Let's take a break from gloom and doom and consider some bits of good news about the global economy, as seen by Kevin Rudd, the prime minister of Australia. He's visiting Washington this week, and in a telephone interview from Canberra he offered a preview of what he will be telling President Obama.
The first positive development Rudd sees is a change in global governance. The world's executive committee is shifting from the small, Euro-American-centered Group of Eight nations to the wider Group of 20, which will meet in London on April 2 to discuss how to fix the economic mess. As Rudd notes, the G-20 is an inclusive group that numbers five participants from Europe, five from the Americas, five from Asia and five others (not least, Australia). It gives voice to rising economies such as India and Brazil on which future growth depends.
Rudd's second encouraging sign, linked to the first, is the growing role of China in maintaining global economic stability. Chinese leaders will attend the summit and presumably endorse its collective response to the crisis. Beijing also wants a larger role in a revitalized International Monetary Fund. The details are still being discussed, but China is expected to contribute more of the IMF's capital and to have a bigger say in the fund's management.
The third upbeat observation from Down Under is that the United States is back as a leader of the network of global institutions. Where George Bush was a reluctant participant in last October's G-20 meeting, the Obama administration has been an enthusiastic player -- supporting plans for new global financial regulation and backing a doubling of IMF resources to $500 billion.
"What's been a breath of fresh air has been the return of U.S. global leadership on the financial crisis," says Rudd. He notes that America's embrace of the G-20 "was noticed by people around the world."
I hope that Rudd is right in the picture he draws of China, the United States and the rest working together to coordinate a global response to the crisis. An alternative to this collective action is a repetition of the protectionist policies that many nations adopted during the 1930s, when they tried to save themselves at the expense of their neighbors -- and made everyone worse off.
Rudd's views about China are worth examining in detail, because he is that rare politician who is actually an expert Sinologist. He speaks fluent Mandarin and served a tour in the Australian Embassy in Beijing, and he's one of the smartest China-watchers I've met anywhere. His expertise is a resource Obama should tap this week in analyzing intentions.
The Chinese are on "the sharp end of the crisis," says Rudd, as declining exports lead to a sharp drop in growth and rising unemployment. Like most governments, the Chinese worry about the political and social effects of having so many people out of work. But Beijing has dealt with economic downturns before, and Rudd argues that, so far, "China's leadership has handled this crisis confidently."
Despite the opaqueness of Chinese economic statistics, Rudd believes that Beijing's announced economic stimulus program is for real, and that there's also a sizable undeclared effort, through easier lending to Chinese companies. Because of these recovery efforts, Rudd said, it's possible that China will emerge from the global slowdown earlier than other major economies.
Rudd said that the recent comment by Premier Wen Jiabao that he was "definitely a little worried" about China's huge holdings of U.S. Treasury bills reflects a larger political discussion in Beijing. "In China, there has been a debate about the causes of the global financial crisis . . . and where some of its national investments have gone wrong." Concern about U.S. mismanagement was pointedly expressed by Vice Premier Wang Qishan in December when he said: "The teachers have much explaining to do."
But Rudd argued that despite recent reversals, China still sees its future prosperity within the U.S.-led global capitalist system. "China is always engaged in a strategic plan rather than a tactical one, and China's strategy is to secure its interests by deepened global engagement," the Australian leader said. The crisis hasn't changed that strategy.
The London summit will test whether the global consensus Rudd describes is more than skin-deep. There's still a wide gap between American views (more stimulus!) and European (more regulation!), and many of China's policies remain a mystery. But as Rudd says, it's at least modestly reassuring that the G-20 will be the forum, China will be a player and America will be back in a leadership role.
David Ignatius