G20 summit in London: A new capitalist world is not possible

"The first global crisis of humanity" (WTO, April 2009);[1] a recession which is "the most profound and the most synchronised in the memory of man" (OECD, March 2009)![2] From the very words of these great international institutions, the present economic crisis is of an unprecedented gravity. In order to face up to it, all the forces of the bourgeoisie have been mobilised for months. The ruling class is doing all it can to hold back the world economy's descent into hell. The G20 is without doubt the strongest symbol of this international response.[3]

At the beginning of April, all capitalist hopes turned towards London, the city holding the summit of salvation that had the task of "re-launching the economy" and "raising the moral standards of capitalism". And to believe the declarations from the different leaders of the planet, this G20 was a real success. "It's the day that the world came together in order to fight the recession" stated the British Prime Minister, Gordon Brown. "It has gone beyond what we could have imagined" the French President Nicolas Sarkozy said emotionally. "It is a historic compromise for an exceptional crisis", was the opinion of the German Chancellor Angela Merkel. And for Barak Obama, this summit was a "turning point".

Clearly the truth is elsewhere.

The only success of the G20: it took place!

These last months, the economic crisis has been stirring up international tensions. Firstly, there has been a drift towards protectionism. Each state has been trying more and more to save a part of its economy, using subsidies and national grants to fight off foreign competition. This, for example, was the case for the support plan for the automobile industry in France decided on by Nicolas Sarkozy, a plan sharply criticised by his European "friends". Then, there's the growing tendency to undertake recovery plans in dispersed order, in particular when it comes to rescuing the financial sector. Finally, the United States, epicentre of the financial earthquake, hit by the full force of the economic storm, has numerous competitors trying to take advantage of the situation so as to weaken American leadership still more. This is the real meaning of the appeals to "multilateralism" from France, Germany, China, and some countries of Latin America.

This London G20 was thus a tense one, and in the corridors the debates were really stormy. But appearances were maintained and the catastrophe for the bourgeoisie of a chaotic G20 was avoided. The bourgeoisie hadn't forgotten how the absence of international coordination and the frenzied turn towards each for themselves had contributed to the disaster of 1929. At that time, capitalism was confronted with the first great crisis of its period of decadence,[4] and the ruling class didn't know how to react to it. First, the states did nothing. From 1929 to 1933, almost no measures were taken, while the banks collapsed one after the other in their thousands. World trade literally collapsed. In 1933, a first reaction was sketched out: it was the first New Deal[5] of Roosevelt. This recovery plan contained a policy of public works and state debt, but also a protectionist law, "Buy American".[6] From there, every country launched themselves into the protectionist current. World trade, already in a bad way, again suffered a shock. Through these measures, the bourgeoisie ended up aggravating the world crisis in the 1930s.

Today, all the bourgeoisies want to avoid a repetition of the vicious circle of crisis-protectionism-crisis... They are conscious that they must do everything to avoid repeating the errors of the past. It was of the utmost necessity that this G20 displayed the unity of the great powers against the crisis, in particular when it came to supporting the international financial system. The IMF even made a specific point of it in its preparatory "Work document" prior to the G20 to warn against the danger of each for themselves.[7] Thus Point 13 was entitled "The spectre of commercial and financial protectionism is a growing preoccupation" and it went on: "Notwithstanding the engagements made by the countries of the G20 (those of November 2008) not to resort to protectionist measures, worrying backslidings have taken place. The lines are vague between public interventions aiming to contain the impact of the financial crisis on sectors in difficulty and inappropriate subsidies to industries whose long term viability is questionable. Certain policies of financial support also lead the banks to direct their credit towards their country. At the same time, there is growing risk that some emerging countries confronted by external pressures on their accounts try to impose capital controls." The IMF has not been alone in issuing such warnings: "I fear that if this does not happen, a return to generalised protection would become likely, as a way for deficit countries, such as the US, to strengthen demand for domestic output and employment.... This is a time of decision. Choices must be made between outward-looking and inward-looking solutions. We tried the latter in the 1930s. This time we should try the former" (Martin Wolf, in front of the US Senate Commission for Foreign Affairs, March 25, 2009).[8]

The G20 heard the message: the leaders of the world have been able to present an appearance of unity and wrote in their final communiqué: "Not to repeat the errors of the past". What followed was a real international cry of relief. As the French economic journal, Les Echos, wrote on April 3rd  "the first conclusion to be drawn about the G20 that took place yesterday in the British capital, is that it hasn't failed, and that is already a lot. After the tensions of these last weeks, the twenty great economies on the planet have displayed their unity".

Concretely, the different countries undertook not to put up barriers, including on financial flows, and have mandated the WTO to scrupulously verify that this engagement is respected. Moreover, 250 billion dollars will be put at the disposal of export support agencies or investment agencies so as to aid the recovery of international trade. But above all, the growth of tensions has not spoilt this summit by turning it into an open fight. Appearances have been maintained and here's the real success of the G20. This is obviously only a temporary success because the crisis will inexorably continue to stir up international disunity.

