Competitive Enterprise Institute | 1899 L ST NW Floor 12, Washington, DC 20036 | Phone: 202-331-1010 | Fax: 202-331-0640
Iain Murray, 202-331-2257
Richard Morrison, 202-331-2273
Washington, D.C., April 2, 2009—Today’s communiqué from the
leaders of the G20 – a motley collection of democracies and dictatorships –
has some good points, but in general it represents a new version of what
economist Friedrich Hayek called “the fatal conceit.” It believes that government has all the
answers, and demonstrates that the world's leading governments recognize few
boundaries. As such, not only does the communiqué promise far more than it can
deliver – something the voters in G20 democracies should remember – but it may
also impede global economic recovery.
The communiqué holds that, “We start from the belief that
prosperity is indivisible; that growth, to be sustained, has to be shared” and
to “do whatever is necessary.” In clause
after clause, this pro-government rather than pro-prosperity declaration
embraces new burdens on a limping financial sector in the form of expanded
global regulation, and effectively requires that all look toward government
before acting in the future. At no point
does the communiqué recognize that government action can and does distort
market action to the point of significant harm.
The only “growth” being sustained in today’s political
environment – and further embraced here – is the open-ended stimulus culture
that has already led to an orgy of “sharing” of citizens’ wealth; in a world
increasingly at ease with the word “trillion,” we are not suffering from a
lack of sharing. The “unprecedented
fiscal expansion” is not, as British Prime Minister Gordon Brown said, an
injection of new money (except for some sales of gold reserves) but mostly a
redistribution of existing taxpayer money to politically-favored recipients.
An effective communiqué would have acknowledged that wealth
is not automatic, that it must be created before it can grow and expand – or be
shared. Individuals acting together in voluntary enterprise form the foundation
of wealth creation and job growth, but that is nowhere articulated here.
Leadership would require the G20 representatives to explain precisely how they
plan to unravel tax and regulatory barriers to the creation of new wealth,
infrastructure, jobs and new financial innovations. Instead, the document
stands as yet another open-ended promise for redistribution of a shrinking pie,
and aggressive new political dominance of economic life.
This is not to say that the communiqué is wholly bad. Even
as they seek to increase the reach of government by a massive expansion of the
International Monetary Fund (by its own figures, the IMF budget is now greater
than the GDP of all but 16 countries), the G20 leaders had no choice but to
recognize the harmful effects of protectionism. The sections lauding free trade
are welcome, and stand as a rebuke to Congressional leaders who have introduced
protectionist language in recent bills. If there is one glimmer of hope in the
G20 communiqué, it is that the vitality of trade may counteract the dead hand
of government control.
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