High-level global financial policy gatherings grind on. On Sept. 4 and 5, finance ministers of the Group of 20 (G-20), the principal industrial economies of the world, met in London. Later this month, the heads of the same governments will meet in Pittsburgh.
The current primary global economic policy mechanism succeeds the Group of 8, reflecting the steady evolution of many Third World nations to First World industrial powerhouse status, and the need for a more inclusive body to attack massive global challenges. Conferences of heads of government and finance ministers from the nations involved, central to stability, have made enormously important collective moves to attack continuing world financial turmoil and recession. Yet their gatherings have not been receiving priority headline media attention. TV talking heads in particular these days largely turn their attention elsewhere.
British fictional super sleuth Sherlock Holmes can help us understand this inattention. In the story 'Silver Blaze,' Holmes solves a vexing crime on the basis of evidence not present, specifically a dog that did not bark, thus pointing the finger -- or paw -- at a suspect the animal knew. Another intruder would have caused the hound to raise a racket.
Holmes knew the value of seeing what has not happened. In the case of the G-20, dramatic collective efforts have generally succeeded in stabilizing the global economy, at least for the time being. The rapid steep decline of financial markets, sparked by the collapse of Lehman Brothers, was driven by a U.S. housing market artificially inflated by credit derivatives. Had the crisis resulted in global collapse, rest assured media attention would be continuous and loud. Disasters make for great headlines; avoiding them does not.
Central bankers have cut borrowing costs to record lows and injected hundreds of billions of dollars into the international financial system. The Bank of Japan, for instance, is maintaining a main overnight call rate of .1 percent. These developments, however, are now old news.
Also, G-20 and associated conference agendas increasingly focus on relatively specific policy concerns, some of which are arcane in nature. In London, the finance ministers dealt with bank capital requirements, often described in terms of sophisticated equity and debt ratios, as well as the more straightforward topic of bonuses taken by senior bank executives.
Regarding compensation of financial executives, there was agreement to have a separate body, the Financial Stability Board, provide recommendations to the heads of government meeting later this month. Simply highlighting particularly greedy financiers, which would draw lots of media attention, does not really address underlying management challenges. That discussion may yet generate media sparks.
Public statements after the London conference testify to policy continuity. On Sept. 7, Jean-Claude Trichet, president of the European Central Bank, held a press conference at the Bank for International Settlements in Basel, Switzerland. He stated that commitment to effective financial stability had been "confirmed at the global level." Premier Wen Jiabao of China announced that unprecedented government spending to assist global recovery will continue.
The G-20 operates in the context of the International Monetary Fund, the World Bank and the World Trade Organization, global structures created during World War II to stabilize and develop the post-war economies. Their durability testifies to the farsightedness of Anglo-American leadership of that era. As Holmes also understood, effectively seeing into the future is as important as understanding the past.
Arthur I. Cyr is a professor at Carthage College in Wisconsin and is the author of 'After the Cold War' (NYU Press and Macmillan/Palgrave). He can be reached at acyr(at)carthage.edu
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