Global regulation without the “global regulator”?

To some extent, President Obama’s encounter with European leaders reminds me of the old Soviet Union era joke: “they pretend to pay us; we pretend to work.” In this instance, Europe’s key leaders will pretend to provide meaningful new support to our efforts in Afghanistan and the U.S. will pretend to back the new, more highly regulated economic regime that key European leaders were insisting upon.

The first half of the equation certainly holds. Obama went to Europe asking for additional troops, beyond the meagre numbers countries like France and Germany now supply. What he got was a commitment to supply economic aid and “police.” In other words, no additional troops.

The second half of the equation is less certain. Clearly, most of what Obama agreed to consisted of vague directives or broad principles. It is largely left up to individual countries to implement them or not. No penalties are associated with non-compliance and no “global regulator” can overrule decisions made by individual countries, as French President Sarkozy would have liked.

But Sarkozy and other Europeans can reasonably believe that Obama will abide by, and act consistently with, their pro-regulation principles. After all, what reason exists to suppose that Obama is any more committed to robust capitalism than centrist European leaders like Sarkozy? With Obama in power in the U.S., and thinking like a European, there may be little need for a “global regulator.”

Thus, although Obama received only a fig leaf on Afghanistan, and the Europeans did not agree to stimulus packages for their economies, he may have come up trumps when it comes to regulation. For he was able to give the green light to a significant increase in global regulation without giving those of us who wish to resist France’s slow growth model very much to shoot at.

As for Europe’s leaders, they may well have come up trumps all around.

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