(Updated April 2) Eric Toussaint on G20: `Putting a fresh coat of paint on a world that is collapsing'; police attack protesters

London on March 28, 2009. Protest organised Put People First, an alliance of more than 150 unions, and attended by 35,000 people. Photo by Xinhua.

Stop press April 2

George Monbiot: G20 protests: Riot police, or rioting police?

At the G20 protests in London only one group appears to be looking for violent confrontation – and it's not the protesters.

Red Pepper: Death in the City

Contrary to media reports, people did not pelt the police as the man who died during the G20 protests was being taken out. Andrew Kendle reports from Wednesday night’s protest frontline.

Lenin's Tomb

* * *

By Eric Toussaint and Damien Millet, translated by Christine Pagnoulle in collaboration with Elisabeth Anne

April 1, 2009 -- The G20 summit meeting in London from April 1 onward was loudly announced and publicised. Those 20 industrialised and emergent countries (G20) are meeting to find solutions to the economic crisis. But long before the end of the summit, it is clear that they will not rise to the challenge.

The G20 was not created in order to provide genuine solutions; it was hastily summoned for the first time in November 2008 to salvage the powers that be and try and to plug the breaches in capitalism. It is therefore impossible for this body to opt for measures that are sufficiently radical to save the day.

Public opinion will be told to look in the two directions that are expected to focus aggravation: tax havens and the CEOs' incomes.

Tax havens have to be abolished, that goes without saying. To achieve this it should be easy enough to make it illegal for companies and residents to have any assets in, or relationships with partners located in, tax havens. The EU countries that function like tax havens (Austria, Belgium, the UK, Luxembourg…) as well as Switzerland must do away with bank secrecy and put an end to their outrageous practices. Yet such is not at all the orientation chosen by the G20: a couple of emblematic cases will be cracked down on, minimal measures will be required from those countries, and a black list of non-cooperative territories that will be eventually made public will have been carefully vetted (Luxembourg or Austria have already been promised they will not be on it).

On the other hand CEOs' incomes, including golden parachutes and other bonuses, are indeed outrageous. In times of growth the employers claim that those who brought such benefits to their companies had to be rewarded to prevent them from moving to another. Now that we live in a time of crisis and those companies have to admit to increasing losses, the same executives still claim similar rewards. The G20 will try to regulate their incomes for a limited duration. The logic of the system is not questioned.

Apart from tax havens and CEOs' superbonuses, which will not be hit by any specific penalties anyway, the G20 countries will further bail-out their banks. Though globally discredited and delegitimised, the IMF will be put back at the hub of the political and economic game thanks to a new provision of funds that will have been made available by 2010.

Popular mobilisation needed

The G20 strategy is to put a fresh coat of paint on a world that is collapsing. Only a strong popular mobilisation will make it possible to lay solid foundations to build another world in which finance is at the service of people, and not the other way round. The March 28 and 30 demos were big: 40,000 people in London, thousands and thousands in Vienna, Berlin, Stuttgart, Madrid, Brasilia, Rome, etc. with the common motto “Let the rich pay the crisis!” The week of global action called for by the social movements from all over the world at the World Social Forum at Belém in January thus had a gigantic echo.

Those who had announced the end of the movement for another globalisation were wrong. It has proved that it is able to bring large crowds together, and this is only the beginning. The success of the mobilisations in France on January 29 and March 19 (3 million demonstrators were in the streets) is evidence that the workers, the unemployed and young people all want other solutions to the crisis than those which consist in bailing out bankers and imposing restrictions on the lower classes.

As a counterpoint to the G20 summit, the president of the UN General Assembly Miguel d'Escot, has called a general meeting of heads of states and governments in June and asked the economist Joseph Stiglitz to chair a commission that will draft proposals to meet the global crisis. The suggested solutions are inadequate because they are too timid, but they will at least be discussed at the the UN General Assembly.

New debt crisis

A new debt crisis is looming in the South, it is a consequence of the real estate private debt bubble bursting in the North. The recession that now affects the real economy of all countries in the North has led to prices of raw material plummeting, which considerably has reduced the strong currency revenues with which governments of countries of the South repay their external public debts. Moreover, the current credit crunch has induced a rise in borrowing rates for countries of the South. The combination of these two factors has already resulted in suspension in debt repayments by those governments that are most exposed to the crisis (starting with Ecuador). Others will follow suit within one or two years.

