A Canadian Marshall Plan
Weary world leaders were in Toronto this past weekend to continue their concerted efforts to prop up the world’s economy. It was the fourth G20 meeting to focus on the global economic chaos that began in 2008. In Washington that year, ground zero of the crisis, the G20 readily embraced a coordinated stimulus package proposed by then President Bush. Back then, G20 leaders were united in their understanding of the breadth and depth of the problem and of the need for allied action. The result was the largest and most comprehensive monetary and fiscal stimulus the world had ever seen. The U.S. again led the way in subsequent meetings in London and Pittsburgh in 2009. These meetings resulted in further coordinated stimulus commitments and established the G20 as the “premier forum for international economic cooperation.”
In Toronto, just nine months later, the world saw a different G20. There was still continued cooperation. It just wasn’t with the United States. Instead, Toronto’s G20 conference became a showdown between the U.S. with its call for continued stimulus and Canada with its endorsement of severe spending cuts, or “austerity measures.” Canada, with an economy that is beyond reproach, won the day.
The final communiqué issued on Sunday, while ostensibly balanced between spending and restraint, strongly leans towards a commitment to debt reduction. In fact, the U.S. was alone all weekend in urging a continued focus on stimulus. Its warning that drastic cuts would jeopardize any recovery was simply ignored. Both Germany and Britain had already decided to adopt the Canadian-style measures before the conference began and President Obama’s admonitions did nothing to sway them. Other countries such as Japan and France welcomed the pledge to cut deficits with nary a nod to Obama’s proposals.
This outcome from Toronto is due to two factors. The first and foremost is the undeniable aura of economic invincibility that now surrounds Canada. Ever since the economic crisis began, Canada has steadily gained recognition as the leading world economy. In late 2008, the World Economic Forum declared Canada’s banks as the “soundest in the world.” In February 2009, President Obama, in Canada for his first foreign visit as President, begrudgingly acknowledged that: “Canada has shown itself to be a pretty good manager of the financial system.” Since then, the glowing reviews have become more forthcoming and more frequent. In the days before the Toronto conference, press reports around the world touted Canada and its economy as the “envy of the world.” By the time the leaders began to arrive in Toronto, a G20 meeting in Canada was being seen less as a conference and more as a pilgrimage.
It is little surprise then that no other country got more of what it was seeking this weekend than Canada. Not only did the G20 commit to global debt reduction, it endorsed Canada’s specific debt reduction targets. Canada was also successful in fending off the global bank tax, a fight that saw Canada opposing not only most of Europe but the U.S. as well. The global economic crisis was the vehicle for Canada’s breakout role. And Canada is now a star.
The other reason that the United States was rebuffed in Toronto (and Canada embraced) is the increasing realization by G20 members that the U.S. does not necessarily have all the answers. This is especially true with regard to the question of how to solve the global economic crisis. The U.S. has employed more domestic stimulus than any other country and, so far at least, it does not seem to have worked.
Similarly, for the past ten years the United States has steadily lost its influence overseas. As other economic powerhouses emerge, the U.S. is perceived less and less as the sole world power. The U.S. born and bred economic crisis has hastened this shift in perception and has fostered the attitude that just because the U.S. runs something up the flagpole it does not mean that everyone has to salute.
As a result, Canada is now the chief architect of the G20’s latest program to assure the recovery of the global economy. As the G20 looks forward to the South Korea conference in November, Canada leaves the Toronto meeting as the only member that can effectively muster the kind of cooperation necessary to ensure the G20’s continued effectiveness. Canada, a country that has always enjoyed a reputation as a facilitator and consensus builder can now, appropriately, facilitate and build consensus on the most pressing global problem of the day.