It’s a Deal – We Will Make Growth Together …

News from the recent G20 pow-wow range from the slightly scary – such as a deal to further undermine financial privacy under the guise of “battling global tax evasion” – to the outright hilarious. The by far funniest report on the meeting appeared in the Australian press and reads as though it came straight from some stand-up comedy routine. You have to see this to believe it (put down the coffee, just to be safe…):

 

“A global deal on growth appears on track to create millions of jobs after the world’s most powerful finance ministers announced plans to add at least 1.8 per cent to their combined economic output.

The G20 finance summit has ended in Cairns with a renewed commitment to a growth target that is meant to add $2 trillion to the world economy, in a positive sign for Australia’s leadership of the group this year. Joe Hockey hailed the outcome as another step towards a major agreement on reform alongside progress on bank regulation, infrastructure investment and a crackdown on tax evasion.

“We are 90 per cent of the way there to meet out 2 per cent goal but I want to emphasize there is much to do,” he told a press conference in Cairns shortly after midday. “It is critical that we take concrete steps to boost growth and create jobs.”

While observers warn the global forum is not acting fast enough to deliver on its rhetoric, the meeting of finance ministers and central bank governors issued a formal communique that commits to actions to lift growth. Central to the agenda is a growth ambition agreed in February to add 2 per cent over the next five years to collective growth when compared to a “business as usual” scenario without new action.

G20 members have submitted about 900 plans to reach the target, ranging from workplace participation programs to infrastructure investments and competition reforms, but the Cairns summit concluded these were not enough to meet the target. The communique said the preliminary analysis of the plans showed collective growth could be 1.8 per cent higher.

“These measures, along with macroeconomic policies, are designed to lift global growth and contribute to rebalancing global demand,” the statement said.

 

(emphasis added)

900 plans were submitted! 900! What could possibly go wrong? When “finance ministers agree” that there shall be 1.8% growth, then by golly, that’s what we’ll get! And if 900 plans aren’t enough, surely even more plans can be made!

We’re actually somewhat less certain whether that output growth thingy on the say-so of these venerable planners will actually work out, but considering the platitudes voiced by Joe Hockey (“a lot needs to be done…it is critical that we take concrete steps … ”) we can be absolutely sure a lot of hot air will continue to be produced at these meetings. So in a sense, production will be up.

 

lagarde and hockey

The solarium-toasted auntie running the IMF and Australian finance minister Joe Hockey at the G20 pow-wow, busy hatching their plot to produce 1.8% global growth

(Photo via Reuters)

So politicians will not only “create millions of jobs” on account of the deal they have just made, but will produce 1.8% in growth…not 1.6%, not 1.7%, and definitely not 1.9% – 1.8% it shall be. This faintly reminds us of the user instruction that come with the holy hand grenade of Antioch …

 

The holy hand grenade of Antioch, and what to do after the pin has been pulled …

 

Conclusion:

We are a bit mystified at this point as to why these 900 excellent plans have not been set into motion, say, three or four years ago. In the euro area there is e.g. widespread yammering these days about growth having pulled a disappearing act from the “core” countries. China is slowing too and has everyone on edge. And it would have been so easy to avoid all this aggravation! All it would have taken would have been “the meeting of finance ministers and central bank governors issuing a formal communique that commits to actions to lift growth” – et voila! We’d all have been saved much earlier already!

 

Oh well, better late than never.

 

Gosplan-1Today this building houses the State Duma – but in Soviet times, it actually housed GOSPLAN, the USSR’s official 5 year plan hatchery.

(Photo via intomoscow.ru)

 


 

 
 

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2 Responses to “We Can All Relax Now – G20 Politicians Will Produce “Growth””

  • Kreditanstalt:

    A PAEAN TO THE EFFICACY OF CENTRAL PLANNING!!!!!

    (Where do we, the poor, wretched and irrational individual economic actors, fit into the plan??)

  • mc:

    No matter what your preference for economic analysis, there is only one valid response to such a meeting: outrage.

    Keynesian: Why so little, so late, if you have the power to control and create growth? Why *allow* recessions to even occur, in fact, why not 3% or 5% or 10% growth annually? If economic planning is so certain, why does anyone have any unfulfilled wants? How can we project the outcome of these actions 5 or more years into the future, yet all economic turning points the central planners fail to see or prevent?

    Austrian: Not possible to create growth via bureaucracy, so the whole thing is a total waste of time and money, since promises made have no bearing on reality. Interventions taken to fix the problem will assuredly manifest as mistakes in later times, such that any effort by these people is definitively counter-productive. Might as well walk to the beach, demand the tides to cease oscillation, and then raise taxes – it will achieve the same direction of effect (fund a nice stroll at taxpayer expense, achieve nothing, and harm the economy, respectively).

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