Question:
On November 11 and 12, 2010, the G20 summit was held in Seoul, the capital of South Korea, under the slogan "Shared Growth Beyond Crisis." The main topics were currency exchange rates and trade imbalances. Its convening was preceded by European statements, particularly from France, attempting to introduce changes to the global financial system. It was also accompanied by a degree of controversy between America and China regarding the Yuan... and regarding America’s pumping of millions of dollars... So, to what extent have Europe and China succeeded in curbing America’s dominance in international financial policy?
Answer:
Yes, the summit was preceded and accompanied by European and Chinese resentment toward American financial arrogance, but America was able to emerge from the summit while maintaining its financial arrogance! To clarify this matter, we will review the relevant events:
On 11/12/2010, Reuters quoted sources from the German delegation at the G20 summit stating, "German Chancellor Angela Merkel expressed her concerns to US President Obama regarding recent moves by the US Federal Reserve to inject liquidity into the US economy. However, Obama told Merkel during a meeting on the sidelines of the G20 summit that he wanted to see more domestic demand in Germany." It appears from this that Germany is concerned about America’s policy of pumping money because it will affect the value of the dollar by keeping it low, which increases the burden on Euro holders as its value rises against the dollar. Consequently, the prices of European goods become high, causing them financial and trade losses. Obama's response appeared indifferent to Merkel's complaint; instead, he attacked Germany, pointing to the weakness of domestic demand in German markets, which would affect American exports to Germany and EU countries due to low consumption—since people lack funds and fear global financial conditions, leading them to save rather than spend. This is evident in the German local market. Thus, Obama’s response to Germany's accusations was that Germany itself is negligent and bears the blame! Reuters added in its report: "America ignored the criticism yesterday (11/11/2010), and Obama said he expects the G20 summit to define mechanisms for achieving broad-based and balanced global economic growth. He said: the rest of the G20 realizes that American growth is important for the global economy." This indicates that America displayed a policy of arrogance and haughtiness in the economy, showing indifference to the world. Rather, it acts as if it is doing a favor for the world's countries and peoples—most of whom suffer from poverty, hunger, and deprivation—by implying that their economic growth is not what is important; rather, what matters to them is the growth of the American economy and the affluence of the American people. It is as if it is saying that as long as America and its people are fine, the world is fine!
The Chinese also tried to attack America by criticizing the policy of pumping money and expressing their deep concern, as stated by their officials. Zhang Tao, Director of the International Department at the People's Bank of China, told reporters on the sidelines of the summit: "Countries with large reserves should take into account the global impact of their policies." He warned, saying: "Unregulated capital inflows resulting from the US Federal Reserve's move could harm emerging economies and pose a threat to the global economic recovery." (Reuters 11/12/2010). However, American officials attacked the Chinese regarding their currency policy, the Yuan, accusing them of keeping their currency low, which causes trade imbalances. They made it appear as if the problem did not stem from them, but rather from the Chinese.
The final communiqué came out in favor of America; it did not criticize it or blame it for the economic destruction of the world. It diverted accusations and pressure away from it, maintained the previous global financial system as it was, and kept America in control of the reins. Even a senior American official, who requested anonymity, said hours before the summit concluded: "The talks are very encouraging." He said: "The final communiqué expected to be issued by the summit will slightly reduce the pressure and tensions we have witnessed and will disappoint those who predicted that the summit would end against a backdrop of divisions." He added: "The final communiqué will be similar to the statement adopted by finance ministers at the end of October in South Korea." (AFP 11/12/2010). This means that America was able to draft it in a way that satisfies it, does not hold it responsible for the continuation of the global financial crisis, and places the consequences and responsibility on all countries—which is what is observed in the final communiqué.
The final communiqué did not bring anything new or provide solutions. What was mentioned in it consisted of general formulas such as: "Advanced economies will provide protection against fluctuations in exchange rates, which will help mitigate the risks of large fluctuations in capital flows faced by some emerging economies." This formula is in favor of America, which creates financial flows by pumping hundreds of billions of dollars into the markets. It is as if it says that the American economy, being advanced, is capable of providing protection against fluctuations in exchange rates and will help mitigate the risks of large fluctuations resulting from pumping money into the markets—a policy it has applied since the crisis appeared in 2008, printing and pumping trillions of dollars into the markets. The statement also said: "The measures, which will consist of a set of guidelines, will help at appropriate times in identifying imbalances that require correct preventive measures." It also stated: "Ministers will work with the International Monetary Fund (IMF) to take the guidelines into account, with discussions on what is taken to occur during the first half of next year." Criticisms arose during the drafting of the statement that "the group—meaning the G20—did not decide to define these guidelines in terms of type or quantity; that is, they remained without sufficient clarification."
It is clear from this that the summit did not change anything in the global financial system as some had demanded, led by France. It did not fulfill the demands of those dissatisfied with American actions, and they were unable to move it from its position. They could not condemn its stances or form a global public opinion against its tyrannical economic behavior, which has reached the level of arrogance, much as it was during the era of Bush Jr. in politics—but here its arrogance manifested in economics and finance. If it prints a banknote that is not even worth the price of the green ink it is dyed with, buys its own treasury bonds that have begun to stagnate, shows that it has eased its debt, revitalized its market, and bought the world's wealth with it for nothing—except under the name of this green paper—then no one has the right to blame it. Rather, it has the right to do that while others do not! We see how the Europeans have shackled themselves, unable to exceed certain limits in printing their currency due to specific restrictions. America has been able to protect itself from criticism, and even from attacks against it, due to the policy of pumping money. It appears that America wanted this conference to protect itself from criticism and prevent the issuance of a statement criticizing it, thereby preventing the formation of a global public opinion against its financial policy that causes global crises. It thwarted calls to change the global monetary system and emphasized the continuity of the previous system extending from the Bretton Woods summit in 1944 until today. This is through the continuation of the dollar as a global currency and the continued role of the IMF. It gave itself the right to print the dollar as it pleases and in the amount it wants without any deterrent. In this way, America was able to maintain its global position as the leading state, which has the authority, the final word, and holds the reins of affairs in the world!
As for the others, China was able to stave off pressure for a rapid revaluation of its currency and accepted that it would happen in stages. The Europeans were the biggest losers; they could not change anything in the global monetary system as they intended, they could not condemn America for its policy of pumping money and devaluing the currency, and they could not create an opinion opposed to it. Thus, it is unlikely that Sarkozy will be able to achieve anything significant during his presidency of the G20, which he took over at this summit for a year, while he calls for a change in the global monetary system. The guidelines the summit requested be established will, as stated in the communiqué, take about half a year of discussion between finance and trade ministers and the IMF before they are completed. Then they will take another unspecified amount of time to be implemented and acted upon. Likewise, the extent of their efficacy is unknown, and things may remain at a standstill until the next G20 summit, which will be held in November of next year!