04.01.09 6:36 AM ET
Welcome to London
President Obama and the first lady swept into London last night with an entourage of around 500—who says the imperial presidency is dead?—but even the world's only superstar politician does not have enough stardust to sprinkle around to make tomorrow's G-20 meeting of the world's most important economies (accounting for 80 percent of global output) go his way. Indeed, Mr. Obama's first foray into global summits may even bring him down to earth with a bump: One excited pro-Obama commentator in this morning's Guardian fears that Obama will arrive as JFK but depart as Jimmy Carter (he thinks this is already happening in America). That is a crazy overreaction but Mr. Obama will struggle to create a global consensus out of squabbling world leaders.
For President Obama, the London summit will probably mark his international transition from messiah to man.
Of course he will be greeted by adoring fans waving little American flags (for many, it will be a celebration of the end of the Bush era) and there will be tea with the Queen. The Barack-Michelle double-act will be the only show in town as far as the international media is concerned (even France's glamorous first lady, Carla Bruni, has stayed away, for fear, some say, of being overshadowed)—unless, of course, the motley fringe of the antiglobalization protestors live up to their threats and wreak carnage on the streets of London, in which case these are the pictures that will dominate all prime-time coverage (but another Seattle is unlikely).
Mr. Obama will learn in London—if he doesn't already know—that the only supporter of his call for a co-ordinated global stimulus to mitigate the international recession is Gordon Brown—and in Europe the British prime minister has become an isolated figure on the matter. In quick succession in recent days, it has been opposed by the boss of the European Central Bank, the governor of the Bank of England, the French president (Nicolas Sarkozy), and the German chancellor (Angela Merkel).
The Obama-Brown stimulus is a dead duck before the G-20 even meets. Indeed an alternative agenda is gaining ground that is already overshadowing it: Chancellor Merkel and President Sarkozy are planning a joint press conference today to say that what the world needs is not more economic stimulus but a new era of global regulation of banks, executive bonuses, hedge funds, and offshore tax havens.
President Obama and Prime Minister Brown have effectively conceded defeat on the stimulus front: Their rhetoric is already muted on the matter and expectations are being rapidly managed down. The policy was fast becoming academic anyway. It is unlikely the U.S. Congress would agree to another stimulus and the markets would balk at any more borrowing by Britain. So the agenda moves more to global regulation.
Neither Mr. Obama nor Mr. Brown is averse to tighter rules for banking and bankers but they are wary of the overarching international constructs being promoted by France and Germany. (President Sarkozy is so keen on them that he is threatening to walk out of the summit if he doesn't get is way—the little attention-seeker!) Mr. Obama knows his administration will face open warfare with Wall Street if he hands it over to global regulators while Mr. Brown, though one of nature's regulators, is wary that the Europeans are out to strangle the City of London as the capital of international Anglo-Saxon finance.
There will not be an open rift: That's not how these events work. But there will be more than the usual copious amounts of fudge needed to disguise the disagreements. The Americans and the British will settle for emphasizing the size of the existing combined stimulus of the G-20 to the global economy (around $2 trillion) and agree to strong words about greater global regulation, which they will later water down in detailed negotiations.
Instead, the emphasis will be on extra resources for the International Monetary Fund to bail out countries in trouble, not just in the developing world but in Eastern Europe too. As much as $500 billion is being talked about, though the Chinese will only pony up if they are given a greater say in the IMF and other global financial institutions (which is only right). Everybody will beat up on tax havens, even though they had nothing to do with the current crisis and closing them down is a lot harder than the G-20 will pretend. All will promise to eschew protectionism (before rushing home to continue erecting discreet barriers to aid their own industries).
The London summit takes place against a grim global economic backdrop: The OECD forecasts that global trade will slump by 13 percent this year—the worst in living memory—and the major economies will decline by an average of 4.3 percent, with America and the eurozone both contracting by 4 percent while Japan falls by 6.6 percent, Germany by 5.3 percent and Britain by between 3.5 percent and 4.5 percent. Nothing decided in London will do much to change that and even 2010 looks like a year of stagnation at best for most.
No doubt some of what is agreed at the G-20 can be seen as the building blocks for a return to growth in the years to come but most of what will be in the final communique could have been agreed without an expensive and elaborate summit. For the host, Gordon Brown, his hopes of a triumphant London summit that would propel him to re-election look increasingly forlorn. For President Obama, the London summit will probably mark his international transition from messiah to man.
Andrew Neil is a publisher and broadcaster working out of London, New York, Dubai, and the south of France. He is chairman and editor in chief of Press Holdings Media Group, publishers of The Spectator, Spectator Business, and Apollo.