Here they are, the G20, a merry grouping of the world’s most powerful leaders, photographed in the wasteland of London’s depressing docks area. How did they do?

The dismal surroundings must have affected their collective judgement.

I’ve been writing here about protectionism for months, while others have dutifully mouthed the mantra: “free trade is good, protectionism is bad”.

Let’s start with some common sense: nothing is as good or as bad as it seems. Applied to the above: some free trade is good, some protectionism is bad. The reverse polarities are also true.

Walk down a street of terraced houses. Although they give the impression of a single, continuous building, they are in fact a series of individual ecosystems.

Each household has its own income, makes its own choices, decides its own way of life within the law, and is governed by its own head. The block is not a single organism in the way ants or bees live. Each property is a self-governing entity whose inhabitants may not even know most of their neighbours.

Generally, humans don’t behave like bacteria or, except at football matches, like flocks of starlings. The best of them are, above all, individuals. The best people like to be in charge of their own affairs and households.

Modern politicians, still suffering from WW2 hangovers, believe they have the right to behave like pushy neighbours and interfere in everyone else’s affairs. They don’t. It would be a better world if other people’s boundaries were respected by everyone else.

The G20 failed because it was fighting 20th-century battles. Some of those principles are worth learning, but many are out of date.

The great problem we face now is the growing divide between exporting, surplus States — China, Germany, Japan — and importing, debtor countries — the US, UK, and many of the rest.

The surpluses and deficits were very large even when the world’s economies were booming, but in a slump, they appear insurmountable.

Countries like China and Germany know they will never get their full value back. The debtor countries will simply inflate their economies — the real reason behind quantitative easing — and/or, like Britain, devalue their exchange rates to improve their international competitiveness and export themselves out of trouble. Import substitution will also push this along at the expense of the surplus exporters.

The effects of this sleight of hand dodge will be to increase tensions in the world, especially between surplus countries that lose out, and debtor States that clawback their deficits by retreating from the moral high ground. Bystander countries will draw the obvious conclusions and the world “trust index” will slump, creating ominous conditions for a new century than may turn out not very different from the last.

Back to the terraced houses, and we can see that many inhabitants are trying to improve their lot by “beggaring their neighbours”. The ecosystem where each household runs itself has collapsed in a welter of indebtedness between families, with some seeking to write off debts unfairly, and the most prudent suffering the most. Some kind of local civil war is inevitable.

The solution, clearly, is to return to individual household responsibility, not to increase the socialization of the terrace and cross indebtedness between houses.

Point One: The “progessive internationalist” approach to the world has broken down. Governments gave us this crisis, the G20 is offering more global governance.

While some countries have vast surpluses, most of it invested in dollar assets or euro bonds, their perceived prudence has now become their undoing.

Point Two: The recent high peaks of international trade were ransacking the world of resources at an unsustainable rate. Whether you believe in man-made global warming, or not, or partly, the rate at which the Earth itself was being consumed to provide shiploads of whimsical products for world consumption, has become the road to hell.

Point Three: The surplus countries created mountains of debt in the deficit countries, way beyond their annual incomes (GDP). This was clearly unsustainable. Sooner or later the bubble had to burst. It did.

The G20 has not solved the enormous problem of how to tackle the aftermath. Creating a “central bank for the world” — a beefed up IMF — with its own “global currency”, will prove as crass as previous decisions by this non-Sovereign body. The G20 has also voted for a ballooning increase in international indebtedness, with unaccountable bureaucrats overruling individual democratic nations.

It has forgotten the important lesson of the 20th century: the “great and the good” on their pinnacles of vanity don’t make better choices than the “small and the mean” at ground level.

The lesson of the early 21st century is that Nation States, which balance their books and their trade accounts, both surpluses and deficits, are vital to a stable and war-free world. Only nations can be approximations of single “organisms” … the world can’t, especially at the current level of individual human development and the great disparities between them.

The surplus nations have the biggest lessons to learn, since they will be at the receiving end of the slump. China kept its currency too cheap too long, hollowing out much of the West’s manufacturing industry. It is now reaping the whirlwind.

Germany over-specialized in sophisticated metal-bashing and is suffering a grievous loss of income as the willingness of others to buy collapses.

For us at the debtor end of the spectrum, our mistakes were general, across government, corporates and individuals. We signed up freely to a psychological contagion, promising endless wealth, and got ourselves deep in debt as a result. British authorities are allowing the exchange rate to fall and pushing up inflation by “unconventional means” so that our debts are reduced. It may well come back to bite us, but so far so murky.

The heart of the problem is not being tackled at all, except through vacuous soundbites.

The verdict on the G20 then, with its irrelevant headline decisions on tax havens, more debt, and the vapourware trillion dollar infusion “to save the world” is negative. It will do no such thing.

It will probably make it worse.

John Evans

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