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Saturday, Nov 15, 2008
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Credibility problem facing Washington summit

N. Ram

Washington: The Summit on Financial Markets and the World Economy, which opened over dinner Friday evening at the White House, faces a major credibility problem, notwithstanding the cautious optimism expressed by official India ahead of the event.

Everyone knows that the summit’s orchestrator and host, President George W. Bush, is as lame-duck as any lame duck can be. This is not merely because his successor’s inauguration is only two months away. Mr. Bush’s deep unpopularity at home and abroad, which also derives from the widespread perception that the Bush administration must bear the lion’s share of the blame for the global financial crisis, threatens to become a political liability for any policy package agreed at the summit.

According to reports in the American press, the goal of the summit, as defined by the Bush administration, is to “forge an international consensus on the root causes of the crisis and lay the foundations for regulatory changes to prevent a similar meltdown.” But the apprehension is that the first part of the agenda might open the door to veiled attacks on the Bush administration’s economic policies over eight years, which contributed in a big way to the present debacle of the international financial system.

European leaders, notably France’s Nicolas Sarkozy, Britain’s Gordon Brown, and Germany’s Angela Merkel, and also Australia’s Kevin Rudd are following a somewhat different trajectory. In general, they seem to believe the financial crisis could have been averted had there not been a massive failure of regulatory oversight. Mr. Sarkozy, in particular, has been advocating a strong international regulatory regime. Not one to shy away from an ideological skirmish, Mr. Bush, in pre-summit remarks distributed by the White House, called upon the leaders of the major economies not to jettison free-market capitalism. Ironically for a leader who has massively extended the reach of the government in the market through billions of dollars worth of bail-outs, he asserted that “the greater threat to economic prosperity is not too little government involvement in the market, but too much.”

The most interesting hand in all this has been played by President-elect Barack Obama. He will have no truck with the summit. He has declined even to meet the leaders of major economies who must be dying to get his measure. It is true, as India’s Finance Minister P. Chidambaram has pointed out, that Mr. Obama has taken “a very politically correct” position that the United States has only one President at a time. But he has a weightier reason for not having anything to do with the summit. He has promised change but his economic policies are still being formed. Being a student of history, he surely knows how shrewd President-elect Franklin D. Roosevelt was in rebuffing, in early 1933, lame-duck President Herbert Hoover’s repeated attempts to involve him in actions to cope with the great crisis, including a joint proclamation closing all banks. “FDR’s message,” says Jonathan Alter, whose book The Defining Moment: FDR’s Hundred Days and the Triumph of Hope holds many lessons for summit participants, “was clear: the incoming president wasn’t going to give the outgoing president political cover.”

Nobody can say at this point that President-elect Obama will do as well as FDR did under not dissimilar circumstances – in the eye of the storm. But it is clear he doesn’t want to give political cover to a President whose policies have been an unrelieved disaster at home and abroad.

Text of Q and A with Finance Minister P Chidambaram on the G20 Summit

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