As global issues grow more serious, global summits grow less so. The reason 750 million-odd taxpayers of Canada, France, Germany, Britain, Italy, Japan, Russia and the United States continue to pay for this colossal nonevent goes back three decades. The speed and range of passenger jets, plus the reach of satellite television, had only recently made it feasible for leaders to appear on a single stage. At Christmastime 1974, a quartet of high officials was having drinks at the White House, mulling over the U.S. defeat in Vietnam, the oil crisis, global recession. None was a national leader yet. Valery Giscard d’Estaing of France turned to Helmut Schmidt of Germany, James Callahan of Britain and George Schultz of the United States. He remarked that while they couldn’t do much about the dismal state of the world, they could bring their bosses together as a kind of global council of economic wise men. The aim, then and this week in Genoa: to manage the free world out of a slump.
It was, at first, an optimistic idea for a pessimistic time. In the ’70s, Keynesian economics still held out the theoretical hope that national governments could ease, even end, the business cycle by regulating the flow of government spending. So why couldn’t a global cabinet do the same? The first summit, held at a forest lodge outside Paris in 1975, reached no great Keynesian deal. But the display of power so lifted Western spirits, summitry gained unstoppable momentum. “As soon as summits became possible,” says Robert Hormats, a veteran U.S. summiteer, “they became essential.”
The hope of global leadership started to unravel as soon as summiteers started to make tough choices. The Bonn summit of 1978 helped to ruin its host, Chancellor Helmut Schmidt. He agreed to cut taxes and boost spending in order to turn Germany into a second “locomotive,” behind the sputtering United States, to push global growth. Schmidt was attacked at home for caving to U.S. pressure. The stimulus accelerated German inflation without raising German growth. Schmidt was out of office in 18 months.
Since then, the iron rule of summits has been this: no agreement shall undermine any leader’s standing at home. George W. Bush will arrive in Genoa much as Ronald Reagan arrived at the Ottawa summit in 1981: doubted at home and abroad as a global statesman. Reagan would later say that getting to know other leaders on a first-name basis “is worth its weight in gold,” and it was more than that. Under the do-no-harm rule, Reagan emerged with a burnished global image, and Bush is likely to as well.
The formal agenda for the summit has changed little over the decades. Budget and economic policies come first, but these talks are now pure ritual. Nations that have tried to manage the business cycle by regulating spending, a la Keynes, have more often produced slower growth and higher inflation. Today, economists trace the source of business cycles mainly to structural problems, like restrictive labor laws that discourage hiring in Europe, or bad debts that discourage new investment in Japan.
So leaders now put on a show of global management, but mainly to impress the voters back home. At a pre-summit finance minister’s meeting in Rome last week, U.S. Treasury Secretary Paul O’Neill revived a rusty old summit metaphor, urging Japan and Europe to become “locomotives” for the world economy behind the United States. In Genoa, Bush will point out that the United States has cut taxes and interest rates, and suggest that it’s Europe’s turn. German Chancellor Gerhard Schroder and French President Jacques Chirac will reply that Europe is growing faster than the United States. Japanese Prime Minister Junichiro Koizumi will privately concede that his budget cuts will slow growth now, but he’ll insist they are necessary for Japan’s long-term health. The final communique will piously proclaim, as it has for years, that every country seeks more growth.
Meanwhile, the globe tilts toward recession, unchecked by the G8. Aside from the Keynesian levers of spending and taxes, the main tool for fine-tuning economies is regulating interest rates and the money supply, which since the 1970s has been firmly under the control of independent central banks. Summiteers can spout off on monetary policy, but can’t change it. The one important thing they can influence is trade, the only issue to produce a real summit success. The stalled Uruguay Round of trade liberalization negotiations was restarted at the 1986 Tokyo summit and concluded seven years later at the next summit in Tokyo.
This victory is not likely to be repeated in Genoa. At a time when trade is the only real “locomotive” of the global economy, trade talks are once again dead in the water, paralyzed by disputes between the United States and Europe. Bush, Schroder and British Prime Minister Tony Blair are seeking a strong commitment to relaunch talks at the World Trade Organization meeting this November in Dubai. The progress of presummit negotiations indicates only a semi-ringing endorsement, at best.
Even the soft issues are contentious now. First discussed in the late 1980s, the environment became a ripe subject for summit platitudes. Not anymore. Last week the EU warned a skeptical Bush administration not to obstruct its efforts to fight global warming. Bush is nonetheless stopping in London a day before Genoa in part to persuade Blair to help him soften Europe’s stand.
It doesn’t much matter how the final communique addresses this point, or others. Bush will have the last say. And so will the other seven leaders. All summits end with simultaneous but separate TV press conferences by all the participants. This compels TV crews to focus on their own national leaders so they get first crack at spinning the final communique to their home audience. Hormats calls these briefings “a unique exercise in eight-dimensional spin.” And any summit staged to say eight different things really says nothing.
