G-20

Today, it's all good news in the world...

Remember back a couple weeks ago when the G-20 leaders agreed to get rid of subsidies on fossil fuels? Well, guess what? So far not much has happened here on that front ... not surprising perhaps since the "commitment" by the G-20 leaders did not include a timeline. But one bold, shining light has emerged that is leading the way for us all. Who should Barack Obama and his fellow statesmen call for advice? Why their old pal Mahmoud Ahmadinejad. Because just this past Sunday the Iranians moved to cut back on their subsidies for fuel (and food) in the interest of trying to trim their budget. Admittedly, the money they save will be used to attempt to make a big hole in the ground where Israel is, but since this is Good News Tuesday, let's focus on the upside. Today, Tehran is our good governance pick of the week.

Have you seen those promos for the latest movie by catastrophe specialist Roland Emmerich, 2012? They'd be pretty horrifying even if they did not, as pointed out in Entertainment Weekly, use collapsing twin towers as one of their money effects. But fortunately, it turns out that we don't have to go see the movie in order to help prepare for the doomsday it suggests was predicted by ancient Mayan calendars. According to an AP story yesterday, the Mayans that are still with us say this end of days frenzy is just an over-wrought misinterpretation of the calendars which do note that late in 2012 some unusual astronomical developments will take place. This may, they imply, be worth a visit to the backyard with a telescope but it doesn't warrant hiding in the basement with a year's supply of franks and beans. Or going to see 2012, which according to early reviews is itself such a disaster, it'll have audiences wishing for the real thing before they've finished their popcorn.

What's better than good governance in Iran and the fact that the world's not going to end in three years? How about something that seemed impossible just a few months back: economic recovery? Yup, according to Larry Summers, the president's top economic advisor, in a letter to Republican House Minority Leader John Boehner, happy days are near again. Consumer confidence is coming back and the housing market is stabilizing. But, for most Americans, an even more credible source than a senior government official who happens to be one of the world's leading economists has emerged: TV ads. Yep. According to a front-page story in today's New York Times, "While economists and investors study housing starts and gross domestic product predictions to measure economic vibrancy, General Electric, Bank of America and other companies are using commercials to proclaim America's future is bright." And if they say it in a TV ad, you know it's true. Otherwise how do you explain all the ShamWows and that Popeil Pocket Fisherman in your basement?

Russian Foreign Minister Sergei Lavrov has reported following talks with Secretary of State Clinton that there is a "good chance" of cutting a deal with Iran on its nukes. He also called the threat of sanctions "counterproductive," revealing a resolute and moving faith in the fundamental decency of mankind ... and especially in the Iranians despite a track record that would and has made lesser nations doubters. State Department spokespeople said that they didn't seek anything from the Russians during the trip, which provides us with more good news since nothing is precisely what they got.

In today's Washington Post, Anne Applebaum, almost certainly their best regular commentator, finally digs deep enough to find the positive spin on our favorite prime minister, Silvio Berlusconi. This is important because without Berlusconi, newspapers would be dull grey things ... er, even duller, greyer things. We need a buffo world leader and I suspect we can all agree he's the perfect guy in the perfect place given his special breed of apparently corrupt ludicrousness and the not unimportant fact that Italy is probably the largest country we could trust to such a clown without really dire consequences to the planet. Writes Applebaum, seeking to explain his popularity, "Besides, with Berlusconi as your prime minister, you don't have to take yourself too seriously. You don't have to trouble yourself with geopolitics or the state of the planet, or poverty and failed states. You can stay at home, remain unserious and argue about the latest legal scandal. And maybe that too, is part of the prime minister's appeal."

And in other good news: The five short-range missiles tested by North Korea yesterday were only short-range missiles, while the recent spate of bombings in Pakistan have been tragic they do serve as a useful reminder that our real problems in that neck of the world are not in Afghanistan, despite the fact that the Baucus health-care bill doesn't actually fix a single one of the problems it sets out to address according to members of the House of Representatives it may actually get a helpful makeover in conference, Nicolas Sarkozy loves his 23-year-old son enough to advance him for a job running a good chunk of Paris's financial district, and perhaps most upliftingly the founder of Cirque du Soleil returned safely from a trip to outer space today thus guaranteeing the world more of his trailblazing work creating the theatrical equivalent of Muzak. Next up: why not an evening of bad jokes, young scantily clad women, acrobats, plastic surgeons and opera music called "Berlusconi!"

