Never mind what the commentariat thinks: for the real take on how the G8′s panning out, take a look at how the markets are reacting.  John Authers:

For currency traders, the G8 was notable solely for what was not said and for who was not there. Rhetoric suggested the summit would be the “high noon” for the dollar as a reserve currency, as China pushed for a more diversified anchor for foreign exchange.

But currencies are not even mentioned in the draft communiqué. China’s premier was not present for the discussions, thanks to trouble at home. The showdown on the dollar’s future did not happen. Rather than dancing to the tune of the world’s leaders, forex markets suffered a new wave of aversion to risk.

That wave started in the commodities market, where prices dipped sharply. The CRB index, a broad index of commodity prices, dropped to its lowest level since early May, pushing below its 200-day moving average – a strong signal that its rebound of the past few months was over. The CRB is down more than 12 per cent since it topped out last month and is 51 per cent below its high set last year. This implies that deflation – falling prices and stalled economic activity – is a much greater risk than the resurgent inflation that was being talked about only weeks ago.

Gold, an inflation hedge, fell 2.2 per cent and is now down more than 10 per cent since it hit $1,000 per ounce in February. In currencies, the Japanese yen, which gains when people are anxious, made dramatic and sudden gains against the dollar and the euro. This could increase pressure to intervene to keep the currency cheap.

These developments are alarming. The pendulum in the debate between inflationists and deflationists has swung back to the deflationists – at a point that inflation still looks the lesser evil. But at least risk aversion will help the dollar avoid further falls and delay the moment when it is replaced as a reserve currency.

What on earth is going on here?

The only reasonable interpretation is that our leaders are attempting to re-enact a scene from Michael Mann’s excellent 1930s gangster film Public Enemies (sample line: “how long does it take you to go through a bank?”).

Alex adds: well, given the gangsta hustla manner in which he arrived, it was clearly always going to end this way. I blame Putin.

Further to Alex’s grovel below, it’s time for me to clarify my position on Italy’s place in the G8.  Yes, I was the one named source in the Guardian’s piece entitled “Calls grow within G8 to expel Italy as summit plans descend into chaos”, reproduced in almost every Italian newspaper and then some.  Yes, I called the Italian preparations for the G8 a “gigantic fudge” – ably translated “una buffonata colossale” by Corriere Della Sera.  And,  yes my boss Bruce Jones then gave a series of quotes broadly backing me.

However, let’s get one thing clear: neither Bruce nor I have at any point advocated chucking Italy out of the G8.  I for one think that it is a silly idea. 

Sure, preparations for L’Aquila haven’t gone great.  But almost all G8 planning processes are a mess – some hosts just get luckier with the outcome documents than others.  The question of whether Italy should be there or not is a total distraction.  The real question is not which Europeans are at the G8 or G20, but how well they coordinate there.   As Bruce and I note in today’s European Voice, the record is mixed:

Europeans frequently fail to use their influence efficiently. The run-up to the London G20 summit was enlivened by intra-European spats, with French President Nicolas Sarkozy threatening to walk out if France’s interests were not satisfied. There was little real co-operation between the UK diplomats planning the G20 and their Italian counterparts on the G8.

Italian officials indicated that they would shape the G8 agenda to meet any requests from the Obama administration, but US officials complain that what they really want from the Europeans is some coherence – to allow more time bargaining with the Chinese and Indians, and to spend less time having to worry whether the Dutch or Italians [sorry Italians!] are on side.

What to do? We have a plan:

France will be Europe’s next G8 hosts, in 2011. It should start co-ordinating within the EU and with the Canadians, who host the 2010 G8, and the Americans, who take the reins in 2012, on how to deliver sleek, workmanlike summits that include China, India and other emerging powers as full partners – rather repeat the confusions of L’Aquila.

