Is Sarkozy hitched to a fading star?
French president Nicolas Sarkozy arrived in Washington today for talks with President Obama devoted in large part to shaping the G-20‘s agenda. Since taking the reins of the world’s premier consultative group, Sarkozy and his advisers have outlined an array of problems they’d like to tackle, including restructuring the international monetary system to decrease reliance ...
French president Nicolas Sarkozy arrived in Washington today for talks with President Obama devoted in large part to shaping the G-20's agenda. Since taking the reins of the world's premier consultative group, Sarkozy and his advisers have outlined an array of problems they'd like to tackle, including restructuring the international monetary system to decrease reliance on the dollar as a reserve currency, coordinating development strategies, controlling skyrocketing food prices, and perhaps even reforming the U.N. Security Council. Shortly before Sarkozy's arrival in Washington, Brazil's finance minister again warned about what he described as currency manipulation and insisted that the G-20 refocus on that problem.Even as Sarkozy bends Obama's ear about agenda items and crafts his strategy, there's a growing feeling that the G-20's finest days may be behind it.
French president Nicolas Sarkozy arrived in Washington today for talks with President Obama devoted in large part to shaping the G-20‘s agenda. Since taking the reins of the world’s premier consultative group, Sarkozy and his advisers have outlined an array of problems they’d like to tackle, including restructuring the international monetary system to decrease reliance on the dollar as a reserve currency, coordinating development strategies, controlling skyrocketing food prices, and perhaps even reforming the U.N. Security Council. Shortly before Sarkozy’s arrival in Washington, Brazil’s finance minister again warned about what he described as currency manipulation and insisted that the G-20 refocus on that problem.Even as Sarkozy bends Obama’s ear about agenda items and crafts his strategy, there’s a growing feeling that the G-20’s finest days may be behind it.
Sarkozy has strong domestic political incentives for making his turn at the head of the G-20 (and the G-8, which France is concurrently chairing) as dramatic and consequential as possible. He’s facing what looks to be a tough reelection battle, and a star turn on the international stage could help boost sagging poll numbers (and strengthen him against a potential challenge from current International Monetary Fund chief Dominique Strauss-Kahn). That political dynamic, and Sarkozy’s own somewhat manic personality, mean that France’s time at the head of the G-20 is likely to be frenetic, or at least appear so.
The French president may have to fight to keep the G-20 in the spotlight. Some of the most ambitious but less plausible agenda items, notably Security Council reform, have already fallen by the wayside. Recent events are driving other issues higher on the agenda; if food riots keep breaking out, for example, that issue might dwarf others by the time the G20 leaders convene in Paris later this year. World Bank president Robert Zoellick has been beating the drum in the past few weeks about the need for the G-20 to put food prices at the top of its agenda. For its part, Washington would probably prefer to keep the focus on the European debt crisis, which it sees as the most pressing international economic threat.
But it’s reforming the international monetary system that may be closest to France’s heart. The French have been careful not to frame the issue as a direct assault on the dollar’s position as the leading international reserve currency. In today’s Oval Office meeting, Sarkozy was on his best behavior. "I’ve always been a great friend, a tremendous friend of the United States and I know how important a role the United States plays in the world, how important the U.S. dollar is as the world’s No. 1 currency." But just a few hours earlier, French officials were speaking of achieving greater balance between leading currencies. "We want to encourage the international development of other currencies, such as the yuan," a Sarkozy advisor told Reuters.
As Princeton University’s Sophie Meunier has argued, it would be easy to see this as another manifestation of France’s recurrent desire to tame what former French foreign minister Hubert Vedrine called the "hyperpower." Sarkozy’s objectives, she writes:
look like a typically French frontal assault against Washington. France’s stated ambition is no less than a brand new international monetary system — throw in also the regulation of commodities markets and the renovation of global economic governance for good measure. The underlying analysis behind this ambitious objective is that international financial instability comes from the privilege of the dollar as reserve currency. Eliminating this privilege, the argument goes, would also better reflect the new multipolar economic reality.
It’s an argument that some U.S. officials might privately support; they know that today’s international reserve system creates an unsustainable and ultimately dangerous American reliance on cheap foreign financing. But with the United States cutting taxes, launching new stimulus measures, and consequently running huge budget deficits, there’s little appetite in Washington for accelerating a move away from the dollar as the default reserve currency.
In any case, it’s not clear that plans for international monetary reform will get off the drawing board. The G-20 got high marks for fending off protectionism and coordinating an international response to the financial crisis in 2008 and 2009 but has struggled to maintain that momentum.
Last year’s Seoul summit was a disappointment; the members achieved little concrete on currency revaluation or anything else. And it’s not clear that the group can induce its members to abide by even the very broad pledges that they have made. At the June 2010 Toronto summit, for example, industrialized nations pledged to slash their budget deficits in half by 2013. That goal now looks all but unattainable for the United States. (This week, the Fund’s deputy managing director John Lipsky diplomatically termed Washington’s recent budget-busting a "major challenge.") America’s failure on that important metric may send an important signal to other members about the meaningfulness of G-20 pledges.
The G20’s lackluster recent performance has led Eurasia Group’s Ian Bremmer to argue that the world is entering a" G-Zero" phase, in which there is effectively no global steering committee:
G-20 cooperation in 2008 and 2009 proved a short-lived collective reaction to panic, safety in numbers in the face of imminent disaster. The first indication it wouldn’t last came in Copenhagen a year ago, following a climate summit marked by such disunity that the outcome was worse than if no meeting had taken place. Climate proved a sufficiently low-grade priority in the middle of a hard-fought global economic recovery that the frictions were largely forgotten. That’s less the case with last fall’s IMF meeting in Washington and G-20 meeting in Seoul, which ended with warnings of a global currency war and of a return to the national economic barriers of the 1930s. During both summits, the economic strategies of the world’s leading economies were set in opposition to one another.
Even some French officials have been seeking to temper expectations. "We have to adapt the G-20 to a new environment, from high frequency management of the world economy to low frequency management. The pace is likely to be slower because we are tackling deeper and more difficult issues," a senior official told the Wall Street Journal.
The problem for the French — and for the world — is that a creation like the G20 may not be able to operate for long at a low frequency. In contrast to the G-7/G-8 and its forerunners, there isn’t a lot culturally, politically or economically that binds together the G-20; it includes countries as diverse as Italy and Indonesia, China and Mexico. And it doesn’t appear that G-20 meetings themselves have fostered any lasting sense of community. The group is too clunky to allow the kind of leader-to-leader bonding that sometimes occurred at G-7 and G-8 confabs. After the inclusion of a variety of "special guests" including Spain, Singapore, Malawi and Ethiopia, the Seoul summit ballooned to 25 heads of state plus more than a half dozen heads of international organizations. The next summit will likely repeat that inflationary practice, and even a fully energized Sarkozy will struggle to make it a meaningful session.
The French and South Koreans have both hinted that the G-20 needs some kind of permanent staff and structure — perhaps a miniature version of the U.N.’s secretariat — to keep the consultative process on the rails, but the idea hasn’t attracted much support in Washington or Beijing. The real problem may be much more fundamental and won’t be solved by creating new bureaucrats: The world needs a reasonably-sized economic steering committee (5-7 members would be ideal) that’s not the European-dominated G-7 or G-8 and that includes key emerging economies.
Barring a major crisis that restores a sense of purpose, it’s quite possible that both Sarkozy and the G-20 will be moving to the sidelines.
David Bosco is a professor at Indiana University’s Hamilton Lugar School of Global and International Studies. He is the author of The Poseidon Project: The Struggle to Govern the World’s Oceans. Twitter: @multilateralist
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