Hangover syndrome

Professor Oleg Tsyvinsky on the economic results of the G8

"Eight" in anticipation. Oleg Tsyvinsky, professor of economics at Yale University (USA), comments on the economic results of the G8 summit
At the summit, it became obvious: the whole world is waiting. Everyone hopes that the acute phase of the crisis has passed and the world economy is about to begin to grow. But at the same time, no one can say with certainty whether there will be a new acute phase of the crisis, whether a protracted recession will begin, or whether we are about to see the first signs of economic growth. That is why no specific anti-crisis decisions were adopted at the summit: this is its main result. The absence of news in this case is already good news: when some global decisions are made to save the global financial system, it means that the crisis is in full swing.

One of the debatable points in L'Aquila is what to do with the price of oil. British Prime Minister Gordon Brown and French President Nicolas Sarkozy called for state regulation of oil prices. Their idea is to set a fair price for oil and limit "harmful speculation." In my opinion, limiting oil prices is an absolutely useless undertaking (which, by the way, President Dmitry Medvedev spoke about in L'Aquila). So far, even OPEC has not been very successful at this. And if other countries that produce oil are added to OPEC, then this mechanism will not work all the more. The summit participants agreed that the fair price of oil today is in the range of $70-80. This corridor is very comfortable for the Russian government, as it allows not to make difficult decisions on overcoming the crisis and reforming the economy. But do not rely on the fact that prices will really be in this corridor, because economists believe that the best forecast for the future is today's oil price.

The issue of state intervention in the economy during the crisis was hotly discussed. US President Barack Obama advocates an active "infusion" of money, and, in my opinion, in vain. He is apparently under the influence of his economic advisers, in particular Christina Romer, who believes in a significant spending multiplier, that is, that every dollar invested by the government will increase GDP by $1.5. That is why Obama insists that the best way to save the economy is to inject public money. He was countered at the summit by Angela Merkel with a more skeptical view of the effectiveness of such an incentive. Her position seems to be correct: at least now, when there is no acute phase of the crisis, injections into the economy are definitely not worth doing. It is better to think about lowering taxes, about free trade, which will bring a much more important and positive effect.

One of the main results of the forum, which, unfortunately, received very little coverage in the press, was the discussion of the so-called exit strategies — exit strategies: many countries today are no longer thinking about the crisis, but about how to deal with the post-crisis hangover — with the consequences of an unprecedented stuffing into the economy of public money, a huge increase in debt, increased protectionism of industries. And the fact that states are thinking about exit strategies is already a good sign.

In the light of the crisis, there were also talks about a new global financial architecture at the forum. However, the leaders did not agree on anything concrete: the summit communiqué contained only general words about the need to reform the global financial system. The only specific point in the final communiqué is about the need to address the issue of toxic assets. And this is the right point: economic growth will not be able to recover until the problems with the banking system are resolved - as the examples of Japan and Sweden confirm.

The fact that countries with developing economies participated in this summit on an equal footing with the G8 is a positive sign: the G8 understands that the influence of such countries as India, China, Brazil has increased, and their opinion must be taken into account when discussing global economic issues. This, by the way, is what Russia is insisting on: it is necessary to reform the global financial system in order to give a greater voice to fast-growing, economically strong developing countries.