Here's a strange thing. The global economy has been growing at its fastest rate in decades. China and India are booming, and the demand of the big developing countries for raw materials is even helping Africa to put on a spurt. In the developed world, there may be clouds on the horizon but policymakers don't wake up in the middle of the night in a cold sweat worrying about double-digit inflation or an imminent slump.
A more rapid pace of growth adds to the pressure on the environment. Almost without exception, the recent scientific evidence has indicated that man-made factors are leading to global warming. As economies expand, they need more power, more steel, more concrete. As consumers get richer, they demand cars, holidays, flat-screen TVs. Feedback mechanisms come into play as well. Wealthier consumers can afford to put in air-conditioning to cope with the heat but cooling systems require even more power, which adds to carbon emissions and ultimately - assuming the science is right - to global temperatures.
A more rapid pace of growth adds to the pressure on the environment. Almost without exception, the recent scientific evidence has indicated that man-made factors are leading to global warming. As economies expand, they need more power, more steel, more concrete. As consumers get richer, they demand cars, holidays, flat-screen TVs. Feedback mechanisms come into play as well. Wealthier consumers can afford to put in air-conditioning to cope with the heat but cooling systems require even more power, which adds to carbon emissions and ultimately - assuming the science is right - to global temperatures.
Yet, perversely, the fact that the global economy is in a "sweet spot" has created the policy space to deal with the problem that a period of strong growth has itself helped to create. When unemployment is going through the roof, politicians want as much growth as they can get as soon as they can get it, and the environment is a long-term problem that can be put off until another day.
Different agenda
So, when Tony Blair goes to Berlin tomorrow to meet Angela Merkel, the agenda for the mini-summit will be totally different from what it would have been when the prime minister met Helmut Kohl in the early days of his premiership. There will be no talks about the euro or the stability and growth pact; economics will be tangential to discussions on securing a post-Kyoto treaty on climate change, what needs to be done to clinch a deal on global trade, how Europe should respond to the latest developments in the Middle East peace process, and a package of help for Africa, concentrated on HIV/Aids treatment and education.
Overwhelmingly, it is a good thing that there is a different agenda from a decade ago. For a long time, lobby groups complained - with some justification - that the issues that mattered (ie the issues they were interested in) were ignored at international gatherings. Now global warming and Africa have moved centre-stage, and that's progress.
There is, however, reason to be cautious. Firstly, the fact that there are no longer meetings of the G7 called to stabilise currencies does not mean that the big economic issues have all gone away. What it means, worryingly, is that the main players are either unable or unwilling to do anything about them.
This impotence was well illustrated by the weekend's meeting of the G7 in Essen - a far cry from that held 20 years ago this month at the Louvre in Paris, which agreed to use intervention in the foreign exchange markets to put a floor under the falling dollar. In theory, there was similar business for finance ministers and central bank governors to get their teeth into this weekend.
For a start, they could have taken up the suggestion of the host nation to do something about the weakness of the yen, which is being dragged lower by Tokyo policymakers' unwillingness to risk raising interest rates for fear that the result would be to kill off what already looks like a faltering economic recovery. Germany, relying heavily as it does on exports, is worried about this trend - and about the growing tendency of hedge funds to borrow money cheaply in yen and invest it in higher-yielding assets elsewhere, often at considerable risks. Yet the Japanese did not want to talk about the yen, while the countries with a light-touch approach to hedge funds (Britain and the US) will do nothing to risk the ire of the City of London and Wall Street.
The G7 might also have taken steps to tackle the chronic global imbalances, and in particular the need to massage down the US trade deficit through a controlled depreciation of the dollar. This, though, would require reciprocal action from China, which has been running up record trade surpluses with the US, and it has become abundantly clear that the G7 is not the body for achieving this end. The penny dropped three years ago in Boca Raton, Florida, when the G7 found that any discussions on global imbalances were otiose in the absence of China, which is not a full member of the club.
The real difficulties the G7 finance ministers have in cutting currency deals points to another reason for some hard-nosed realism about possible action on climate change - namely, that nation states are terrified of signing international treaties that might damage their economies. In the US, members of both houses of Congress are convinced that China is manipulating its currency to secure a competitive advantage in its trade with the US; as such, Washington is going to be mightily wary about signing anything that puts tougher burdens on businesses in the developed world than it does on those in the developing world. On the other hand, the Chinese and the Indians do not want to accept any agreement that might hinder their attempts to lift hundreds of millions of people out of poverty. Beijing and New Delhi are becoming increasingly aware of the dangers of global warming - hardly surprisingly given the smog that blankets their cities - but say that the developed countries, having caused most of the problem, have to accept more of the responsibility when it comes to clearing up the mess.
Blair has been around long enough to know that this could be a potential deal-breaker before negotiations have even begun, so what he is looking for by the time Merkel hosts the G8 summit in June is an agreed set of principles to help speed up negotiations on a post-Kyoto deal by two or three years. He would like all the major countries to be part of the process (unlike Kyoto); agreement that there should be a stabilisation target for emissions; acceptance of the need for a global carbon-trading scheme, and a commitment to a technology transfer process.
