The G20 has wrapped up, and from Gordon Brown's speech today, it looks like France and Germany have in many ways won the day. There was little in the way of new national loan-free stimulus, and much in the way of a new regulatory system, the death of tax havens, and an end to credit-hungry consumerism. In short, today was the last day of the Anglo-Saxon model of capitalism.
So what will replace it? It's not quite clear yet. In fact all that is clear is that the old system is done. "The old Washington consensus is over," Brown declared today. In his press conference later, Barack Obama said much the same thing. Now of course what they were immediately refering to was the consensus which set up the IMF and the World Bank, but the language they used reflected that there is more change afoot here than just a retooling of these two institutions. And yet we didn't get a Bretton Woods 2 today. That will have to be ironed out in some time.
The G20 agreed to majorly reform the organisation of the international financial system, regulating hedge funds, registering credit agencies, overhauling accounting rules, capping bankers' pay, and ending banking secrecy in tax haven countries. The end package included much of what Merkel and Sarkozy had demanded in their joint press conference yesterday, when they said that a complete overhaul of the Anglo-Saxon financial system was nonnegotiable. They also stood firmly opposed to further stimulus. Sarkozy was understandably jubilant today after the meeting, saying that the result was beyond his expectations.
This result will likely help both Merkel and Sarkozy at home, where they are both struggling.
As regards the banking secrecy, Obama was reportedly instrumental in bridging differences between the French and the Chinese on the issue. In the end the Chinese, who are concerned that a banking secrecy clampdown would affect Hong Kong, relented and agreed to the OECD publishing a 'name and shame' list of non-compliant tax haven countries. It will be interesting to see where Switzerland will find itself on that list. In response to a question at his press conference, Sarkozy speculated that Switzerland would find itself in a gray area on the list.