When the rich world’s finance ministers met in the South Korean beach resort of Gyeongju last week, few people really expected them to achieve very much -- and, in that regard, they did not let anyone down.
Respondents to last week’s web poll voted overwhelmingly that the G20 meeting of finance ministers and central bankers achieved nothing. The participants came out of the meeting claiming to have averted a currency war and said some fine things about the role of markets in determining exchange rates, but they didn’t agree to anything that would actually hold them to these principles.
That, perhaps, is just as well because most of the people around the table would be up on charges almost immediately -- especially the host, South Korea, whose currency has miraculously slumped against its neighbours, giving it a nice trade advantage in tough economic times.
Korea has good incentive to be so aggressive in manipulating its currency; it is the most export-focused country in the G20, with more than 80% of its economic output generated from international trade.
Needless to say, the Koreans aren’t the only bad neighbours in the Asian hood. China’s currency is infamously under-valued against the dollar, but since the greenback started collapsing, the renminbi has also become heavily under-valued against its peers in Thailand, the Philippines and other countries in the region.
And, of course, the Americans can hardly pretend that the collapsing dollar is an accident of market forces -- it is a competitive devaluation that will doubtless continue when President Obama embarks on the next round of quantitative easing. The renminbi, traditionally linked to the dollar, will follow it down, more or less, while everyone else suffers.
If the G20 finance ministers couldn’t agree on anything meaningful at their meeting, it seems highly unlikely that the leaders themselves will get any further when they meet this month.
With a global economy that is already hugely imbalanced, the prospect of further protectionism is a worrying one, especially for Asia’s trade-dependent nations -- but it is at least something the great and the good of the G20 can take credit for.
Some 86% of the respondends to our poll said last week's G20 meeting achieved nothing, while 14% were willing to give the finance ministers and central bank governors a bit of credit.