So there, we are constructive, nice people after all.  And pro-Italian.  I celebrated my new-found notoriety at the excellent Sorella on the Lower East Side.  Go there, New York-based readers and have the pate de fegato:

Earlier this week, Global Dashboard contributor Richard Gowan spoke to the Guardian newspaper about the G8 summit, during which he made certain remarks about Italy’s preparations that might be construed as offensive.  Specifically, he said that:

“The Italian preparations for the summit have been chaotic from start to finish. The Italians were saying as long ago as January this year that they did not have a vision of the summit, and if the Obama administration had any ideas they would take instruction from the Americans.”

Asked about the fact that between 39 and 44 heads of government would be attending the summit in L’Aquila, Mr Gowan added that,

“This is a gigantic fudge. The Italians have no ideas and have decided that best thing to do is to spread the agenda extremely thinly to obscure the fact that they didn’t really have an agenda.”

Mr Gowan’s coments were made in the context of an article entitled “Calls grow within G8 to expel Italy as summit plans descend into chaos”, which suggested that Italy might be ejected from the G8 in favour of Spain. While the article also quoted other sources, Mr Gowan was the only one who spoke on the record, and hence bears a particular responsibility for what followed.

The next day, Silvio Berlusconi strongly rebutted Mr Gowan’s claims at a press conference, calling the Guardian’s report “a colossal blunder by a small newspaper”. Foreign minister Franco Frattini added that: “I hope that the Guardian is expelled from the great newspapers of the world. What the Guardian says is a joke – nonsense.” Defence Minister Ignazio La Russa has also called for a boycott of the paper.

Global Dashboard takes very seriously the clear and justified sense of hurt felt by the Italian government, and wishes to underline that Mr Gowan’s intemperate remarks do not represent the views of this blog, which regards Mr Berlusconi as an international relations powerhouse.

We would like to place it on record that we believe him to be a beacon of good governance and commitment to international development, and that we disdain the various groundless slurs made on his personal behaviour in recent months. We also strongly support his bid for the Nobel Peace Prize.

Ban Ki-moon has come out fighting against recent criticism in a pretty strong interview with AP.  But I’d hoped not to hear this cliché about leading the UN ever again:

“You don’t see any other nation or government or even private organizations where you have equally important 192 shareholders,” Ban said. “How to balance all these different 192 countries, that is quite time consuming.”

Feel familiar? Here’s Kofi Annan in 2006:

Sometimes it’s hard to get agreements across the board. But one has to persevere. When people say: “The secretary is like a CEO,” I would love to see a CEO manage his company with a board of directors of 192 and has to get things done as effectively and efficiently.

Now, I suspect this cliché is almost as old as the UN.  But in Annan’s case, he was parrying Senator Norm Coleman, now the just-ex Senator from Minnesota.  Back in the day, Coleman was Annan’s nastiest American foe, demanding that the SG resign over the oil-for-food scandal.  Like this:

It’s time for Kofi Annan to step down. The massive scope of this debacle demands nothing less. If this widespread corruption had occurred in any legitimate organization around the world, its CEO would have been ousted long ago, in disgrace. Why is the U.N. different?

So, for old-time (well, not that old-time) UN watchers, at least the “CEO+192 shareholders” gag reeks of bad times.  Don’t take us back there, Mr. B.

Full-scale photo here.

Bugger:

The world’s major industrial nations and emerging powers failed to agree Wednesday on significant cuts in heat-trapping gases by 2050, unraveling an effort to build a global consensus to fight climate change, according to people following the talks.

As President Obama arrived for three days of meetings with other international leaders, negotiators dropped a proposal that would have committed the world to reducing greenhouse gas emissions by 50 percent by midcentury and industrialized countries to slashing their emissions by 80 percent.

The discussion of climate change was among the top priorities as world leaders gathered here for the annual summit meeting of the Group of 8 powers. The leaders were also grappling with the sagging global economy, development in Africa, turmoil in Iran, nuclear nonproliferation and other issues.

The breakdown on climate change underscored the difficulty in bridging divisions between the most developed countries like the United States and developing nations like China and India. In the end, people close to the talks said, the emerging powers refused to agree to the limits because they wanted industrial countries to commit to midterm goals in 2020 and to follow through on promises of financial and technological help in reducing emissions.