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This may have been the best month for Brazil since about June 1494. That's when the Treaty of Tordesillas was signed granting Portugal everything in the new world east of an imaginary line that was declared to exist 370 leagues west of the Cape Verde islands. This ensured that what was to become Brazil would be Portuguese and thus develop a culture and identity very different from the rest of Spanish Latin America. This guaranteed the world would have samba, churrasco, "The Girl from Ipanema," and through some incredibly fortuitous if twisted chain of events, Gisele Bundchen. 

While it took Brazil sometime to live up to the backhanded maxim that it was "the country of tomorrow and always would be," there is little doubt that tomorrow has arrived for the country even if much work remains to be done to overcome its serious social challenges and tap its extraordinary economic potential.

The evidence that something new and important was happening in Brazil began to build years ago, when then President Cardoso engineered a shift to economic orthodoxy that stabilized a country racked by cycles of boom and bust and mind-blowing inflation. It has gained momentum however, throughout the extraordinary term of the country's current President Luiz Inácio Lula da Silva.

Some of that momentum is due to Lula's commitment to preserving the economic foundations laid by Cardoso, a courageous political move for a lifelong labor leader from the opposition Workers Party. Some of it is due to luck, a changing global energy paradigm that helped make Brazil's 30 years of investment in biofuels start to pay off in important new ways, massive discoveries of oil off Brazil's coast and growing demand from Asia that has enabled Brazil to become a world agricultural export leader and assume the role of "breadbasket of Asia." But much of it is due to great skill on the part of Brazil's leaders in seizing a moment that many of their predecessors likely would have fumbled.

Of those leaders, much of the credit goes to President Lula who has become a bit of a rock star on the international scene, harnessing energy, drive, charisma, uncanny intuition, and common sense so effectively that his lack of formal education has hardly been an impediment. Some goes to other members of his team, such as his chief of staff Dilma Rousseff, a former energy minister who has become a very tough chief of staff and a possible successor to Lula. But I believe a large amount of it ought to go to Celso Amorim, who has masterminded a transformation of Brazil's role in the world that is almost unprecedented in modern history. He has been Lula's foreign minister since 2003 (he also served in the same role in the 1990s) but I think there is a fair case to be made that he is currently the world's most successful foreign minister.

It is impossible to pinpoint just one turning point in Amorim's efforts to transform Brazil from a lumbering regional power of dubious international clout into one of the most important players on the world stage, acknowledged by global consensus to play an unprecedented leading role. It may have come when he played a central role helping to engineer a pushback by emerging countries against a business-as-usual power play by the U.S. and Europe during the Cancun trade talks in 2003. It might have been the canny way the Brazilians have used issues such as their biofuels leadership to forge new dialogues and influence either with the United States or with other emerging powers. It certainly involved his embrace of the idea of transforming the BRICs from acronym to important geopolitical collaboration, working with his counterparts in Russia, India and China to institutionalize the dialogue between the countries and to coordinate their messages. (Arguably the BRIC helped most by this alliance is Brazil. Russia, China and India all earn places at the table due to military capabilities, population size, economic clout or resources. Brazil has all these things...but less than the others.) It also involved countless other things from the Brazil's deepened and tightened ties with countries like China, it's promotion of both investment flows and a reputation for being comparatively secure in the face of global economic reversals, the comfort level America's new President has with his Brazilian counterpart -- even extending to encouraging them to play a role as a conduit to, for example, the Iranians. Agree or not with their every move in places like Honduras or in the OAS on Cuba, Brazil has also continued to play an important regional role even as it is clear its focus has shifted to the global stage.

