There were two official portraits of world leaders to emerge from the recent G20 summit in London, arguably the most important economic gathering in generations. One did not include Stephen Harper, who, as the BBC reported in its inimitable style, missed the photo op because he was predisposed “in the loo.” The PM, of course, was present in a later make-good pic, although a decidedly more colourful politician ended up missing that shot: Italian Prime Minister Silvio Berlusconi.
Talk about metaphor. On the one hand, the G20 leaders reached surprisingly broad consensus to combat the global recession with US$1 trillion in financial aid for countries in trouble. They also agreed in principle to usher in a new era of regulation to curb excesses that even U.S. President Barack Obama conceded had proved a “contagion.” Tough international accounting standards were promised, as were new curbs on debt-rating agencies and runaway hedge funds. Excessive executive compensation is to be reined in, as are tax havens and dodges. Yet there was clearly something missing from the overall picture — and that was nitty-gritty.
Summit communiqués, typically, are worked out behind the scenes, well in advance. But while world markets rallied strongly on the latest sentiments — and some even suggested that, rather than being ensnared in a bear rally, the global economy may indeed be turning a corner — as is always the case in these things, the devil is in the details. We don’t want to rain on the parade. But let’s be realistic: when it comes to dotting the i’s and crossing the t’s, a couple of clear dangers remain.
Obviously, the recent love-in might still give way to national self-interest. Another, more alarming scenario is the threat of over-regulation, the very real possibility that in an attempt to right past wrongs, politicians will be tempted to throw the baby out with the bath water. (Think 2002 and the Sarbanes-Oxley Act.) Or they may decide to toss something altogether different: more good money after bad. And don’t forget protectionism, which still looms in the background like some discordant Greek chorus.
Yes, there was plenty to applaud out of the recent summit. But you’ll want to keep a very keen eye on corporate earnings in the weeks ahead. Let’s hope that as the numbers pour in, world leaders will still be grinning — and that Canada will indeed be in the picture.