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LOOKING AHEAD
20.11.2008

November 17, 2008 (the date of publication in Russian)

Andrey Kobyakov

A MANIFESTATION OF IMPOTENCE

The decisions of G20 summit are pointless and ludicrous – its members will have to give up liberal dogmatism in the near future

Washington G20 summit turned out to be helpless and extremely ineffective, just as it was expected. No serious aims were announced, which would be really connected with the positive reorganization of world finance architecture and would change it radically, in such a way that to prevent future systemic crises through the elimination of the most serious "crisisogenic" factors from now on. Instead of this, dull and insignificant ideas of "more transparency", "more attentive rating agencies" and other blah-blah-blah were discussed. Responsible and truly professional economists were shocked by this baby-talk.

It's worth noticing, that present anti-crisis summit decisions are absolutely identical to the ones made in 1998. At the time, almost a year after the beginning of Asian crisis, frightened financial structures (in particular, IMF, which had already spent all its funds on helping countries involved in crisis) had also offered to change the architecture of world finance. This idea was supported by the leaders of developed countries – as that time the crisis influenced markets in England and other developed countries, then touched Russia and moved some huge American financial institutions (LTCM) close to bankruptcy.

Still everything ended up with the discussions of "more transparency". But even that time the question was put more radically than at this Washington summit. Al least, in 1998 there were calls for exposure of the activities of hedge funds and private equity firms as well as for the creation of the new accountant and regulatory standards for them. But now even this question was set aside with only a recommendation to hedge funds – to strengthen the transparency of their activities on their free will and to use "voluntary best practices".

The agreements, which were completed in Washington, make no sense in present situation. It's obvious, that neither Russia, nor other states will follow them. Furthermore, even the US will be forced to break all this agreements. For instance, the participants of the summit expressed the will to cooperate on free international trade against the backdrop of crisis. But if the crisis turns to be long and deep (and, as I predict, if will be just like that), we will see the countries come to strict protectionism one after one.

I'd like to remind, that Jose Manuel Barroso, the president of the European Commission, was among the first who congratulated Barack Obama on the victory in the presidential elections (even though it was late at night in Europe). He dedicated a half of the text of his greetings telegram to a very important topic: he expressed hope, that the elected president of the US would be able to propose the new "new deal", which would get American and world economy from the abyss of crisis – like Franklin Delano Roosevelt did in 1930th. The use of such a straight analogy by the European leader in his personal message to the leader of the USA denotes the realization of inevitability and necessity of radical changes in predominant socio-economic paradigm as the only possible and responsible way of reacting upon expanding, unprecedented by its scale and depth, world crisis.

The moment of truth will come together with the turning point to the deeper stage of the crisis. We'll see the governmental control over economy will be put to use, we'll see governments reject many liberal dogmas.

But as for now, regretfully, we have to state, that the Washington G20 summit, which participants fatuously repeated numerous liberal mantras and swore fidelity to the ideals of "free market", was only a useless waste of time.


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