Birds of a Feather...

As the G-20 continues work in London this week, the primary goal of the conference has already been well-established: facilitating continued global cooperation in the exchange of goods and services, maintaining already lowered trade barriers and discouraging the type of protectionist policy that stifled growth in the inter-war period.

As Obama's stimulus package begins to take effect, Europe has offered mixed reactions to the prolonged spending spree designed to revitalize the world economy. Germany is avoiding further stimulus, as the country has so far avoided the major shocks that have shaken the US, in particular the housing bubble and burst. The Germans remain hesitant to encourage further spending, as illustrated by their current take on GM subsidiary, Opel.

"Speaking to 3,000 Opel workers, Merkel brushed off calls from labour bosses and her coalition partners the Social Democrats for the state to take a direct stake in Opel, stressing that the government is not in the business of running companies.

Opel employs about 25,000 people in Germany and has said it needs 3.3 billion euros (3 billion pounds) in state aid from European governments to save jobs and keep plants open" (Reuters UK).

The problem is, of course, that the United States has already dispensed an enormous sum of money in order to thaw credit and restore trust in the auto industry. Any positive effect gleaned from that move will ripple into Opel's coffers, with or without help from the Germans.

This reluctance to go along with US policy is not new, nor is it too telling in either direction as to what line the EU will take in the future with regards to continued financial stimulus.

"For half a century and more, in good times and bad, European leaders have advised new American presidents not to bother them with big, risky, expensive Washington ideas. They almost always prefer the status quo -- or, at most, very incremental change. But, having said their piece, they then usually come around (Sometimes -- very rarely, it has to be said -- they're right to begin with.)" (Foreign Policy).

Europe, like the United States, prefers to handle its business in its own particular "idiom," meaning that there is nothing atypical about the EU's resistance to shell out as much cash as we have in recent months. The Keynesian model of deficit spending has not been granted a real opportunity to shine since the Great Depression, and governments remain wary of its effectiveness.

The real problem here is that Europe and the US live in a very much unified economic world, and we are bearing the brunt of thousands of bad decisions, domestic and abroad, here at home. EU leaders are waiting for our next move; will we continue to prop up floundering multinational firms in the name of global cooperation without any outside support, or will we seek out a more cooperative method with increased assistance from our European counterparts?

With the conclusion of the G-20 this week, there are a few bright spots that have risen to give hope to international economic coordination. Most importantly, the G-20 has renewed the importance of the IMF in combating the economic crisis. The bank expects to undergo significant reform, including a re-hash of its management structure based on current financial figures: Asia will begin to play a much larger role in its operations. The IMF hopes to resume its role as a lender of last resort to struggling economies, as well as its regulatory role in managing currency exchange and liquidity among states.

"After the World Bank said 17 of the G-20 nations had reneged on a November promise not to pursue restrictive trade practices, leaders reiterated their commitment not to resort to protectionism. They also promised to avoid competitive devaluations of currencies" (Bloomberg.com).

As the United States struggles with a lessened stance in the international arena, its economic policy has shifted to encourage the continued growth and deepening of established multilateral institutions, signifying a major departure from the protectionist policy that followed the great depression.

History is our greatest teacher, and US and EU leaders must work to prevent the isolation and closure that trapped the developed world for much longer than necessary. We must continue to advocate the ideal that cooperation trumps conflict, and that we are more capable of weathering this crisis when we all do it together.

"As a defence against the cold, a colony of Emperor Penguins forms a compact huddle (also known as the turtle formation) ranging in size from ten to several hundred birds, with each bird leaning forward on a neighbor. Those on the outside tend to shuffle slowly around the edge of the formation, producing a slow churning action, and giving each bird a turn on the inside and the outside" (Wikipedia).

image courtesy of the World Wildlife Federation