Deutsche Bank Asset Management, which is one of the leading investors in renewable energy, last month put up a 50 foot electronic counter in Times Square, showing how much greenhouse gases are being put into the atmosphere every second. Here’s a short video of the launch:

Alex and I have a new article published  today by World Politics Review, as part of their special on risk and resilience in a globalized age. The other piece is by John Robb of Global Guerrilla’s fame.

In The Resilience Doctrine (also available in our library here), we argue that globalization is both unstable and inevitable, and that governments have little choice but to build collaborative platforms to manage risk. We conclude with a dozen guidelines for building an international system fit for the 21st century.

1. Develop a doctrine with resilience at its heart, using it to create a unified narrative about how to manage the risks the world will face between now and 2030.
2. Start with the ultimate objective of building and protecting global systems, cultivating a new constitution for the society of states.
3. Create incentives for connecting to the international system and increase penalties for exclusion. Avoid disrupting the global order for short-term gain.
4. Focus on function (what systems need to deliver in order to manage risk) over form (the organogram that devotees of international politics obsess over).
5. Build the global institutions (rules, norms, markets, organizations, etc.) needed to deliver these functions. Aim for a shared operating system capable of managing each key risk.
6. Invest in mechanisms that create, analyze and debate solutions, delivering the shared awareness that underpins successful reform.
7. Build shared platforms on which state and non-state actors can work together to re-engineer systems. Sustain them over the long periods needed to battle for systemic change.
8. Use open standards to foster interoperability, allowing networks of organizations to work together and achieve elevated rates of innovation and learning.
9. Develop a theory of influence tailored to the modern age and use it to bind together all the instruments of international relations (diplomacy, development, military).
10. Apply a rigorous principle of subsidiarity, devolving responsibilities to regional, national and local levels where possible, thus maximizing resilience throughout the system.
11. Use the opportunity to reform national governments, increasing their openness, while reducing the scope of their mission so that they do less, better.
12. Be accountable for outcomes, using shared metrics and external assessors to report publicly on whether resilience is increasing for those risks that will mean most to the future of our civilization.

- With yesterday’s US-Russian pledge to reduce strategic nuclear arsenals came news of the death of Cold Warrior, Robert S. McNamara, former US defence secretary and later president of the World Bank. Thomas Lippman offers a sympathetic portrait of a man who will be forever remembered for his role in Vietnam. Indeed, The New Yorker asks whether the original Whiz Kid is likely to be the “Ghost of Wars Past, Wars Present, or Wars Yet to Come”.

- Turning to those wars present, Rory Stewart, the former British diplomat turned Harvard academic, offers a critical perspective on current Af-Pak strategy in the current LRB. “Obama and Brown”, he reflects, “rely on a hypnotising policy language”, which “misleads us in several respects simultaneously: minimising differences between cultures, exaggerating our fears, aggrandising our ambitions, inflating a sense of moral obligations and power, and confusing our goals. All these attitudes are aspects of a single worldview and create an almost irresistible illusion”.

- In a similar vein the American military scholar, Andrew Bacevich, laments “the consequences of strategic drift” in current US overseas engagements. “The urgent need”, he suggests, “is for the administration to articulate a concrete set of organizing precepts — not simply cliches — to frame basic U.S. policy going forward”.

- Finally and on a different note, offering a preview of his latest book, Cass Sunstein – of Nudge fame – asks what leads us to hold extreme views. His answer: “group polarisation”.

Following on from Alex’s post on DFID’s new white paper , the Ministry of Defence (MoD) has announced that it will be kicking off a root and branch review of Britain’s defence policy. The whizzo idea is to publish an interim Green Paper early in 2010.

Since November 2007 think tanks have been arguing for a review of defence policy. The latest think tank to join the bandwagon – IPPR – has, it seems, finally tipped the balance. But before everyone congratulates themselves on this first tentative step – bear in mind that the power now rests with the MoD.

With the announcement of a green paper they can now start to ask searching questions of those individuals and organisations who have been calling for a defence review. To aid them in this task the MoD should, at the very least, hold seminars with each of the think tanks that have focused on this issue – to date: Chatham House , Demos , IPPR (Global Change Team) and RUSI .Perhaps even do a roadshow across the UK?

