By Kevin McLoughlin
THE G20 Summit in London was said to be the start of the “fight back against the global recession”; and the creation of a “New Economic Order”. Some of the leaders even said it was “historic”. Does the G20 agreement mean that a global recovery is likely soon?
While hailing the summit and “green shoots” of recovery, the G20 was mainly an orchestrated public show of unity, a papering over of huge economic difficulties. Like relatives at a wedding, on the surface the “leaders” were nice to each other but under the surface they are increasingly agitated.
The G20 are united in the desire to save the capitalist system. Publicly they still say they are hoping for a quick turn around so all countries can move forward together. But first on each country’s list are their own capitalist interests.
As the global crisis worsens, co-operation is likely to be replaced with competition and conflict between the G20 countries themselves. The official communiqué stated, “We are determined not only to restore growth but to lay the foundation for a fair and sustainable world economy. We recognise the current crisis has a disproportionate impact on the vulnerable in the poorest countries and recognise our responsibility to mitigate the impact of the crisis”, but in the real world, the fall of the world economy was getting worse.
These so-called leaders are indeed responsible for condemning an estimated 50 million more to unemployment and driving another 200 million people into poverty conditions globally.
Germany, the powerhouse of Europe, is facing a 7% decline in its economy this year. The fall in Japan will be worse. Brazil, key to Latin America, which was growing up to recently, is expected to contract by 3% this year. Incredibly the figures for the fourth quarter of 2008 indicate a fall in global industrial production of 30%.
The two main decisions at the summit were the $1,100 billion package to stimulate the world economy, in part through the IMF, and a new approach to regulate the finance and banking sector, which it was claimed would rule out such financial crises in the future.
However, the vast bulk of this money was already committed as part of the stimulus programmes already in train. A large amount of the funds for the IMF must be spent in the advanced countries, while the peoples of the poorer areas are abandoned once again.
With regard to regulation, it will remain limited, as privately owned big business remains in control. Right at the very start, the communiqué says, “We believe the only sure foundation for sustainable globalisation and rising prosperity for all is an open world economy based on market principles”. They want to stick with the neo-liberalism capitalism that caused the crisis and destroyed the economy in the first place.
The capitalist leaders will bail out the banking sector but they don’t want to nationalise the banks, fearing it would tend to expose the fact that private ownership is unnecessary. Their light touch regulation and fear of nationalisation will actually cut across the stimulus packages, as private ownership and control – the profit motive – of the banks is a key barrier that stops the bail out cash from being used in the real economy to alleviate the crisis.
The stimulus packages are huge, now totalling over $11 trillion in the US alone. While such vast sums will have some effect, it will not stop the crisis from worsening.
This is not just a financial crisis, this is a crisis of capitalist production that has been building up over many years. There is weak and collapsing demand. There is a crisis of profitability and capitalists are not investing. Without sustained real investment, the economy will stagnate or decline. Obama may be a global celebrity but the weakness of the new stimulus measures at the G20 indicates the relative decline in the position of the US. His performance got a warmer response in Europe than in the US. Brown and Sarkozy also tried to milk the summit to gain some domestic political advantage but both are likely to become very unpopular, as mass opposition to their policies develops over the next months.
While the capitalist powers are hanging together, hoping for a pick up, the failure of the Obama stimulus package would be a significant blow and would intensify competition between the capitalist powers increasing the possibility of protectionism and bringing the crisis facing the G20 to another level.
Likewise the crisis is putting huge pressure on the economic and financial framework of the EU. The hesitation of the German government to go further on a stimulus programme indicates that there is a limit to how much they are prepared to bail out other EU states and raises the possibility of the EU unravelling in the next period.