An Almighty Fudge Emerges from Docklands

April 2, 2009

A protester down at the Excel Centre in Docklands today.

A protester down at the Excel Centre in Docklands today.

Something is emerging from the caverns down in Canning Town, where the twenty of the world’s leaders are hammering out a deal. That deal will not “save the world” but will seek to ensure that the commercial and financial interests of those powerful nations stand a fighting chance. Nations outside of the hallowed few can expect virtually nothing, while the aspirations of campaigners (and most ordinary people) for a fairer, stable, sustainable world are even further removed from the Excel Centre.

What’s emerging is a document, which the BBC is reporting extensively on. Apparently, the leaders have come to a grand bargain of sorts – a fudge in common language – which will allow them to save face when engaging with their respective business interests and the media while doing very little to solve the underlying crisis in global capitalism.

There will be a cash boost for the International Monetary Fund – which has seen its reserves shrinking in recent years, and its potential customers dwindling due to decades of awful advice that deepened financial crises in developing nations when it didn’t outright cause them. The commitment falls short of what commentators had been suggesting, adding $500 billion in loans to the IMF along with $250 million in cash. The Times, in a strident opinion piece last week called for ” a doubling of the IMF’s resources to at least $500 billion” but will be disappointed by the loan, rather than a conventional grant.

South Africa’s neoliberal finance minister Trevor Manuel, meanwhile, complained in March that the Fund “has become incredibly marginalised” adding that in global finance, “The largest shareholder is going to the market for $1,750bn. The IMF’s firepower is $300bn.” With a $500 billion loan injection, it’s still marginalized, although it might be able to provide some triage to struggling Eastern European economies.

It is also being reported that the IMF boost will be funded by selling off the Fund’s gold reserves, essentially beggaring it, rather than boosting it substantially, while there may even be ulterior motives for the cash injection.

As the Guardian’s Dan Roberts puts it in a brief comment note, “The huge increase in money for the IMF agreed today at the G20 could herald its evolution from a body focused on developing countries to one right at the heart of the developed world…If public finances continue to deteriorate, Ireland, Eastern Europe, perhaps even one day Britain itself could ultimately be beneficiaries of this new money.”

This could therefore be read as an extraordinary admission of how deeply capitalism is failing, if the IMF is set to become a global bail out fund.

Tax havens will apparently be tackled, as has been long promised by Gordon Brown and Barack Obama. According to the BBC, “the G20 have agreed to impose sanctions on tax havens that refuse to sign up to OECD rules to fight money laundering and tax evasion, although discussions are continuing over whether unco-operative havens will be named and shamed.”

However, this does not approach anywhere near the abolition of tax havens, which are purely parasitic entities and provide no benefit to the world’s economy. All they do is provide a means of enrichment for corrupt corporations, organized criminals and world leaders – or a mixture of all three. The information that discussions are continuing about whether naming and shaming will happen should be amended to which havens are to be shamed, or perhaps we won’t even have a Caribbean island dragged through the media mire. It would certainly be a great surprise to see Jersey or the Isle of Man “shamed” any time soon.

Strikingly, no new money will be pledged to fund fiscal stimulus packages, which marks a key victory for European nations, and is a massive embarassment for Barack Obama and Gordon Brown, both of whom rode into the summit demanding a global stimulus and now leave chastised.

On the eve of the summit, Obama said that while “The press has tended to frame this as an ‘either/or’ approach, I have consistently argued that what is needed is a ‘both/and’ approach. We need stimulus and we need regulation” yet the summit has delivered the latter, and not the former. According to the BBC, “leaders are expected to pledge to do whatever it takes to boost their own economies” – a pathetic result from the American perspective.

Meanwhile, regulation will be tightened. European leaders have got their way on hedge funds, but there are no signs of a global “super regulator” that can actually research, prosecute and discipline criminal financial institutions, or coordinate global policy changes.

What there may be is something that Gordon Brown is calling a “financial stability board” that will somehow “ensure co-operation across frontiers and to stop risk to the economy.” This is far fetched. Without challenging the liberalization of financial services, a mere “board” will be toothless.

While regulation of financial systems will be tightened (slightly), one of the most important developments of the summit appears to be that nations practising “protectionism” will also be “named and shamed.” This marks a development from the November G20 Summit, which broke up with world leaders promising to do what they could to prevent protectionism creeping into their policies. All of them succumbed to measures which sought to protect jobs and industry, which after all, is extremely hard to avoid in a democratic state.

Now, a group of nations, all of whom practice protectionism (agricultural subsidies, “Buy America” campaigns etc..) are claiming that they will name and shame protectionists (via the WTO apparently). It’s a strange one. In reality, this is all nonsense. Given deepening economic crisis, protection is inevitable and will continue.

This is implied by the Independent, which comments that “States attending today’s talks are not expected to be asked to remove trade barriers, but to sign up to a commitment not to introduce any new protectionist measures.”

What the world needs is not less protection, but more. It needs a global forum that will allow nations to protect both infant and strategically vital industries such as food production, while facilitating fair trade. This was far from the minds of the G20 Summiteers, yet is essential if we are to avoid a vortex of capitalist competition, with nations protecting against each other, rather than negotiating to secure a fair and rational level of protection.

Extraordinarily, given the public anger on the issue, and the amazing incompetence of the profession, there “may also be measures to clamp down on bankers’ pay.” Anyone living in a democracy will be amazed. There “may” be measures to restrict bankers pay?

This is actually less black and white than it sounds. Focusing solely on bankers’ pay is wrong. Remuneration of corporate leaders and investors, not to mention heads of state or celebrities, has been far, far too high for decades – if not forever. What we need is a globally agreed maximum income, with the surplus skimmed off to fund vital projects, of which there is no shortage.

So what’s missing from this list? For starters, if the BBC is correct, then developing nations will receive zero emergency aid to assist them through the economic crisis. Falling commodity prices, capital flight and the cessation of international credit has hit poorer nations hard.

In Mexico, for example, after having spent the 1990s and early 2000s becoming ever more dependent upon remittances sent from migrants working in the USA, those flows have now reversed, as Mexican families send money northwards to support relatives who are out of work.

Botswana, a country that depends upon diamond revenues for its foreign exchange reserves, has seen 90 percent of that trade dry up since last year.

Everywhere, diminished trade flows are resulting in huge lay-offs, falling government revenues and social misery. The inter-connected global market is producing its inevitable shadow – inter-connected poverty and distress.

While the G20 will apparently allocate around $250 billion to “boost international trade” this is a pitiful amount. And supporting trade is a long way away from supporting development – health services, welfare systems, education, environmental projects, infrastructure. It’s actually embarassingly small.

But the money apparently heading to support trade still dwarves that allocated to fund climate change mitigation, which does not even figure in the BBC’s report.

In fact, what is striking about the report is how modest the whole package actually is. It provides hardly anything for developing nations, and barely refurbishes the IMF let alone reforming it. It falls short of building a global regulatory system to restrain international finance and is mild towards tax havens. It is similarly unambitious in failing to secure an agreement on stimulus packages.

The reality is that there seems to be very little agreement at all, just a lot of posturing. This is thin gruel for a summit that was supposed to “save the world” and it’s the kind of rubbish that sent 6,000 people out onto the streets yesterday where they braved wholesale violence from the police.

[By the way, for an extraordinary list of things that a summit like the G20 could have achieved, had it reflected popular will or even cared about human rights, see this posting on Indymedia UK, from Peace, Earth and Justice News]

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