Today's debt prepares the crisis of tomorrow    

Since the summer of 2007 and the famous "sub-prime" crisis, recovery plans have followed one another in a frantic rhythm. The first time that a massive injection of billions of dollars was announced there was a momentary breeze of optimism. But today, as the crisis has got worse and worse, each new plan is welcomed with more and more scepticism. Paul Jorion, a sociologist specialising in economics (and one of the first to announce the economic catastrophe) had this to say about the whole spiral of setbacks: "One moves indifferently from the small push of 2007 from a mounting figure in millions of euros or dollars to the big shove at the beginning of 2008, then to the enormous push at the end of the year numbering  hundreds of billions. As to 2009, it's the year of the "colossal" push, to amounts this time expressed in "trillions" of euros or dollars. And despite the Pharonic ambition, still not the least glimmer at the end of the tunnel!" [9]

And what does the G20 propose? A new raising of the stakes that is just as ineffectual! 5,000 billion dollars will be injected into the world economy from here to 2010.[10] The bourgeoisie has no other "solution" to put forward and thereby reveals its impotence.[11] The international press is not mistaken about it: "The crisis is in effect far from being finished and one would be naive to think that the decisions of the G20 will change everything" (La Libre Belgique), "It has failed at a time when the world economy is about to implode" (New York Times), "The recovery left the G20 summit unmoved" (Los Angeles Times).

The estimates of the OECD for 2009, as optimistic as they are as usual, leave hardly any doubt about what's going to hit humanity in the coming months, with or without the G20. According to these calculations, the United States will undergo a recession of 4%, the euro-zone 4.1% and Japan 6.6! The World Bank, for its part, affirmed on March 30th that for 2009 it was anticipating  "a contraction of 1.7% of world GDP which constitutes the strongest retreat in global production ever recorded". The situation will certainly become more aggravated in the months to come, and the crisis is already worse than that of 1929. The economists Barry Eichengreen and Kevin O'Rourke have thus calculated that the fall of world industrial production over the last nine months was as violent as in 1929, that the fall of stock markets was twice as rapid, and the same for the shrinkage of world trade.[12]

All these figures have a very concrete and dramatic reality for millions of workers around the world. In the United States, the top world power, 663,000 jobs have been destroyed in March alone, which brings the total to 5.1 million jobs destroyed in two years. Today, every country is being hit hard by the crisis. In Spain, for example, unemployment will go past 17% in 2009!

But this policy is not simply ineffectual today; it also prepares still more violent crises for the future. In effect, all these billions are created by massive recourse to debt. But one day, not too far into the future, an attempt must be made to repay them. Even the bourgeoisie says so: "It is clear that the consequence of this crisis is that it will be necessary to pay the bill: there will be a loss of wealth, losses of inheritance, of revenues and jobs; and it would be demagogic to say that nobody in the world will not pay part or all of this bill" (Henri Guanino, special advisor to the President of the French Republic, 3rd April).[13] By accumulating these debts, capitalism is putting its economic future in hock.

And what did the journalists, who were pleased with its new found importance, say about the IMF? Its financial means have been tripled by the G20, to 750 billion dollars and further, we have seen the authorisation of the issue of Special Drawing Rights (SDR)[14] for 250 billion dollars. One can understand why its president, Dominique Strauss-Kahn, has stated that this is "the greatest coordinated recovery plan ever decided upon". The mission given to him is to "aid the weakest", particularly the countries of the east who are on the edge of bankruptcy. But the IMF is a strange last hope. The - justified - reputation of this organisation is to impose draconian austerity in exchange for its "aid". Restructurings, redundancies, unemployment, suppression of health spending, pensions... such are "the IMF effect". For example, this organisation went to the sick bed of Argentina in the 1990s and continued prescribing its medicine up to... the collapse of this economy in 2001!

Not only has this G20 not at all cleared the capitalist sky but it has given us a glimpse of still more gloomy tomorrows.

The great bluff of a "more moral" capitalism

Given the patent incapacity of this G20 to propose real solutions for the future, it was quite difficult for the bourgeoisie to promise a rapid return to growth and radiant tomorrows. But there is among the workers a profound disgust for capitalism and a growing reflection on the future. The ruling class has been quick to respond to this questioning. With drums and trumpets, this G20 promised a new capitalism, better regulated, more moral, more ecological...

The manoeuvre is so gross that it's ridiculous. As a gesture towards the ‘moralisation' of capitalism, the G20 is turning its gaze on a few ‘tax havens', threatening sanctions that it will consider from now to the end of the year (sic!) against countries not making the effort to achieve "transparency".  They have pointed the finger at four areas that make up the "black list": Costa Rica, Malaysia, the Philippines and Uruguay. Other nations have been lectured and classified on the "grey list". Included here are Austria, Belgium, Chile, Luxemburg, Singapore and Switzerland.

