Yesterday Remembrance Services that marked the 90th anniversary of the end of WW1 were held in many nations across the face of the globe. Services from the humble village church to the gravitas of the Cenotaph in Whitehall conveyed the memory of, and gratitude to, all those who have fallen in war.
The end of WW1 was not “the great war to end all wars”, indeed the very meaning of 'armistice' indicates 'truce' not finale, a sad fact highlighted only a generation later by WW2. It was that conflict that in turn led to the major super-powers of the day to create the Bretton Woods agreement that would stabilise the fundamentals of global trade. A major landmark, given that it was the perception of unfair inter-regional trade practices that has been the perennial problem behind a long history of international conflict.
90 years on from that philosophical and literal spark in the Balkans that set the first of a billion bullets flying, the leaders of the G20 nations are due to confer at the forthcoming summit to try and stem the global fiscal melt-down and optimistically look to set out a new roadmap – a Bretton Woods II as some have claimed.
As some leading commentators have stated, creating such a far reaching and transformative accord of BW ilk may at this juncture be 'over egging the mix'. Since although there has been a massive global financial fracture different regions have suffered at different rates and therefore will be more vs less inclined to a radical re-alignment of trade policy-making.
So whilst there has been a growing agreement for international fiscal co-ordination of stimulus packages so that each nation or region can assist themselves - ranging from the US's $700bn TARP to talk of an EU Fund to Japan's $51bn effort to China's $589bn by the CCP – the idea of an all-pervasive, completely global agreement has unsurprisingly set economists and politicians chattering. But it cannot be denied that today's world is fiscally inter-connected, both as we've seen with financial markets that operate a myriad of instruments that support the 'enterprise economy' and the myriad of products shipped across oceans and services proffered via a global e-based hyperspace that underpins the 'real economy'
But there is no singularly similar action plan that each individual national economy can or should undertake, each effort although globally co-ordinated must be appropriate to domestic and foreign trade needs and growth plans. This basic premis is obvious given the 'differing states of differing states'. But exactly how this is achieved quickly and efficiently will be the major headache.
Given the size of the global financial fall-out there have been calls for increased regional and international regulation, and the push to align US accounting standards from GAAP to IFRS will undoubtedly be used as an argument co-coalesce the 21 or so central bank models currently in existence. [That #21 derived from a recent lecture by Sir Howard Davies at the London School of Economics].
However, utilising the GAAP to IFRS vehicle to successfully promote global fiscal policy alignment might be a problem, since the US acceptance of the new accounts principles may yet be resisted by the Obama government given negative outcome that running the model has had on blue-chip example accounts results. It will take a brave US president indeed to accept that this is the US's responsibility to see a better international outcome further down the road. That would create yet more short to medium -term pain for the US economy but ultimately could strengthen its foothold against the ever more internationally accepted Euro (and possible petro-Euro), especially regards an extended period of attracting foreign direct investment (FDI).
At this poignant and prescient time, the G20 summit will hopefully remember the lessons drawn from the first half of the 20th century, and act responsibly. As the spectre of terrorism (born from a perception of a split world) hopefully wanes, and the topic of climate change becomes the ethereal yet powerful new enemy for all, we will hopefully witness a new age of alliance in fiscal framework agreements and subsequent domestic government policy that provides a global mutuality without the constraint of independence that the powerful essentially 'emerged' BRIC+ nations demand. As the FT's Martin Wolf and the LSE's Davies correctly concur, there must be a new era and realm of international diplomacy and relationship building.
To not achieve this will dangerously put the world back 90 years or more, to revisit a time of sullied, aneamic economies that creates insularity and trade protectionism and engenders nationalism, xenophobia and possibly fascist international moves motivated by a sense of economic loss that was previously and 'rightfully' theirs.
To conclude, whilst we remember the past and those who suffered, we should not and cannot sleep-walk back 94 years if the peoples of the world are to win as a whole. We must see the individual and national Chinaman, American, Arab, European, African and Asian as trading partners, not economic threats.
