Last weekend, the world’s political leaders gathered at the G20 summit in Washington – hosted by the soon to depart US president George Bush – in a bid to rescue the world economy from financial instability and deepening recession.
A conspicuous absentee from the meeting was US president elect Barack Obama – perhaps not wanting to be tied to the policy of a failed president.
But will this 24-hour conference solve the underlying crisis in world capitalism? Despite Kevin Rudd calling the event “a point of historical significance”, it’s clear that little of substance was agreed. Bush, for example, wouldn’t accept more regulation over speculative hedge finds – despite the US financial system generating the lions’ share of toxic debt, some $1.4 trillion.
Bush also wasn’t enthusiastic about Gordon Brown’s much vaunted ‘stimulus package’ policy, involving putting more resources from the richest countries at the disposal of the International Monetary Fund. Within the European Union countries there also wasn’t a ‘united front’ on the way out of the current crisis.
And despite welcoming China’s recently announced $600 billion stimulus package, the G7 countries are not keen on allowing China’s rulers a bigger place at the table of the world capitalist institutions such as the IMF and World Bank.
Moreover, the hope that China’s still expanding economy can save world capitalism is misplaced.
China, like Japan and Germany, is dependent upon high levels of exports to maintain growth but with consumer confidence slumping in the US – the world’s biggest market – China’s meteoric economic growth is slowing and Japan and Germany have moved into recession.
Likewise, oil rich countries such as Saudi Arabia and Russia have seen their stock markets collapse and their revenues from oil and gas exports hit by sharp falls – with oil down from a July high of $147 a barrel to $50 last week.
Of course, many of the world’s poorest and heavily indebted countries may well ask: since when has the IMF been the provider of financial stimulus to economies? On the contrary, the previous application of IMF financial prescriptions to qualify for loans has been the ‘kiss of death’ in many countries throughout Africa, Asia and Latin America.
Often the IMF ‘medicine’ (privatisation, deregulation of markets, lowering of tariffs, cutting public services, etc) has been worse than the disease – pushing many countries into recession.
Typically the G20 summit was all about rescuing the global elites from the gigantic hole they have dug for themselves and ignoring the plight of billions of poor people throughout the world.
However, one thing the IMF has got right is predicting global recession, with outright contraction for the rich economies of North America, Europe and Japan for the first time since world war two.
By SP reporters