Overwhelmingly, it is a good thing that there is a different agenda from a decade ago. For a long time, lobby groups complained - with some justification - that the issues that mattered (ie the issues they were interested in) were ignored at international gatherings. Now global warming and Africa have moved centre-stage, and that's progress.
There is, however, reason to be cautious. Firstly, the fact that there are no longer meetings of the G7 called to stabilise currencies does not mean that the big economic issues have all gone away. What it means, worryingly, is that the main players are either unable or unwilling to do anything about them.
This impotence was well illustrated by the weekend's meeting of the G7 in Essen - a far cry from that held 20 years ago this month at the Louvre in Paris, which agreed to use intervention in the foreign exchange markets to put a floor under the falling dollar. In theory, there was similar business for finance ministers and central bank governors to get their teeth into this weekend.
For a start, they could have taken up the suggestion of the host nation to do something about the weakness of the yen, which is being dragged lower by Tokyo policymakers' unwillingness to risk raising interest rates for fear that the result would be to kill off what already looks like a faltering economic recovery. Germany, relying heavily as it does on exports, is worried about this trend - and about the growing tendency of hedge funds to borrow money cheaply in yen and invest it in higher-yielding assets elsewhere, often at considerable risks. Yet the Japanese did not want to talk about the yen, while the countries with a light-touch approach to hedge funds (Britain and the US) will do nothing to risk the ire of the City of London and Wall Street.
The G7 might also have taken steps to tackle the chronic global imbalances, and in particular the need to massage down the US trade deficit through a controlled depreciation of the dollar. This, though, would require reciprocal action from China, which has been running up record trade surpluses with the US, and it has become abundantly clear that the G7 is not the body for achieving this end. The penny dropped three years ago in Boca Raton, Florida, when the G7 found that any discussions on global imbalances were otiose in the absence of China, which is not a full member of the club.
The real difficulties the G7 finance ministers have in cutting currency deals points to another reason for some hard-nosed realism about possible action on climate change - namely, that nation states are terrified of signing international treaties that might damage their economies. In the US, members of both houses of Congress are convinced that China is manipulating its currency to secure a competitive advantage in its trade with the US; as such, Washington is going to be mightily wary about signing anything that puts tougher burdens on businesses in the developed world than it does on those in the developing world. On the other hand, the Chinese and the Indians do not want to accept any agreement that might hinder their attempts to lift hundreds of millions of people out of poverty. Beijing and New Delhi are becoming increasingly aware of the dangers of global warming - hardly surprisingly given the smog that blankets their cities - but say that the developed countries, having caused most of the problem, have to accept more of the responsibility when it comes to clearing up the mess.
Blair has been around long enough to know that this could be a potential deal-breaker before negotiations have even begun, so what he is looking for by the time Merkel hosts the G8 summit in June is an agreed set of principles to help speed up negotiations on a post-Kyoto deal by two or three years. He would like all the major countries to be part of the process (unlike Kyoto); agreement that there should be a stabilisation target for emissions; acceptance of the need for a global carbon-trading scheme, and a commitment to a technology transfer process.
New urgency
The prime minister believes there is a new urgency in the international community as a result both of the recent scientific evidence and concerns about energy security. The mood music out of Washington is certainly far more emollient than it was when Blair made climate change one of the two priorities for Britain's G8 presidency in 2005.
Even so, it remains the fact that the international community has known for more than half a decade that the global imbalances are a threat but done nothing about them. Almost every leader in the world professes to want a new trade deal, but negotiations are still going on after more than five years.
So, there's still much to do over the next four months, not least the conundrum of how a business-as-usual model of growth-based global economics can be squared with putting a meaningful ceiling on emissions.
If, as many environmentalists believe, the cost-free approach to saving the planet is a modern variant of alchemy, Blair's best efforts will have been in vain.
Understandably, though, he doesn't want his last months in Downing Street to be marked by anti-climax and he remains upbeat about a deal that would last and have teeth. If he's right, the dog days of his premiership may prove the most significant of the lot.
Even so, it remains the fact that the international community has known for more than half a decade that the global imbalances are a threat but done nothing about them. Almost every leader in the world professes to want a new trade deal, but negotiations are still going on after more than five years.
So, there's still much to do over the next four months, not least the conundrum of how a business-as-usual model of growth-based global economics can be squared with putting a meaningful ceiling on emissions.
If, as many environmentalists believe, the cost-free approach to saving the planet is a modern variant of alchemy, Blair's best efforts will have been in vain.
Understandably, though, he doesn't want his last months in Downing Street to be marked by anti-climax and he remains upbeat about a deal that would last and have teeth. If he's right, the dog days of his premiership may prove the most significant of the lot.
Source: The Guardian
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