G20: Drawing the battle lines

It’s All Fools’ Day, and the G20 on which Gordon Brown has pinned so much hope will formally start in London tomorrow.  Already the battle lines are clear.  The US and the UK (or rather Obama and Brown) are calling for one more push — more spending, more investment, more fiscal stimulus to pile on top of the billions already committed.  This morning (according to the BBC) Japan also lined up behind the Washington/London Axis.
Meanwhile our continental friends, led by France and Germany, are berating these gung-ho Anglo-Saxon approaches and crying “Whoa!  Let’s pause for breath.  Let’s see what success our existing efforts will have before we throw good money after bad.  Let’s not try to solve a debt crisis by borrowing more money”.  And Sarkozy threatens to throw his toys out of his pram if he doesn’t get the additional international regulation he’s demanding.
At one level I’m delighted to see the old alliance of the US and the UK, the transatlantic alliance, in good shape, and in sharp contrast to those garlic-eating Europeans.  There’s only one problem: that on the substance of the debate, I’m afraid that the Europeans are right and Obama/Brown are wrong.  Further fiscal stimulus might be justified if we were in a strong fiscal position, but we’re not.  We’re close to broke, and in a sharp reminder, an auction of British government bonds failed last week.  Mervyn King cut up Gordon Brown’s credit card.  This is no longer simply a matter of political judgement: this is international lenders close to saying “No more money”.
And ironically, the European position with regard to spending is probably more Anglo-Saxon than the Anglo-Saxons.  It has always been corporatist continentals who spent money they didn’t have on state support and nationalisation, and it is galling now to see Brown doing the same thing.  Fiscal responsibility and living within our means have historically been Anglo-Saxon traits (at least on good days).
I cannot of course endorse the Sarkozy call for more international regulators.  I believe that the current crisis is a failure of regulators even more than a failure of bankers, so it seems perverse to respond by giving those failed regulators more power.  Our primary approach to the crisis should be two-fold: firstly, to cut wasteful and profligate government hiring and spending, and as soon as we can responsibly do so, to cut taxes.  And secondly, to cut regulation.  Here in the European parliament we see almost daily new regulations that will pile billions of pounds of extra cost onto the British economy.  Both Open Europe and the Taxpayers’ Alliance have done valuable research on this issue recently.  Five billion here, ten billion there and pretty soon you’re talking real money.  It’s time to scrape the regulatory barnacles from the hull of the Ship of State, and to get our economy lean and mean and competitive again.
Yet Brown has no interest in these things.  Instead, he wants to fiddle about with regulatory mechanisms, and with bankers’ bonuses, which make great headlines but fail to address the real issues.  If it weren’t such a dreadful cliché, one could say he was fiddling while Europe burned.

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