Three big picture objectives for the G20
What do the G20 leaders need to achieve today? And will they do it?
We're all here in Pittsburgh, negotiating the roadblocks, devising the shortest trip from hotel to shuttlebus to press room. And so are all the leaders (minus the shuttlebusses) - together again for the third time in less than a year.
You have to wonder: what can they agree in a day of meetings that they couldn't have agreed by phone? One answer, as Robert Peston has noted from London, is that they are sending a message that this is now the forum where the important stuff gets done. The G8 is dead. And I firmly expect Canada to put it out of its misery officially next year when the summit is chaired there.
But there are three more big picture objectives.
The first is to send a message to the world that they are not taking the global recovery for granted. It's true that many countries have surprised the forecasters by coming out of recession much earlier than expected. But senior policy-makers everywhere are anxious to avoid the impression that we're out of the woods.
You might thing that rather strange. Shouldn't they be talking up the recovery, now that the tide of market consumer confidence is finally moving their way? But in fact, confidence is precisely the reason they don't want everyone to relax. Because they think the next year is going to be bumpy - not "double-dip" bumpy, perhaps, but bumpy enough to want to prepare everyone in advance.
This is especially true in the UK, where there is a number of forecasters expecting at least one quarter of negative growth in the first half of next year, even if the economy formally recovers in the next few months. Mervyn King and the chancellor don't want that to come as too much of a surprise - to the markets or anyone else.
The second big thing they want to achieve - at least, the US and Britain do - is a new "framework" for thinking about global growth. This is tricky. As Larry Summers, President Obama's Chief Economic Advisor, told me yesterday, the US consumer "cannot, will not, should not" continue to be the engine of global demand. They're going to adjust. And if other countries don't want to suffer sub-par growth as a result, they're going to have to adjust too. And as of now, that adjustment is barely under way. In the leaked draft of this part of the communique, it warns that "absent further adjustment... there will be insufficient global growth".
I've said enough about this in the past for you to know this isn't a problem that gets solved in a communique. That well-known economist, John Humphrys, grasped the basic problem when we spoke on Today this morning: there's no easy way to persuade German or Chinese consumers to spend more if they don't want to. There are places you can start - I've written about this before - but they are not the kind of policies that can be imposed from outside.
The Anglo-American backers of the new framework say it will be worth the paper it's printed on - because it will provide, for the first time, a formal mechanism for linking what the IMF says about economic imbalances to what leaders have said about avoiding them. That will provide an element of "naming and shaming" that they didn't have before.
But if the Germans are signing up to it, we can be fairly sure that they don't think it's going to get in the way of the export-driven growth which they quite clearly want to maintain - see my post A tale of two economies and my report from Germany.
Bottom line? The proof of this framework will be in the eating. But the ordinary punter will quite reasonably retain a large dose of scepticism about what the new process can achieve.
Finally: reforming the financial system. Robert Peston has written about this in detail this morning. All I will add is that financial sector reform is an area where the economic, political and financial priorities at this particular juncture are not well-aligned.
From the standpoint of market certainty, and the banks themselves, the system needs clarity on the level and structure of the new rules for capital, leverage and liquidity as soon as possible. But the economic imperative is not to scare the horses. Policy-makers - especially in France and Germany, where banks are still under-capitalised by US and British standards, are determined not to do anything which discourages banks from lending. And the politics - well, the politics speaks for itself. Voters want them to bash the bankers - regardless of whether it makes sense for the financial system or the economy.
We will see progress this afternoon, along the broad outlines Robert has outlined. I will have more later. We will also have a firm insistence - in the words of one senior US official I spoke to recently - that "there will be civilian control of the military". They're not going to make the mistake of letting technocrats make decisions in closed rooms in Basel that end up putting taxpayers on the hook for billions of dollars.
But all that said, the absence of hard numbers will make it hard for many ordinary observers to see what, exactly, has been achieved.