Nothing illustrates how far Brazil has come or how effective the Lula-Amorim team has been than the events of the past few weeks. First, the countries of the world cashier the G8 and embrace the G20, guaranteeing Brazil a permanent place at the most important table in the world. Next, Brazil becomes the first country in South America to be awarded the right to host the Olympics. Yesterday's FT carried news that "Asia and Brazil lead rise in consumer confidence", a reflection on the reputation that the government has effectively sold (with the bulk of the credit going to a resurgent Brazilian private sector.) And this week's stories out of the IMF-World Bank meeting in Istanbul show a further institutionalization of Brazil's new role with agreement to change the structure of the International Monetary Fund. According to today's Washington Post: "The nations also preliminarily agreed to reshape the fund's voting structure, promising a blueprint for giving more clout to emerging giants like Brazil and China by January 2011."

Not a bad few days work. And while it's Brazil's Finance Ministry you'll find at IMF-World Bank Meetings, the undisputed architect of this remarkable transformation of Brazil's role in Amorim.

Much work remains to be done, of course. Part of it has to do with the new role that has been shaped. Brazil wants a permanent place on the U.N. Security Council and more of a leadership role in other international institutions. It may well earn these, but it will have to maintain its growth and stability to get there. Further, Brazil seems inclined to minimize regional threats such as those posed by Venezuela (Brazilians tend to look down their nose at their neighbors to the north almost as much as they do toward their Argentine friends to the south ... and thus they under-estimate the ability of men like Hugo Chavez to do too much damage.) And they have an election coming up that may change the cast of players and of course, that can alter the current trajectory in any number of ways -- good and bad.

But it is hard to think of another foreign minister who has so effectively orchestrated such a meaningful transformation of his country's international role. And that's why if I were asked today to cast a ballot, my vote for world's best foreign minister would likely go to Santos' native son, Celso Amorim.

One note on yesterday's post: I received a note late yesterday from a spokesperson for the British Embassy taking issue with my assertion that the British Ambassador had joked that he wasn't getting much attention from the Obama administration. The thrust of their point was that "the Embassy denies categorically that the Ambassador made these remarks, even in jest, and that in our view the relationship between the UK and USA remains as close as ever -- whatever the noises off by febrile commentators in the media." While I stand by my story, their email to me on this was so civil and well-argued that I felt it only fair to pass on their views. I would take the "febrile commentators" point personally, but I had a flu shot only yesterday so they can't possibly mean me.

AFP PHOTO/JUAN MABROMATA

In a world of self-help addicts who "just feel too much," the ultimate hero was Watergate burglar G. Gordon Liddy. Never mind that the guy was a few rounds short of a full clip of ammo. He is the man who held his hand over a flickering candle flame while his flesh appeared to roast and then, when asked how he did it, responded, "The trick is not caring."

I'm reminded of this because as we contemplate this week's G20 Summit in Pittsburgh and reflect back on the breathlessness with which the entire world viewed the last two such summits, it is clear that the trick they've seemed to accomplish is that this time around we all don't seem to care so much.

That could, of course, be partially due to the fact that this event is in Pittsburgh and that not that much really exciting has happened there since Franco Harris' "immaculate reception" during an AFC Playoff Game in 1972. At least for me, even recent Super Bowl victories have lacked the gritty drama of those by-gone days as the town has become spiffier and blander. (Have you been to Pittsburgh Airport recently? It's a shopping mall where they happen to land planes.) It's not that the city isn't grittier than say, Santa Monica. It's just that I feel some of that special Pittsburgh "let's have a beer and then punch each other in the faces until we fall down" kind of charm is gradually being lost. We're not too far from the day when a little kid asks, "Why do they call the team the Steelers, Daddy?" and the father then has to explain that once upon a time the steel that went into American cars and buildings was made right here in America. (More on this last point shortly.)

Of course, the reason the meeting is in Pittsburgh has to do with at least one respect in which the region is still seen as pretty exciting to certain types of folks -- like professional politicians, for example. Obama needed Pennsylvania to defeat John McCain. And the people of Pittsburgh like our current Ambassador to Ireland Dan Rooney helped deliver for the president and the president is therefore regularly looking for ways to deliver right back. (This is not to suggest that Rooney might possibly have gotten his job as a form of political payback. His years of experience as the principal owner of the Steelers made him an obvious choice for an important diplomatic position. After all, what riddles could dealing with the Irish pose that would be more complex or challenging than say, former Steeler quarterback Terry Bradshaw's break-up with ice-skater JoJo Starbuck back in 1983.)

