planned financial industry reforms may lower global economic growth by as much as one percentage point.
Sacrificing one percentage point of global growth to bring in international bank capital and other rules might be worth it -- if the planned reforms were to guarantee global economic and financial stability. But there are no guarantees and plenty of skepticism about any expansion of existing rules and powers of global agencies. "Regulatory co-operation is clearly a growth industry," says Marc Levinson, a senior fellow at the Council on Foreign relations. "But that growth is not necessarily good for the global economy."
The G20 concept, as it is now emerging in policy circles, is that all governments acting together to align regulatory, fiscal and monetary policy can somehow avoid financial and economic crisis. But Mr. Levinson, writing in Foreign Affairs magazine, said that "over three decades of experience have shown that international co-operation in financial regulation brings as many risks as benefits." Policy harmony, he said, has meant that "many countries make the same mistakes."
Already there are indicators there will be no sweeping agreement in Toronto and there is unlikely to be a uniform package in place at the end of further meetings later this year. Mario Draghi, head of the G20-aligned Financial Stability Board, yesterday laid the groundwork for an official patchwork of disagreement, with some countries phasing in G20 financial reforms ahead of others. Mr. Draghi was speaking at the International Economic Forum of the Americas in Montreal, where G20 issues dominate the agenda.
The less achieved at the coming G20 the better, since there is little evidence that massive co-ordination and harmonization would be of great benefit. Canada, for example, is the current hero of global financial regulation, precisely because it did not follow international guidelines and global standards. For this reason, Canadian resistance to global standards -- either through bank taxes or carbon taxes -- are more than welcome, despite persistent calls from academics and policy activists that Canada lead the G20 to greater heights of co-operation and international co-ordination.
G20 mania has a darker side -- a growing push for forms of global government. Paul Martin rejects such suggestions. In the latest issue of Policy Options, Mr. Martin says "effective global co-ordination does not mean the slow road to global government." He's not reading the background papers. An enthusiastic new paper, released yesterday by the Centre for International Governance Innovation , makes the opposite claim: "We should not shy away from naming the big fish honestly. It is global government."
Fortunately, chances are good that the coming G20 summit in Toronto -- the Tumble in Toronto--will not get very far in catching the big fish.