In other words, the main tax havens are missing from the list! The Cayman Islands and its hedge funds, the dependent territories of the British Crown (Guernsey, Jersey, Isle of Man), the City of London, American states such as Delaware, Nevada or Wyoming... all these are officially as white as snow (and thus figure on the white list). The G20's classification of tax havens is just like the pot calling the kettle black.

Full of hypocrisy, only a few days after the London summit, the OECD - responsible for this classification - announced the withdrawal of the four countries from the black list, in exchange for promises to try to be transparent!

There's absolutely nothing astonishing about all this. How can these big capitalist leaders, real gangsters without faith or honour, how can they "moralise" about anything?[15] And how can a system based on exploitation and the search for profits be more "moral"? What's more, nobody is seriously expecting to see a "more human capitalism" come out of the G20. That does not exist and the political leaders talking about it are like parents telling their children about Father Christmas. On the contrary, this time of crisis will reveal, still more cruelly, the inhuman face of this system. Almost 130 years ago, Paul Lafargue wrote: "capitalist morality (...) curses the body of the worker; it takes as its ideal the reduction of the worker to the smallest minimum of needs, to suppress his joys and passions and condemn him to the role of the machine delivered up to work without truce or mercy",[16] or rather, we can add, the sole truce possible being unemployment and poverty. As the economic crisis strikes, the workers are sacked and thrown on the streets like useless objects. Capitalism is and will always be a brutal and barbarous system of exploitation.

But the grossness of the manoeuvre is itself revealing. It demonstrates that there's really nothing more to offer, that capitalism no longer brings any good to humanity, just more misery and suffering. There is no more chance of seeing the birth of an "ecological capitalism" or a "moral capitalism" than of seeing alchemists turning lead into gold.

If this G20 showed one thing, it's that another capitalist world is not possible. It is probable that the crisis will undergo highs and lows, with sometimes punctual moments of a return to growth. But, fundamentally, capitalism will continue to founder economically, sowing misery and engendering wars.

We can expect nothing from this system. The bourgeoisie with its international summits and its recovery plans are not part of the solution but part of the problem. Only the working class can change the world, but for that it is necessary for it to have confidence in the society that it can give birth to: communism!

Mehdi (16th April 2009)

 

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[1]. Declaration by Pascal Lamy, Director General of the World Trade Organisation

 

[2]. Organisation for Economic Co-operation and Development "Economic Outlook - Interim Report" March 2009. Available online at https://www.oecd.org/dataoecd/18/1/42443150.pdf

 

[3]. The G20 is composed of members of the G8 (Germany, France, United States, Japan, Canada, Italy, United Kingdom, Russia), to which can be added South Africa, Saudi Arabia, Argentina, Australia, Brazil, China, South Korea, India, Indonesia, Mexico, Turkey and finally the European Union. A first summit was held in November in the midst of the financial storm

 

[4]. Read our series "Understanding the decadence of capitalism" in International Review n° 48, 49, 50, 54, 55, 56, 58, 60 and online at https://en.internationalism.org/series/304.

 

[5]. A myth abounds today, according to which the New Deal of 1933 allowed the world economy to pull out of the economic swamp. The logical conclusion today is to call for a "New New Deal". But in reality, the American economy of 1933 to 1938 remained particularly flat; it was the second New Deal, that of 1938, which allowed a real recovery of the machine. But, this second New Deal was nothing other than the beginning of the war economy which prepared the Second World War. You can understand why this isn't talked about much!

 

[6]. This law imposed the buying of goods produced on US territory for purchases directly made by the American government.

 

[7]. Source : contreinfo.info/prnart.php3?id_article=2612

 

[8]. Martin Wolf is a British economic journalist. He's the Associate Editor and economic commentator in chief for the Financial Times.

 

[9]. "The Age of the Colossal Shoves", a blog published April 7th.

 

[10]. In reality, 4,000 billion will come from dollars earmarked for recovery plans already announced these last few months

 

[11]. In Japan, a new recovery plan of 15,400 billion yen (116 billion euros) has just been decided upon. It's the fourth recovery plan elaborated by Tokyo in the space of a year!

 

[12]. Source : voxeu.org

 

[13]. On the role of debt in capitalism and its crises, read our article in the previous issue of International Review: "The most serious crisis in capitalism's history".

 

[14]. The SDR are a basket of money made up of dollars, euros, yen and pound sterling. China has particularly insisted on these SDRs being used. These last weeks the Middle Empire has multiplied its official declarations calling for the creation of an international currency that could replace the dollar. And numerous economists throughout the world have relayed this message, by warning of the inexorable fall of the US currency and the economic tremors that would follow. It's true that the weakening of the dollar, as the American economy sinks into recession, is a real danger for the world economy. As an international reference point, it is one of the pillars of capitalist stability since the war. On the contrary, the emergence of a new money reference (be it the euro, the yen, the pound sterling or the IMF's SDR) is totally illusory. No power will be able to replace the United States; none can play its role as international economic stabiliser. The weakening of the American economy and its money thus signifies a growing monetary disorder.

 

 

[15]. Lenin described the League of Nations, another international institution, as a "den of thieves".

 

[16]. The Right to be Lazy