Rooney wasn't the only one who helped Obama, however. Which, not surprisingly, brings us back to steel again ... and in particular to the United Steelworkers. Because it is clear that it is not an accident that Obama will be using this meeting to call for new initiatives against global trade imbalances in the hometown of one of his favorite unions. Just like it's not an accident that he primed the pump for his efforts with the recent decision to impose duties on Chinese tires, an issue that was pushed most vigorously by the steelworkers. Just like it's not an accident that Obama's new manufacturing czar is Ron Bloom, who was most recently the special assistant to the president of the United Steelworkers.

Which is all by way of saying, the G20 is not in Pittsburgh either because it's beautiful (and it has its charms) or because it's boring. The G20 is in Pittsburgh because of the domestic politics of U.S. international economics. Just as Marshall McLuhan once said "the medium is the message," in this case the location is the message.

And so we return to the "trick" of this meeting. It is no small feat that while last November's G20 meeting and the one that followed it in London in April were hot topics as the world careened through the worst economic crisis since the Great Depression, that this meeting is viewed in a more relaxed matter. There is an emerging consensus that things are slowly getting better, that we are probably even out of recession even you read this. (Feeling better yet?) No doubt this is largely due to the market working through its fears and repricing accordingly, but the speed and scope of interventions in the United States and China and even some parts of Europe undoubtedly had some positive effect. To the extent we are not still "falling off the table" in the words of Larry Summers, the G20 leaders deserve some of the credit.

And if this turns into a sustainable recovery, none of us should begrudge them the credit they get. But the problem with tricks is that they often involve some form of well, trickery. In the case of Liddy, the (not very well kept) secret was that he was bonkers. But in the case of most sleight of hand the secret is misdirection. We look in one direction while what is important is happening someplace else.

I hope that's not what is happening with the global economy. I hope we are moving toward both a sustainable recovery and toward enacting regulatory reforms that ensure we don't make the same mistakes that led to last year's market debacle. I hope we are not looking at one set of indicators while ignoring another. But there are warning signs.

One is that while the G20 will agree on an expanded role for the IMF, national governments including our own are moving too slowly to address root causes of the recent crisis from opaque, often-illiquid but massive global derivatives markets to effectively controlling the risk appetites and exposures of large financial institutions whose failures carry with them a large risk of damage to the public at large. That's not to say some measures aren't being considered or implemented. It's saying that many of the steps-like creating more transparent markets in some derivatives -- don't go far enough. The biggest banks are bigger. New risky behaviors are being embraced. Old ones are creeping back into vogue.

In fact, I can't help but wonder if the biggest problem with the recent crisis was that it wasn't painful enough. Or that perhaps it ended too quickly to deliver effectively the lessons we ought to have learned.

Further, on the macro level there's still plenty to worry about. First, recovery will be slow. Second, those who are depending on Asia to lead us out don't realize how limited their capability is to do that. Chinese consumers are many decades away from being able to make up for any substantial fall-off in demand from Americans. And there are risk factors out there ... relating to dollar or commercial real estate markets or simply a panic induced by an exogenous event ... that could lead to serious trouble...the dreaded "W."

And finally, there's Pittsburgh. Or rather the reason we are in Pittsburgh.  I'm not sure the Obama team has irreversibly set a protectionist course. In fact, I'm pretty sure that the issue is still something of an open question. Summers and Geithner are certainly not protectionists by instinct and USTR Ron Kirk is still getting his legs under him. But many of these decisions are getting made on the political side. So it might be that we will add to the cocktail of inadequate reforms and questionable macro trends policies that can only make things worse: like getting a series of trade scrapes and scuffles that will impede recovery and make key relationships much more complicated.

Which is why, just as with Liddy's little trick, this one creeps me out a bit. The world is letting out a sigh of relief at a moment that has me holding my breath. 

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