The situation is absurd: countries of the South are net creditors to the North, starting with the US whose external debt is over US$6000 billion (twice the total external debt of all the countries of the South). Central banks in countries of the South buy US treasury bonds instead of setting up a democratic bank of the South to finance human development projects. They should leave the World Bank and the IMF, which are tools of domination, and develop South-South relations of solidarity such as those that exist between countries that are members of ALBA (Venezuela, Cuba, Bolivia, Nicaragua, Honduras and Dominica). They ought to audit the debts they are asked to repay and put an end to the payment of illegitimate debts.

The G20 will see to it that the core of neoliberal logic is left untouched. Its principles are asserted again and again, even though they have blatantly failed: the G20 maintains its attachment to a global economy based on an open market. Its support to the god of free market is non-negotiable. Everything else is hocus pocus.

[Eric Toussaint is president of the Committee for the Abolition of Third World Debt (CADTM), Belgium (http://www.cadtm.org), author of A diagnosis of emerging global crisis and alternatives (Mumbai: Vikas Adhyayan Kendra, 2009) and The World Bank: A Critical Primer (London: Pluto Press, 2008). Damien Millet is spokeperson for CADTM France. Toussaint and Millet are joint authors of 60 Questions 60 Answers on the Debt, the IMF and the World Bank, English version to be published in 2009.]


Morales about the IMF: “the wolf can not keep the flock”

ennahar 03 April, 2009 07:35:00

The Bolivian President Evo Morales has denounced Friday the injection
of more than 1,000 billion dollars through the IMF against the global
crisis, saying that countries at the root of the crisis can not solve
it, or his words, that “the wolf can not keep the flock.”

“It's like giving money to the wolves, or to entrust the care of the
flock: the wolf is not going to keep the sheep, it will devour them,”
Morales told the foreign press in La Paz, commenting on the decisions
G20 in London to fight against the crisis.

“It is not possible that the countries of capitalism, which has caused
the financial crisis, are now the same from where comes the solution,”
said the Socialist leader, adding that few countries are at the origin
of this financial crisis, but “180 must cope.”

Bolivia is experiencing the beginning of economic deceleration, and is
5% growth at best in 2009, against 6.5% in 2008.

“As long as we do not touch the structural points of capitalism, it
will be difficult to resolve the financial crisis,” said Morales about
the G20. “If we want to solve economic problems, we must first end the
free market, then the speculative capitalism.”

Morales has challenged the role of the International Monetary Fund
(IMF), accusing him of the award of credit conditions, as “the
privatization of our natural resources, our basic services, to
implement the business models that are part of the capitalist system.”

Ennaharonline / AFP


Venezuela's Chavez slams results of G20 summit

03/ 04/ 2009


MEXICO CITY, April 3 (RIA Novosti) - Venezuelan President Hugo Chavez

has harshly criticized the plans to overcome the global financial

crisis announced by G20 leaders after their summit in London.

"I did not expect that such unreasonable and silly decisions would be

taken at the G20 summit," said in a telephone interview with

Venezolana de Television.

The leaders who met in London on Thursday agreed to allocate $5

trillion by the end of 2010 to resolve the global economic crisis,

with one-fifth of the funds going to the International Monetary Fund

and other financial institutions.

Speaking during a visit to Iran, Chavez said the decision to give the

money to the IMF was senseless and would only make things worse, going

on to criticize declarations of increased financial regulation.

"At the summit there was a lot of talk about strict regulation of

financial markets, but they are worth nothing. You have to understand,

it is impossible to regulate the financial monster spawned by the

capitalist system," Chavez said.

According to an aide, Russian President Dmitry Medvedev, who was among

the leaders of industrial and developing countries at the summit,

welcomed the decision to inject funds into the IMF, but said such a

move should be contingent on reform of it and other international

financial institutions.


Chavez touches on G-20 summit failure
Venezuela's Chavez says capitalism needs to go down.

Fri, 03 Apr 2009 19:53:48 GMT
Venezuelan President Hugo Chavez says the G-20 summit failed to
address the real reason behind the global meltdown -- capitalism.

Speaking during a visit to Iran, the Venezuelan leader on Friday said
the G-20 nations' plan to spend more than a trillion dollars would
strengthen "one of the great guilty ones behind the crisis: the
International Monetary Fund."

The leaders of the group of 20 industrialized nations who met in
London on Thursday agreed to allocate USD 5 trillion by the end of
2010 to resolve the global economic crisis, with USD 1.1 trillion
going to the IMF.

The IMF and the World Bank are "tools of imperialism" and must be
eliminated, Chavez said, the Associated Press reported.

He also criticized the groups' plan to enlarge the IMF, saying it was
like "entrusting beef to vultures".

In earlier remarks, he also blamed the United States and Britain for
the global financial turmoil, because of the financial model they have
been forcing on the world for years.

