G20 in Toronto: Divergence

The final communiqué from the Toronto meeting of G-20 leaders contains no big surprises. As foretold by the earlier meeting of finance meetings in Busan, the group placed a greater emphasis on the need for fiscal consolidation than it has in the past, while no global deal on a bank tax was forthcoming. 

In fact, leaders have either agreed to disagree (on fiscal policy) or have postponed possible agreement until later (on bank capital and other financial rules). This means a key theme of the Toronto Summit has been divergence rather than convergence on policy initiatives.

To some extent, this inability to achieve consensus is disappointing, although it's not particularly surprising.  It's also a sign that policymakers and politicians think that the world economy is returning to (relative) stability.

At the height of the GFC, there was both a remarkable degree of consensus on what action was needed – basically, to throw fiscal policy, monetary policy, and the kitchen sink at the world economy in order to fend off a major collapse – and a collective sense that if the world's major economies didn't hang together, they would all hang separately. 

Now we are in the post-crisis phase, neither of these two conditions hold. As a result, differences in national positions and priorities are accorded their traditional prominence.

Photo by Flickr user future15pic, used under a Creative Commons license.