The imperialist countries and other big powers face the dilemma between, on the one hand, continued deficit spending supposedly to boost collapsing economies and, on the other hand, building up unpayable public debt. Without fundamental reforms to benefit the working classes and the middle strata, cutbacks on government deficit spending ( which has been touted as stimulating demand but in fact boosting the book profits of monopoly banks and corporations without any expansion of production and employment) will further deepen the state of depression in the world capitalist system. However, continuing with the fiscal deficits without generating production will rapidly inflate a sovereign debt bubble that will likewise cause enormous unprecedented financial and economic turmoil worldwide when it fully bursts and runs completely out of control.
Either situation means that billions of working people around the world will be driven into deeper acute misery and backwardness. Widespread defaults and financial meltdowns are looming and, as it is, the early concerns about sovereign debt sustainability are already causing havoc on currency markets as well as spilling over into financial and commodity markets.
The bursting of the private debt bubble and collapse in demand in 2008 was momentarily mitigated by an inflating public debt bubble and stimulus programs. But when the public debt bubble fully bursts and with no other source of new demand, the reality of global depression will become more undeniable than ever before. The people will suffer further unemployment and drastic cuts in social services (education, health, housing, welfare and pensions) increased poverty levels, mortality rates and hunger, with; all these compounded by governments raising the people’s tax burden to maintain operations and pay off the public debt from year to year.
The imperialist powers have used the crisis as the reason for developing the G-20 into a mechanism for greater global financial and economic governance. US president Barack Obama at the Pittsburgh summit declared the G-20 the premier forum for global economic coordination, in conjunction with the IMF and World Bank (WB) which remain firmly in US control. The group includes such other big economies as China, India, Brazil and Russia to reflect a supposedly multi-polar world order and collectively represents two-thirds of the world’s population, four-fifths of world trade, and over 85% global output. The policy directions the G-20 sets are therefore significant.
The G-20 summit in Toronto concluded with the apparent consensus that government deficits and debts would be reduced in the long-term but would be a problem to be approached differently in the short-term by different countries. There appeared to be some disagreements among the major G-20 members (especially the US, EU, Japan and China) on the pace of reducing budget deficits but the communique set general albeit non-binding directions and called for a halving of budget deficits by 2013 and stabilizing debt-to-GDP ratios by 2016.
The imperialist countries seek to impose austerity measures on themselves as well as on the underdeveloped and dependent countries. A recent report released by the UNICEF examined the fiscal outlook of 86 underdeveloped countries and found that nearly 40% of the governments are planning to cut spending in 2010-2011 by an average of 2.6% of GDP (by as much as 13% in some countries). These cuts are being instigated by the IMF which has advised the removal of fuel or food subsidies, public sector downsizing, wage cuts and pension reforms at a time when the populations in these countries are still confronting widespread chronic unemployment, rising prices of food and fuel, and the adverse impacts of climate change.
Public outrage at the use of taxpayer money for the multi-billion dollar bailouts compelled governments to commit sweeping financial regulation and reforms supposedly to rein in the excesses and reckless practices of bankers and financial speculators. However nearly two years into the crisis progress in the G-20 towards these supposed reforms is extremely little and slow, with gaping loopholes on the steps being taken and little consensus on the measures to come. Finance capital is voracious and always acts to shift the burden of crisis to the people. There are no real measures that can significantly curb the rapacity of the monopoly finance capitalists and the irrational and destructive character and course of the financial system.
It is not surprising that no consensus was reached on the specific banking and finance proposals. Decisions on these were put off to the next G-20 summit in Seoul, South Korea in November. The proposals included that of Europe for a bank levy to fund future bailouts, as well as global bank and financial transactions taxes and that of the US for more stringent rules on bank capital requirements and liquidity.
The most visible disagreement was between the US and such European countries as Germany and the UK on fiscal consolidation. The US expressed preference for a slow exit from so-called stimulus measures as opposed to Europe which, already facing a public debt crisis, preferred more rapid implementation of spending cutbacks and tax increases to cut government deficits and reduce pressures on public debt.
These differences in position reflect differences in their respective economies (such as reliance on speculative finance and on exports) and in how the crisis has specifically affected each of them so far (such as the real or perceived strengths of country banking systems). In part they also reflect confidence in the US that even as it is somewhat diminished in economic and financial clout it remains the world’s lone superpower and that amidst deepening crisis it is still perceived as the relatively safest haven for capital. At any rate, the big powers tend to adopt and implement policies as they individually see fit according to their national or ultra-national interest.
The G-20 notably backpedaled on making any firm time-bound commitments to complete the Doha round of World Trade Organization (WTO) talks on multilateral liberalization after targeting the end of 2010 for this in the Pittsburgh Communique. Conspicuously mentioned for the first time is the openness to bilateral and regional deals. This manifests the intent of the big powers to consolidate and expand their respective trade and investment blocs. The advanced capitalist powers always seek to preserve their profits and positions at the expense of their rival powers. Inter-imperialist contradictions characterize the world capitalist system.
It is also important to highlight the fact that none of the so-called reforms pushed by the G-20 address the underlying core issues inherent to monopoly capitalism and that are at the heart of its exploitativeness, instability, grossly uneven distribution of the social wealth, and the poverty and restricted consumption of the masses. Financial sector deregulation was a key part of the previous decades of neoliberal globalization that started in the 1980s, accelerated in the 1990s and exploded in the 2000s with financial values bloating far beyond what the real economy could sustain or justify.
The worst features of the world capitalist system are being laid bare as the banks, the corporations and the imperialist states fail to solve the crisis and all the problems that they have generated and try ceaselessly to shift the burden of crisis to the dominated countries and the working people. First, public money has been used to bail out the big banks and corporations. Then the public deficits and public debts lead to the further exploitation of the people through austerity measures. There is a pressing need for the people to comprehend how the world capitalist system exploits and oppresses them and to strengthen their resolve and struggle to replace the system with one that is truly free, democratic, just and progressive.
The International League of Peoples’ Struggle (ILPS) congratulates all the people and organized forces involved in the massive mobilizations in Toronto, reaching some 25,000 demonstrators at the peak. The protest mass actions were organized despite repressive security measures and effectively exposed the true anti-people and anti-democratic nature of what has been touted as the largest, most expensive and most heavily secured meeting of global leaders in history, costing at least US$1.2 billion.
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