Issue of the week: Obama lays an egg in Seoul

last updated 8 January 2015

Well, that could have gone better, said Christi Parsons, John Glionna, and Don Lee in the Los Angeles Times. Last week’s G-20 summit in Seoul was “frequently rancorous,” produced “far more setbacks than gains,” and highlighted the group’s “inability to find common ground” on steps to avert currency and trade wars. President Obama, who was counting on the summit to restore some of the luster rubbed off by the midterm elections, “suffered the biggest disappointment.” He failed to persuade other nations to condemn China’s currency manipulation and he took a drubbing for the Federal Reserve’s “recent decision to pump $600 billion into the U.S. financial system.” He also couldn’t reach agreement with South Korean President Lee Myung-bak on a long-delayed free-trade pact. The only thing the summiteers—heads of state from the leading economies of the industrialized and developing worlds—managed to produce was a mushy promise to monitor trade imbalances, said Howard Schneider and Scott Wilson in The Washington Post. But even that undertaking “deferred the substance of the work” to a later date.

Obama and his treasury secretary, Timothy Geithner, have only themselves to blame for their rude reception, said The Wall Street Journal in an editorial. The president arrived in Seoul “blaming the rest of the world for U.S. economic weakness.” Rather than take responsibility for mismanaging America’s finances, Obama faulted “the export and exchange-rate policies of the Germans, Chinese, or Brazilians.” Obama wasn’t alone in playing the blame game, said the Financial Times. The entire meeting was a “joint abdication of power.” The G-20, which in the darkest days of the 2008 financial crisis worked together to avert worldwide depression, has devolved into a spectacle in which “old and emerging powers agree to disagree.” Their failure to take collective action to speed the industrialized world’s recovery and to prevent developing economies from overheating will only end up “making things harder for each other.”

The criticism of the Fed’s policy is “understandable but shortsighted,” said The New York Times. America’s trading partners worry that the Fed’s injection of $600 billion into the economy will “harm their export sectors,” but in fact, it’s designed to “head off deflation” and boost demand at home, including demand for exports. If the Fed can “spur households and businesses to spend and invest,” it will earn praise for reinvigorating “one of the main sources of global demand and global growth.” Until then, however, Obama will have to live with the consequences of “a weak economy, heavy external debt burden, and general loss of faith in American capitalism,” said Alan Beattie in the Financial Times. “This, perhaps, is what the decline of economic hegemony looks like.”