"It's impossible that capitalism can regulate the monster that is the
world financial system... Capitalism needs to go down. It has to end,"
Chavez stressed.

Billionaire investor George Soros, meanwhile, has warned that if G-20
efforts to restore stability in the international market fail, the
global economy will head for a huge meltdown.

"That could push the world into depression. It's really a
make-or-break occasion. That's why it's so important. The chances of a
depression are quite high - even if that is averted, the recession
will last a long time. Look, we are not going back to where we came
from. In that sense it's going to last forever," Soros was quoted by


By Bretton Woods Project
(This article was first published by the Bretton Woods Project, 3 April 2009, http://www.brettonwoodsproject.org/art-564159)
To great fanfare, the G20 announced a $1.1 trillion global package, which will actually deliver less than half that amount in new or guaranteed resources. Meanwhile issues of fundamental economic reform were left off the agenda.
The G20 meeting on 2 April, billed as the London Summit 2009 because of its inclusion of non-G20 players, captured positive media attention despite failing to set out a vision for transformative economic change, and pumping more money into the IMF and World Bank without a clear plan for reforming them.
The IMF received most of the boost, with a possible $500 billion in new resources and $250 billion in issuances of Special Drawing Rights (SDRs). Of the $500 billion, only half has been signed and sealed, the vast majority of which had been previously announced:  $100 billion from Japan in January and the same amount from the EU in March.  Most of the new $50bn comes from China - a small drop in its vast ocean of reserves, indicating that it continues to be reluctant to back the IFIs financially without real governance reform. The second tranche of $250 billion only exists as a G20 promise to find the extra cash, and to make "substantial progress" in doing so by April's spring meetings.
The other massive increase in IMF resources was through an allocation of Special Drawing Rights (SDRs), the IMF's own internally created reserve asset (See article.) An SDR allocation effectively means printing new money, $100 billion of which will go to "emerging market and developing countries". Unlike other forms of finance, SDRs come without conditions attached, but a country must still pay interest when it uses them.  As SDRs are allocated according to voting shares at the IMF, the majority will go to rich countries.
On new money for the multilateral development banks (MDBs), the language is particularly hazy.  The G20 agrees only to "support" additional annual lending by the MDBs of $100 billion per year.  Some of this, such as a boost to IFC trade financing, is money already promised.  Some is supposed to come from existing MDB resources.  Some will come from a 200 per cent boost to the Asian Development Bank's capital, and consideration of similar moves for the Inter-American Development Bank and the African Development Bank.
World Bank attempts to garner additional contributions for their 'vulnerability' funds were snubbed, with the G20 making clear that these would only be delivered bilaterally from willing donors.  So far, the UK is the only country to make concrete commitments - diverting £200 million of its existing aid budget for this purpose.  The G20 also asked the Bank to increase lending limits for "large countries" and to lend at market rates to low income countries, but only those with "sustainable debt positions and sound policies."
Of the putative $1.1trillion, $50 billion, or less than 5 percent, is likely to be for the 49 poorest countries in the world.  The communiqué does not give clear details of how this figure is arrived at.  Brussels based NGO, Eurodad estimates that, in addition to $6 billion (over three years) from IMF gold sales that will be added to the IMF's concessional lending pot, $19 billion in new money will come from the SDR allocation. The communiqué also calls for a doubling of the IMF's concessional lending capacity, currently at about $20 billion. That means that most of the total is IMF loans, which are only available if poor countries' economies go into meltdown.
The detail on the promised "global effort to ensure the availability of at least $250 billion of trade finance over the next two years" is entirely absent from the communiqué. The communiqué's commitment to meet existing aid pledges obviously meant more to some G20 countries than others. Italy, the current host of the G8, plans to cut its aid by 55 per cent this year.
The G20 communiqué says nothing new on IFI governance reform, and big increases in IMF resources have not been matched with clear commitments to end the controversial austerity policies that have so far been accompanying IMF bailout packages.
Changes to voting shares to give developing economies "greater voice and representation" are promised in general but the annex appears to backtrack on IMF reform. The existing plan for Bank governance reforms by the 2010 Spring Meetings for the World Bank is reconfirmed, but on the Fund, the annex indicates that the slightly accelerated quota review may not address the democratic deficit or governance imbalance but will be undertaken "to ensure the IMF's finances are on a sustainable footing".
Critics remain concerned that lessons from the Asian financial crisis a decade ago have not been learned, where IMF conditions were blamed for worsening recessions. Duncan Green of Oxfam said: "we have deep concerns about how central the IMF has become in this crisis. The fund has been given a blank cheque but its reform remains no more than a promise."
Campaigning NGOs and continental European governments had pushed the issue of tax havens to the fore in the run up to the summit.  The UK, itself a sponsor of many of the world's most famous tax havens including the Cayman Islands and Jersey, had picked up the rhetoric.
