By Anthony Faiola
Washington Post Staff Writer
Thursday, April 2, 2009
LONDON, April 1 -- On the eve of a global economic summit here, President Obama delivered an unusual warning Wednesday for an American leader: The "voracious" U.S. economy can no longer be the sole engine of global growth.
The statement signaled a recognition of a new economic era with a less dominant U.S. role. Although Obama said the United States should not miss "an opportunity to lead" the way out of the crisis, he suggested he would not be the globe's financial decider. "I came here to listen," he said, "not to lecture."
His message also amounted to a challenge to world leaders that highlights the core differences expected at Thursday's summit. As more than 20 heads of state write a plan to combat the crisis, major European powers are firmly resisting calls to further open their coffers and cut taxes to spur the global economy.
Such resistance may not have mattered as much in the past. In previous downturns -- including the Asian crisis in the late 1990s -- the United States was by and large the driving force of global recoveries. But in the wake of the current crisis, Obama said, Washington will have to deal with "our long-term fiscal position" and the notoriously low consumer savings rates that for years drove Americans further into debt even as U.S. imports soared.
This time, he said, the rest of the world cannot depend on the "United States being a voracious consumer market."
"Those are all issues that we have to deal with internally, which means that if there's going to be renewed growth, it cannot just be the United States as the engine," he said during a news conference with British Prime Minister Gordon Brown. "Everybody is going to have to pick up the pace."
The sense of a new economic order with the United States sharing the stage is hanging over this Group of 20 summit. In this relatively new forum, leaders of industrialized powers including the United States, Britain and Japan as well as emerging giants such as China, India and Brazil are grappling together for an answer to the global economic crisis.
Nations will produce a communique Thursday with a list of carefully worded prescriptions, including the regulation of hedge funds and more rigorous standards for banks, a move to shed light on the secrecy of tax havens, new ways for regulators in different countries to coordinate their oversight and dramatically increased funding for the International Monetary Fund, according to a draft of the agreement.
Obama noted that faulty financial regulations in Europe and elsewhere contributed to the crisis. But he did not try to deflect the blame directed at Washington and Wall Street, most vociferously by French President Nicolas Sarkozy, German Chancellor Angela Merkel and leaders from developing countries. "Given our prominence in the world financial system, it's natural that questions are asked -- some of them very legitimate -- about how we have participated in global financial markets," Obama said.
It was a candid assessment of the limits to his influence here as he works with other leaders to clean up a mess that began at home, and where more spending in the United States cannot be the only answer.
"We cannot rely on the U.S. being the global locomotive," said Willem H. Buiter, former member of the Bank of England monetary policy committee and a London School of Economics professor. "Those days are gone."
In the 1980s global downturn, the U.S. economy accounted for about one-third of the world's economy, he noted. It now accounts for one-quarter. The U.S. government is also far more indebted than it was in the '80s.
"It's true that the United States is no longer capable of pulling the world along on its own," Buiter said, adding that Obama's assessment appeared to be "a coded way of asking for more fiscal stimulus from the rest of the world."
Although diplomats were scurrying Wednesday night to fine-tune the details, few issues were as divisive as how governments would approach fiscal stimulus. Apparently seeking to avoid a direct clash with France and Germany, the Obama administration is not pressing for specific spending targets. "I know that G20 nations are appropriately pursuing their own approaches," Obama said. "We're not going to agree on every point."
Included in the communique is likely to be a reference for nations to do whatever is necessary to combat the crisis, effectively leaving open the decision for more spending. But Obama appeared to be saying that this should not be viewed as a sign that the United States is willing to shoulder the burden alone of jump-starting the world economy.
The leaders of France and Germany, at least, appeared not to be listening.
In a joint news conference with Merkel, Sarkozy seemed to back away from earlier threats to walk out of the summit if his priorities were not addressed. He repeated earlier statements blaming the United States for causing the crisis, which, he noted, "did not start in Europe." Both leaders said they have launched government spending programs to boost their economies -- though their efforts, according to the IMF, have fallen short of other governments including the United States, China and Japan. Both leaders said the world should not expect more.
"Germany and France want the principle of new regulations to be a major aim," Sarkozy said. "Germany and France have put everything into [promoting] recovery. We have to fuel that, and we have done that."
Correspondent Mary Jordan contributed to this report.