By Stephanie Flanders 14.11.2010

Western officials should have realised this summit would be different when they arrived in Seoul to find their smartphones didn’t work. The problem was that Korea’s nationwide 4G network was too advanced. On early negotiating missions, key UK officials found themselves communicating with London via e-mail, on rented phones.


That was never a problem in Pittsburgh, or in Toronto. But as George Osborne liked to point out, this was the first G20 summit not hosted by a G8 country – and, he might have added, the first where G8 countries didn’t call the tune.

As we know, there was vanishingly little progress on the debate of the hour – the question of global imbalances. China is going to open its economy and take on more of the burden for sustaining the world economy. But it’s going to do it in its own time, in its own way. And that includes raising the international value of its exchange rate.

America isn’t helpless in this battle. Far from it. The US controls the only truly global currency. And its central bank will print a lot of it, if it has to, to keep the American economy going. But, as I said last month, this battle over the Chinese exchange rate may be the closest we have seen to a fair fight between America and another nation for a very long time.

China has spent $2 trillion in the past decade keeping its exchange rate at a competitive level, and there’s plenty more where that comes from.

It wasn’t just currencies. The development agenda tilted eastwards at this summit as well. As far as China, India, or Korea are concerned, no-one ever got rich following the old-style Washington Consensus of the World Bank and IMF: Africa, least of all. The way they see it, Asia is where the really big falls in poverty have all been achieved – and that didn’t happen by playing Western rules.

The Washington Consensus has been dead for a while, or at least under serious review. But the “Seoul Consensus” that the G20 signed up to this week made it official. And there were Asian fingerprints all over it.

In the communique, the leaders also agreed that “innocent victims” of the currency wars – countries whose exchange rates were getting pushed up for no good reason – might be right to impose formal capital controls. That’s the final nail for another G8 taboo.

I remember back in the Asian financial crisis, in the late 1990s, when Malaysia resorted to widespread capital controls to protect their economy. It became a pariah – at least in IMF circles. But most of the fast-growing Asian economies have limited capital inflows for years – and after this latest turbulence, they’re planning to regulate more in future, not less. Like it or not, the IMF and the G20 are catching up with reality.

It’s too soon to call the end of America’s hegemony over international summits. The US will be the largest economy in the world for a few years yet. I suspect US presidents will continue to set the agenda, long after it slips to second place – if only to give the others something to pick apart.

But this may go down as the summit where China said no to the US – and where the G20 stopped feeling like the G8-plus.

Like the global economy, this new G20 has a different balance of power. It’s more diverse. More fractious. And it’s not a little disconcerting to the old guard. Just don’t expect Nicolas Sarkozy to admit it, when he chairs the G20 next year.


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