The G20 decided to endorse the OECD approach of exchanging information about companies and individuals suspected of evading taxes on request, rather than the more stringent automatic exchange of information called for by the Tax Justice Network and others. There was no mention of measures that could help developing countries crack down on corporate tax abuse: country-by-country financial reporting or requiring transparency of all information on beneficial ownership in all jurisdictions.
The fanfare surrounding a supposed 'blacklist' of non-cooperative countries published on the day of the summit by the OECD went silent when it emerged that only four countries were on the list - Uruguay, the Philippines, the Malaysian Federal Territory of Labuan, and Costa Rica - none of them well known tax havens.  The strong rhetoric - declaring that "the era of banking secrecy is over" and promising to "stand ready to deploy sanctions" - has yet to be turned into effective action. 
As promised by the G20 finance ministers in March the Financial Stability Forum will be expanded to include all G20 countries, and renamed the Financial Stability Board (FSB).  It will continue to have a purely advisory role to; "promote co-ordination"; "assess vulnerabilities affecting the financial system" and "set guidelines".  With no specific powers or sanctions available to it, and a lack of a clear governance structure, it remains to be seen whether the new board will be an improvement on the old forum.
On banking regulation, a topic that has dominated headlines in the run up to the summit, surprisingly little concrete was agreed, though international bodies are tasked with looking further into a host of issues. International minimum capital requirements will remain unchanged "until recovery is assured" and the often criticised Basel II capital framework supported. The existing 'toxic assets' in banks remain a huge problem, but one that has been left to national regulators to fix.
In his post-summit press conference, British Prime Minister Gordon Brown repeated his assertion that the 'shadow banking system' would be brought into "the global regulatory net", but the language of the communiqué is far more cautious - "systematically important financial institutions, markets, and instruments" should be subject to an "appropriate degree of regulation and oversight."
The FSB and IMF are tasked with deciding what "systematically important" means. Many hedge funds and private equity firms may continue to escape the regulatory net, especially those formally headquartered in off-shore financial centres. Hedge fund and credit rating agency "registration" is promised, and credit derivatives markets will be "standardised," but it is left to the industry itself to decide how to do this.
Green groups slammed the G20 for failing to grasp the opportunity to signal a clear commitment to building a low-carbon economy.  The communiqué promises to "make best possible use" of stimulus packages "towards the goal of building a resilient, sustainable, and green recovery" and to "identify and work together on further measures to build sustainable economies."  But there were no hard commitments about what portion of stimulus packages would be directed towards green projects, technologies, or jobs.
The aim of the upcoming UN climate talks in Copenhagen is set as reaching agreement, with no reference made to the scale of the changes G20 countries, particularly the richest ones, will have to make to combat climate change. Friends of the Earth said the G20 had "short changed people and the planet"; whilst Greenpeace said climate change had been tagged on to the communiqué as an "afterthought".
The communiqué is understandably short on the usual congratulatory opening paragraphs, though it reiterates support for "an open world economy based on market principles" but now balanced by "effective regulation, and strong global institutions."
On trade the expected promise to "not repeat the historic mistakes of protectionism" is made, but the commitment to "reach an ambitious and balanced conclusion to the Doha Development Round" looks suspiciously similar to the commitments made by the G20 in Washington last November, since when little progress has been made. Interestingly the G20 estimate for how much the Doha trade round could boost the global economy stands at a modest $150 billion. Civil society organisations around the globe have questioned whether reviving a trade round that developing countries have rejected many times is a good idea. 
Marches and protests took place around the world in the run up to the G20 summit, including in India, Philippines, Indonesia, Spain, Germany, France, Austria and Italy. In London, thousands marched under the banner of 'Jobs, Justice, Climate,' as part of the 160-plus Put People First alliance of development, environment, faith groups and trade unions.
In addition to mobilisation of citizens, civil society groups have also put out collective statements which look very different from the limited set of issues in the G20 communiqué.  At January's World Social Forum, civil society and social movements from around the world produced a statement signed up to by more than 600 organisations worldwide, entitled "Let's put finance in its place!"  It includes demands barely considered by the G20, yet at the heart of the debate about how best to control global finance, including controlling capital flows, and calling for "citizen control of banks and financial institutions." It also issued a challenge to the leaders gathered in London, saying: "the G20 is not the legitimate forum to resolve this systemic crisis."
