By Jim Hoagland
Sunday, October 26, 2008
It is the global economy this time, stupid.
Even the Bush administration now accepts that serious international economic coordination is needed to overcome the shattering financial crisis that has reduced the final days of the U.S. election season to slogan-mongering irrelevance.
The campaign promises of Barack Obama and John McCain -- to revitalize the national economy single-handedly while painlessly providing expensive new benefits to the electorate -- are the political equivalent of collateralized debt obligations or junk bonds. This crisis is international in nature and can be resolved only by sustained international reform and greater interdependence.
That will be true whether it is Obama or McCain who takes office on Jan. 20. The victor will necessarily share global leadership as no American president has since World War II. The first vital question is: Share with whom? A quiet struggle to determine which countries will decide the shape of a new international financial architecture is already underway among the world's presidents, prime ministers, kings and emirs.
There is some good news on this front. Led by Britain and France, other nations are providing creative ideas and fresh energy in the hunt for solutions to the worldwide credit crash. A non-ideological, action-oriented common approach is being forged by the immense dangers the system faces. President-elect Obama or McCain will find capable partners ready for a new pattern of global leadership that must be rooted in pragmatism.
Prime Minister Gordon Brown (and Mervyn King, the adept head of Britain's central bank) usefully galvanized thinking in Washington on partially nationalizing banks at a crucial moment earlier in this nerve-racking month. The principles that Brown has laid out to guide government action in rescuing the private sector strip away old ideologies of the left and the right. He has converted New Labor's romantic Third Way philosophy into a desperate Only Way (to prevent disaster) imperative.
And French President Nicolas Sarkozy has constructively hammered away for months at the need for a new Bretton Woods agreement -- that is, for an overhaul of the international financial institutions and rules that have prevailed for six decades. He finds ways to represent all points on the political spectrum, at different times, or at the same time, as need demands.
When the two met at Camp David last weekend, President Bush reluctantly agreed to host the first in the series of meetings among global leaders to redesign the global financial architecture. It was one last bitter pill to be swallowed by Bush, who has had to toss, piecemeal, his unfettered free-market ideology into history's junkyard in his eight years in office. This time Bush acted to keep his successor's options open.
Sarkozy wanted to anchor the opening round of talks among the Group of Eight industrial powers that unites North America, Europe, Japan and Russia and then hold an expanded 14-nation session that would have brought in developing countries led by China, India and Egypt, according to U.S. and French sources. He also suggested that the opening talks be held in New York.
Bush ruled out New York, wanting to eliminate any suggestion that the new effort would be overseen by the United Nations. But he did make a bow to developing countries by agreeing to host a meeting of the G-20, a forum of affluent and emerging nations that, not so coincidentally, will be headed next year by Britain's Brown.
Bush's G-20 stratagem brings into the talks one much-needed participant -- Saudi Arabia, which was not on Sarkozy's list -- and dilutes the potentially unhelpful influence of G-8 member Russia.
The Saudis are not just U.S. friends; they hold the key to world energy prices. According to U.S. officials, the Saudis put extra oil onto world markets this year to restrain price spikes. They also possess enormous cash reserves and have lately been willing to exert constructive leadership on Middle East political issues. So Bush is right to host Saudi King Abdullah with 18 other leaders at a White House dinner on Nov. 14, according to current plans.
The only important decision to come out of the Nov. 15 talks is likely to be when and where to meet again and perhaps to link a conclusion of the current round of World Trade Organization negotiations to this new process.
But this gathering will be important as a symbol of the launching of a new era in which new balances between consumers and producers should be established and past financial wrongdoing is vigorously exposed and punished. If Bretton Woods II leads to those two results, we should all support it.