Hill+Knowlton Strategies

The lasting legacy of the G20 Summit will not be the political bounce any one politician gets out of it. Those summits which do come up with instant results for politicians tend to be judged rather harshly by history.

Neville Chamberlain returned a hero from the Munich conference in 1938 waving his piece of paper in the air which supposedly guaranteed peace. John Major was considered a master in Maastricht with an agreement which divided his party as they lurched out of office for more than a decade.

The liquidity in the financial markets is more important than fluidity in poll figures. A stabilisation of banks a better measure of its success than solidification of poll leads.

Let the political journalists decide whether a failure to agree a second fiscal stimulus is a failure for the PM.

What matters to your business are decisions which have already been made – the summit itself lasts for just four and a half hours and three working meals. Most of the hard talking has already been done and while there will be few instant results there has been progress.

There is consensus that the IMF and World Bank need more funds. Japan and the EU have contributed $100 billion each but to reach the target of $500 billion the Chinese and Saudis will need to dip into their pockets. They are unlikely to do that unless they get a greater voice in new and existing institutions. If they get it – and they probably will – the long term effect will be a shift in geo-political power which reflects the shifts in economic muscle which have been a reality for at least the last decade.

The IMF also needs more teeth and the ability to regulate with greater co-operation and uniformity between national bank regulators.

The G20 governments agree that each one must resolve the issue of banking’s bad debt and there will be tough action to regulate hedge funds and private equity funds and effectively to put an end to tax havens.

What of a second fiscal stimulus? The truth is that most of the first, in each of the countries, has yet to be spent. In the UK the tax cut for basic rate payers doesn’t come in until four days after the summit. The same is true with the loan guarantee scheme for businesses and the automotive industry.

The idea that there is no agreement for a second one may be perceived as a party political failure by the media and the PM’s opponents but the truth of the matter is that to commit to another one before the first has been fully applied would be a much greater admission of failure.

As President Obama told the FT: “To start to make a whole host of plans about next year, without having better information about how the current stimulus efforts are working, is something that I think is of concern.”

But again, what is said on the day will not matter as much as what happens in the months to come.

The G20 will come out in favour of free trade. It did last time. And since then 17 of its 20 members have introduced protectionist measures – including the USA and the EU. This time the proof will be if they have not added any more – or indeed removed those they have put in place – by the end of the year.

The statements of unity which will be made on Thursday evening will be grand. But don’t measure its success by that.

Measure it by the willingness of a bank executive to extend your overdraft on a wet Wednesday afternoon next June.

If you start to get the liquidity you need then all those working dinners will have worked.