The G20 countries have come to agreement on a number of important steps to foster a recovery from the recession. However, since we always knew that they would come to "agreement", the substance of the deal is not entirely clear at this point.
There are two areas where the nature of the agreement seems clearest: clamping down on tax havens and increased funding for the IMF.
The clampdown on tax havens is a restoration of an agenda that had been gaining momentum in the 1990s but was then derailed by the Bush administration. While outwardly committed to preventing tax fraud, the Bush administration worked to undermine any substantive measures intended to accomplish this goal.
The G20 seem to be in agreement that tax havens must be closed, with the first step being the public identification of the rogue states. This naming will be followed by sanctions if these states continue to support tax evasion.
A crackdown on tax havens may be viewed as unambiguously positive, but the promise of increased support for the IMF is less encouraging. The G20 committed to tripling the resources available to the IMF to $750bn. It is not clear that giving additional power to the IMF is a step forward. The IMF failed to warn of the growing dangers posed by the housing bubble in the United States and the shaky credit system that supported it. It's not obvious why this failure should rewarded by giving the institution even more responsibility.
Furthermore, the IMF continues to dish out its aid with important conditions, most notably demanding fiscal austerity. While most of the governments that turn to the IMF probably should be taking steps to get their budgets in order, the timing is questionable. Rather than demanding immediate reductions in deficits, it would be better to see commitments to phased reductions. Tax increases and spending cuts are not what the world economy needs right now.
The renewed support for the IMF also threatens one of the most promising trends in international finance in recent years: the growth of alternative multinational funding mechanisms in the developing world.
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The most explicit alternative to the IMF is the Bank of the South that has been established with the support of most of the countries in Latin America. However, there is also an East Asian bailout fund (which coordinates with the IMF) and also China's own efforts to act as an IMF-like source of funds.
It would be desirable to see a variety of institutions applying different approaches to multi-national lending. This sort of competition would allow for a real world test. Unfortunately, the G20 agreement seems to reaffirm the leading role of the IMF and to at least imply a position of official hostility to innovation.
The agreements in other areas are more ambiguous. The countries are ostensibly committing $1tn to supporting recovery, but we have no idea what this $1tn entails. It is not called "stimulus", so it is clearly not intended to mean a new commitment of tax cuts and/or new spending.
It is also not clear what the new regulatory regime is supposed to look like. The United States supposedly agreed to regulate hedge and equity funds, but it is not clear how serious this regulation will be.
The G20 also committed themselves to "free trade". This is just gobbledygook. No one in the G20 is actually committed to free trade. There are all forms of trade barriers that they ignore or are even in the process of extending (patents and copyrights being the most obvious). The commitment to free trade is just there so they can feel that they are not repeating the mistakes of the 1930s.
Perhaps the biggest disappointment is the failure to talk about the core imbalances that led to this crisis. The dollar will have to fall to get the US trade deficit down to a sustainable level. No one seems to want to discuss this yet. Perhaps we need an even worse downturn before our leaders are prepared to get serious on this issue.