Il Pleut. Greece has poured vinegar on the G20's frites.
- 3 November 2011
- From the section Business
Mark the date: 3 November 2011. In Oakland, California, protesters - including workers - have blocked the operation of a major US port; in New York, one of the world's top stockbrokers is bust; in Europe the Greek government is on the brink of collapse, the Italian government in disarray and speculators are short-selling French sovereign debt in the expectation of a domino effect.
In Cannes, amid torrential rain, many of the leaders have adopted the Gallic shrug: what can you do? They had come to work on the fine points of a tactical adjustment to the crumbling world order - but instead, as one markets contact put it to me - all the stories on the news are merging into one big story.
Here is the big story: there is a crisis of globalisation.
Europe and the United States, having handed over to China, India and Brazil the baton of industrial leadership, have spent 20 years failing to adjust their economies, or the expectations of their people, to the consequences. Now - because the impact of the Lehman collapse was never properly contained - those consequences are rapidly unfolding.
You can see it in the gait of the politicians and their officials as they march through the deserted secure zone between the big hotels: the only confident body language comes from people with money. And who has money? China, Singapore, Russia, Brazil, the Saudis.
Are you noticing a pattern there? Each of these countries is an export giant, has experienced rapid-fire modernisation and income growth, has a heavily statised economy, practises some form of covert protectionism, and has - with the exception of Brazil - either zero or attenuated democracy.
The countries in crisis, by contrast, are experiencing a crisis of democratic legitimacy for the chosen political-economic orthodoxy: finance-driven free market economics.
It was the Greek people who made it impossible for George Papandreou to carry on without a referendum; the American people - split down the middle over the role and size of the state in economic life - who forced their representatives into a confrontation that has destroyed the US' ability to deal with the twin fiscal and recession problems.
It was Italians who went on voting for the old showman who, even now, cannot get the most basic fiscal restructuring measures through his parliament.
This morning I have interviewed the Singaporean PM, Lee Hsien Loong, and the Japanese finance minister, Jun Azumi. Conforming to the pattern of the week (see previous blogs) both of them raised, spontaneously, the problem of the #occupy movements.
The politicians are focused on them like a laser beam: they understand that if the Western populace rejects austerity then we are in for one crisis after another along the lines of the last 24 hours.
The mantra of the Asian governments, as with the OECD and European Commission, is that austerity has to be accompanied wherever possible with pro-growth policies and rapid restructuring of the Western economies to produce more, borrow less - both privately and at state level.
Of course, when it comes down to concrete measures, these very same Asian governments reserve the right to use currency depreciation to offset the impact of any renewed competitiveness, and indeed have been using that right in the case of Japan and China.
The macro solution to the world's crisis is global rebalancing. And as Mr Lee said to me, since there is no world government it has to be done at the G20, by negotiation.
But the global protest movement has confronted them with a social dimension to rebalancing that, incredibly, the East seems to understand better than the West.
The Chinese Communist Party has spent 30 years restraining the market in order to maintain social order: maintain social order is the slogan on every police station wall, and burned into the psyche of every official. With 1.3bn people they understand this cannot be done only with tasers and mass arrests.
It's becoming clearer and clearer with hindsight that the Western social order model was credit: populations tolerated rising inequality, income stagnation, deindustrialisation because their tangible lifestyles were rising. Now that's in reverse, and there is a growing worry that if the present is bad, the future for their children might be worse.
Economic rebalancing is easy to talk about, hard to do: even at the macro-level, getting China to consume more, Britain and America to produce more would be hard - even if you did not have to get there through a series of bruising social crises.
But social rebalancing has been off the agenda in the West for a decade. For those born after 1989, we used to call it "redistribution". Behind the scenes here, again you have to almost pinch yourself to say it, quasi-dictatorial governments from Asia find themselves in a position to lecture the Nato countries on redistribution, on the quality of leadership, and business transparency - a subject the Japanese finance minister also raised with me just now.
On this last issue, it is clear that everywhere except Europe, the thrice attempted, thrice fudged bank stress tests are regarded as a joke.
The European Union is now undergoing a stress test of its own. Again, speaking as a middle-aged fogey, who remembers the days of Jacques Chirac, Gerhard Schroeder, Felipe Gonzalez et al, it is hard not to compare the quality of leadership, narrative and vision of today unfavourably with that era.
Cannes itself, the villas and leafy lanes and uber-expensive clothes shops and watch emporia, is a living symbol of the world the European elite created for itself. It turns out that immersion in this world of Breguet watches and sycophantic public affairs consultants does not turn you into a statesperson.
For all this, the tasks of the next 48 hours are pretty easily defined: cauterise Greece, by raising so much money for the EFSF, and creating so little uncertainty around Italian and Spanish debt, that Greece does not matter. Bring forward the means and the will to create fiscal union for those who want to stay in the eurozone, with a real EFSF and a quickly constituted ESM. Find a way to force the European Central Bank to change its stance, to become guarantor of an interim fiscal union.
Above all, Europe needs to find a leadership group and a joint narrative; otherwise the centrifugal pressures will pull the whole project apart.
The problem: every one of these measures flies in the face of where the European electorates and peoples stand right now. And because nobody is offering to inflict significant losses on the banks, or taxation on the rich, or credit easing for the poor, there is nothing out of which to construct a narrative.
Though Greece is a special case, don't think the Greek situation cannot happen elsewhere in southern Europe. Faced with penury in the name of multilateralism and globalisation, this is a continent whose addiction to national solutions long pre-dates its experiment with internationalism.
I'm off now, into the fray of the summit again.