Britain’s Prime Minister Gordon Brown achieved more than he can even have hoped for from this April’s G20 summit. He has been heralded in the media as the champion of a new world order. But the praise heaped on the summit needs to be tempered by a hard-headed look at whether the G20’s promises really contain sufficient vision to transform the global economy to one which puts justice, jobs and climate at its core.
Even looking at the symptoms, where the G20 appears to be travelling in the right direction, they are doing so at a snail’s pace. Of the much-heralded $1.1 trillion “package,” only half is actually “in the bank” and most of that had already been announced before the summit, some of it diverted from existing aid funds. Only $50 billion is likely to reach the world’s 49 poorest countries.
Most of the money will take the form of loans and will be channeled through deeply compromised institutions. The International Monetary Fund (IMF) is the biggest winner, gaining a $750 billion increase in the amount it can lend. The IMF has been at the center of the third world debt crisis, a previous economic crisis from which many countries are still reeling. Rather than canceling these long-overdue and deeply unjust debts, the G20’s solution is more loans through the same institutions.
A further “trade finance” package of money will enrich export credit agencies – like the UK’s Export Credit Guarantee Department, a government agency that guarantees more risky UK exports overseas. In effect it acts as a subsidy, most especially to enormous arms and carbon-intensive industries, leaving a trail of defaulted debt to be picked up by the UK taxpayer and poor country governments.
A clear call on the G20 was to clean up the financial system – radically to reform a global system where the main economic “activity” is making money from money. The G20 made a lot of noise about ending financial secrecy, particularly taking on tax havens, which are believed to rob developing countries of 250 billion pounds (almost $500 million) a year.
The agreement to date will fall far short of closing down tax havens as it still lacks enforcement mechanisms. Action on hedge funds and other “innovative” financial products are even weaker – “systematically important financial institutions” will face an “appropriate degree of regulation.”
Of course, none of these changes would have even been hinted at a year ago. But the point is that they will do nothing fundamentally to change a system which is not simply in economic, but moral, crisis. Massively growing inequality, the scourge of the global economy, has changed the nature of the society we live in, turning life into a Monopoly game that the vast majority of the world can never win.
Indeed in some ways, the G20 moves us clearly in the wrong direction. The G20 continues to believe that free trade – the liberalization of markets and capital – is the solution. But this is the very reason that countries have become so dependent. A recent report by ActionAid clearly shows how those countries that have become most dependent on capital inflows to their economy have been most vulnerable to the financial crisis.
International institutions have spent decades forcing developing countries to open their markets, destroying the livelihoods of small and subsistence producers. Today, tens of millions of people are dependent on over-consumption by the West, while starvation and hunger rises and falls with the commodity markets.
As the IMF has been empowered by the G20, the United Nations has been consigned to its time-honored role of clearing up the mess, only being asked to “monitor the impact of the crisis on the poorest and most vulnerable.” This is extraordinary given that a United Nations summit will take place on the financial crisis in early June – something which the G77 group of Southern countries had to fight hard for in the UN in December.
In the run-up to the G20, Nobel laureate Joseph Stiglitz produced a report that had been commissioned by the president of the UN General Assembly. Its findings go well beyond the G20’s “vision,” calling for an international debt workout process, which would allow for far greater and fairer debt cancellation, an end to forced conditionality, a global economic council and a new reserve currency to replace the dollar.
This makes one thing clear – there is no shortage of coherent solutions to the global crisis. The issue is one of political will.
Thirty years of economic fundamentalism has not simply created an economic crisis, but a profound sense of disempowerment on the part of Southern countries and ordinary activists. Now is the time – the first in a generation – to reclaim that political and ethical space. Ordinary people must make themselves heard wherever and whenever world leaders meet if we are to ensure that 2009 becomes a year of global change.
Nick Dearden is director of the Jubilee Debt Campaign. His column appeared in Britain’s Baptist Times and is posted here with permission.