At the moment the terms of the debate aren’t clear – nor is the fundamental question a green paper would seek to answer – perhaps a good starting place might be: What is defence for in the twenty first century?

As will become increasingly apparent there are no straightforward answers to this question – not least because this is really a debate about Britain’s place in the world… and that’s a different story.

Time was when any suggestion that conflict prevention might be central to development would be met by blank (if not outright hostile) stares at DFID’s headquarters – but DFID’s latest White Paper, published yesterday, certainly puts that attitude to rest for good.

Fully half of new UK bilateral aid will focus on conflict-affected and fragile states; there will be an intensive focus on job creation in five at-risk countries (Yemen, Nepal, Nigeria, Ethiopia and Afghanistan); security is for the first time defined as an essential service, like health or education; there’s lots of additional focus on SSAJ (safety, security and access to justice); and there’s plenty more besides.

Now, sharp-eyed conflict watchers among you will already be wondering: does all this mean that the cuts to UK conflict prevention spending announced by David Miliband in March this year are effectively reversed?

(The problem, readers will recall, was that while peacekeeping missions were mushrooming – MONUC, UNMIS and the AU mission in Somalia in particular – the pound was collapsing against the dollar and the euro, the currencies in which peacekeeping bills are denominated. This was driving a coach and horses through the planned cross-governmental conflict prevention budget of £556 billion – comprised of £109m for the Conflict Prevention Pool, £73m for the Stabilisation Aid Fund and £374m for peacekeeping missions. The peacekeeping bit would now have to rise £456 million. So even after DFID and MOD had lobbed in an extra £71 million, it was clear that tough cuts would have to be made – a point made with anguish in a letter to the FT in March from foreign policy luminaries including Lords Ashdown, Hannay, Howe, Jay, Kerr, Robertson and Wallace. Now read on..)

Well, now that DFID’s Secretary of State Douglas Alexander is promising that the UK will spend £1 billion a year in post-conflict countries, it’s clear that much of the money that was cut in March will effectively be available again – though you’ll have a fight on your hands to get DFID to admit this to be the case, since it’s shy of creating any impression that it’s there to bail out other departments when the full, epic sweep of spending cuts becomes clear after the election.

But we’re nonetheless in a new situation, rather than back to the status quo ante, in at least three important ways. (more…)

Last month, I gave a quick overview of media coverage of Ban Ki-moon as he reached the half-way point in his term at the UN.  There’ve been positive pieces and negative ones, but the prize for least constructive criticism still goes to Jacob Heilbrunn’s FP piece on Ban as the “world’s most dangerous Korean”.  That’s silly, however you view the SG.  It has sparked an even sillier response from Moon Chung-in, a Korean prof:

Why is Heilbrunn targeting Secretary-General Ban? It is difficult to think of any reason, besides the fact that Heilbrunn is a well-known Jewish neoconservative. During the situation in Gaza last January, Ban was the first foreign leader to visit the scene. While denouncing Israel’s barbaric actions and expressing the position that those responsible needed to be found and punished legally, he requested an immediate unilateral cease-fire from the Israeli government. The world, and Arabs in particular, sent an unprecedented message of praise to the Secretary-General. Ban also visited the U.S. Congress in March and criticized the nation as a “deadbeat donor,” for not having submitted its 1 billion dollars in UN dues. This kind of behavior would be enough to generate objections from a neoconservative like Heilbrunn who regards the benefits of Israel as paramount and argues that the UN is useless.

This must not shake us. The people should be unstinting in their support and encouragement for Secretary-General Ban, who is working to speak for those without power and without voices to stand on their side in creating a better world.

Oh dear. This is not merely name-calling with anti-Semitic overtones. It is also wrong. As Robert Koehler - who has followed Korean reactions to Ban impressively closely – notes Heilbrunn is best known as a critic of the neocons.  Ban has responded to the last month’s criticism with dignity.  He doesn’t need this sort of help.