Harper and the G20 tension between the U.S. and Europe


 

The notion of Canada occupying a middle ground between the United States and Europe is an old, familiar one, and usually rather flattering for Canadians. We’re supposed to blend European-style openness to government programs and intervention with an American-type instinct for letting free markets stay free.

But this comforting version of the Canadian political identity has seemed outmoded under Prime Minister Stephen Harper’s government, which feels so firmly anchored on this side of the Atlantic. Until this G20. Here in Toronto, the idea of a Canadian affinity for Europe has fresh relevance.

The reason, of course, is the debate over how far the G20 should go toward committing its members to targets on deficit and debt reduction. Harper has aligned himself with the Europeans by proposing that the G20 nations pledge to cut their deficits in half by 2013 and start reducing their debt-to-GDP ratios no later than 2016.

Now, his bid for clear benchmarks planted Harper squarely on the side of his fellow conservatives, notably Germany’s austerity-minded Angela Merkel and Britian’s David Cameron, who comes to the summit having just tabled a tax-raising, cost-slashing budget. It puts him at odds with U.S. President Barack Obama, who emphasizes the need to maintain stimulus spending in the face of a still vulnerable world economic recovery.

The Canada-Europe bridge is explicitly recognized in high places. Asked yesterday at a news conference about Harper’s suggested targets, José Manuel Barossa, president of the European Commission, said: “It’s very interesting. Why? Because it shows that this concern with fiscal consolidation is not just the concern of Europe.”

And Barossa predicted Harper’s position would find its way into today’s final G20 communiqué. “We expect the G20 to agree on concrete targets for deficit reduction and the stabilization and reduction of debt,” he said. “We want these targets to be credible and we expect them to be minimum targets.”

By his morning, however, the sense that Harper’s position is bound to carry the day is coming under question. Donald Brean, a finance and economics professor at University of Toronto’s Rotman School of Management, and calls the clash “texbook macroeconomics”—a matter of when to “slow the engines of stimulus.”

But beneath the technical matter of timing a contentious economic policy shift, Brean also sees a dense mesh of history and politics.

Relevant history: “The Germans are paragons fiscal probity because they’ve had two experiences in the last century of two totally destructive periods of punishing hyperinflation.” As for politics, he points to looming mid-term elections in the U.S. Congress, crucial votes this coming fall for which Obama’s Democrats need to keep the economy humming: “The Americans are worried, knowing they can’t raise taxes and they can’t cut spending in a mid-term year.”

If he is positioned between America and Europe, then, Harper is staking out a complex bit of real estate—where the last century’s European history, today’s global macroeconomic conditions, and next fall’s U.S. politics all intersect.


 
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Harper and the G20 tension between the U.S. and Europe

  1. Yes, but as proven in his other imitations, Harper will talk the talk and waddle like a duck the rest of the way. He's still living off the impressions and accomplishments of past governments regarding fiscal reputation, after all.

  2. You know the world is in deep trouble when the USA cannot figure out basic facts of economic life, and we are relying on Europe, Canada and China for a little economic common sense.

    As much as all the usual unsavory suspects cannot wait for the American decline to continue, I am pretty sure nobody is going to like the world very much after the USA self-strangulates in its own debt and loses its status as an influential world power.

    • I've been wondering if the U.S. might be a country equivalent of "too big to fail" because how is it possible that the U.S. dollar is anywhere near the value it is at with the debt it is holding?

      • First, it's the reserve currency for oil. If you need US$ for oil, you're willing to pay more than they're worth if you have to.

        Second, and more importantly, it's just further evidence that despite the libertarian assurances, the market isn't really rational — it's a mob-mentality. When Goldman-Sachs was being investigated for basically wholesale fraud against the US financial markets, the value of the US dollar increased because mob-mentality investors have the notion in their heads that the US dollar is the "safe" bet when a crisis hits. The fact that this particular crisis was all about whether the US dollar is actually safe didn't occur to them.

        • I completely agree about the "safe" bet currency thing. I just thought (and yes, in spite of all the evidence to the contrary) that these financial geniuses might actually know what they were doing. Ergo, purposefully propping up the US dollar–they could change the oil currency at any time, as I understand it–in order that it doesn't move to the yuan or something. Because the U.S. is too big a power (we've put all our eggs in their basket) to fail.

          • Thwim & Jenn, we are standing before a bubble that no one seems to want to call a bubble. Which makes for an incredibly large bubble, and, ultimately, an incredibly painful pop.

          • I wonder how much of the pain it will take away when we can point to this board and say "toldyaso"

            My guess is, not much.

          • My guess: none. Everyone will be hurting. And it will be the fault of THIS population that allowed it to happen. So the smug "I told you so" crowd will deserve to feel as failures for not getting the truth through to enough people when we had the chance.

        • If you're referring to this article, then I guess you are insinuating that raising taxes and decreasing spending during an economic crisis is "common sense". It's funny to see that America is finally the country being financially responsible, while countries in a position to reduce their debt (Germany) are forcing fiscal austerity on countries that will be destroyed by it. And Canada is following right along. Embarrassing. The one time Harper actually should follow the example of the States, he manages to sht the bed as usual.

          I mean I know it's American history, but surely one other leader at that summit should have heard of Herbert Hoover. They're taking the exact same approach he did in the 1930's. I wonder if they ever heard of the Great Depression.

    • If you're referring to this article, then I guess you are insinuating that raising taxes and decreasing spending during an economic crisis is "common sense". It's funny to see that America is finally the country being financially responsible, while countries in a position to reduce their debt (Germany) are forcing fiscal austerity on countries that will be destroyed by it. And Canada is following right along. Embarrassing. The one time Harper actually should follow the example of the States, he manages to shit the bed as usual.

      I mean I know it's American history, but surely one other leader at that summit should have heard of Herbert Hoover. They're taking the exact same approach he did in the 1930's. I wonder if they ever heard of the Great Depression.

  3. Obama’s Mother and Father were both communists/socialists, I guess the apple don’t fall to far from the tree.

    • Here's something to chew on.
      The essence of democracy is that what the majority of people want, the majority of people get.
      The essence of human nature is that the majority of people want to have surplus.
      The essence of resource scarcity means that most people will not have surplus.
      The essence of socialism is that people with surplus provide some of it to those with less.

      Put those things together and sooner or later the conclusion has to present itself: If you support democracy, you're supporting socialism.

      So.. rather than constantly insulting it, fighting it, etc, it might be a better use of your time figuring out how to make it work as best we can.

      Either that, or realize that you just don't like democracy.