On the eve of the G20, at the World in Crisis NGO summit in Prague, a declaration was issued calling for putting economies "...at the service of social, environmental and other vital interests of women, men, girls and boys, in particular to start greening our economies and to increase local economic resilience."  A raft of proposals were included on a host of critical topics including: market regulation; breaking the dominance of finance over the economy; keeping the climate negotiations on track; rethinking development finance; fairly sharing resource consumption across the globe; ensuring tax justice; and making IFIs more transparent, representative and accountable.
Meanwhile, the London Summit was slammed for systematically excluding civil society voices.  In contrast to most international gatherings there was no process for civil society organisations to accredit and attend.  Of the few who were allowed in as media representatives, some had accreditation withdrawn at the last minute. One of these denied entrance, Benedict Southwark of UK campaigning group the World Development Movement said that this: "starts to reek of the deliberate exclusion of critical voices."
Spotlight turns to UN
A week before the G20 met in London, the UN General Assembly president's commission on financial reforms released its draft report. The Joseph Stiglitz-led commission was much stronger in the latest report than in its first set of recommendations, and appears ahead of the G20 curve. The G20 has yet to pay adequate attention to this high-powered group of thinkers.
The recommendations said: "short term measures to stabilize the current situation must ensure the protection of the world's poor, while long term measures to make another recurrence less likely must ensure sustainable financing to strengthen the policy response of developing countries."
The commission was not unwilling to lay blame: "Loose monetary policy, inadequate regulation and lax supervision interacted to create financial instability," and there was "inadequate appreciation of the limits of markets." The report split its recommendations up into things to be done immediately and those that should be on the agenda for systemic reform.
Among immediate goals, it called for global fiscal stimulus, a new credit facility with better governance arrangements than exist at institutions such as the IMF, an end to pro-cyclical conditionality and rolling back the limits on developing country policy space created by trade agreements. For the financial sector the commission noted "While greater transparency is important, much more is needed than improving the clarity of financial instruments," and recommended the use of rules and incentives to limit excess leverage, prevent tax evasion, and address the regulatory race to the bottom.
While the short-term recommendations were sometimes eye-catching, the systemic demands surprised many observers. The call for "a new global reserve system", echoed the demand to end the US dollar's privileged position as international reserve currency made by China's central bank governor Zhou Xiaochuan. The commission also supported the idea for a UN-based Global Economic Council at the head of state level - essentially bringing a G20 type structure under the auspices of the UN system.
On long-term changes to financial regulation, the commission has seven areas for reform and warned against "merely cosmetic changes". Notably it said: "The fact that correlated behaviour of a large number of institutions, each of which is not systemically significant, can give rise to systemic vulnerability makes oversight of all institutions necessary." This throws cold water the G20's plans for regulating only 'systemically-important' financial institutions.
The UN commission, despite being organised more quickly than the G20 meeting, was much more open to civil society input. More than 100 organisations made submissions to the stakeholder consultation procedure, and the final report on civil society opinion was detailed, comprehensive, and well received by the commission. The civil society submissions were all put online, more than can be said of the official G20 working group reports, which are yet to be published. In late March, members of the commission also held interactive dialogues with representatives at the UN General Assembly and civil society organisations.
The global focus will now move to a planned UN conference from 1-3 June in New York, billed as the follow-up to the UN Financing for Development conference in Doha. The conference is being held at the initiative of the General Assembly president, rather than from the UN Secretariat because of opposition from some major countries.  It is unclear how much participation there will be by heads of state, especially as the G20 announced that it will hold another leader's level summit sometime before the end of this year.
* The Bretton Woods Project works as a networker, information-provider, media informant and watchdog to scrutinise and influence the World Bank and International Monetary Fund (IMF). http://www.brettonwoodsproject.org/index.shtml
By Walden Bello*
30 March, 2009: The Group of 20 (G20) is making a big show of getting together to come to grips with the global economic crisis. But here's the problem with the upcoming summit in London on April 2: It's all show. What the show masks is a very deep worry and fear among the global elite that it really doesn't know the direction in which the world economy is heading and the measures needed to stabilize it.
The latest statistics are exceeding even the gloomiest projections made earlier. Establishment analysts are beginning to mention the dreaded "D" word and there is a spreading sense that a tidal wave just now gathering momentum will simply overwhelm the trillions of dollars allocated for stimulus spending. In this environment, the G20 conveys the impression that they're more commanded by than in command of developments (In addition to the seven wealthy industrial nations that belong to the G7, the G20 includes China, India, Indonesia, Mexico, Brazil, Argentina, Russia, Saudi Arabia, Australia, South Korea, Turkey, Italy, and South Africa.).
Indeed, perhaps no image is more evocative of the current state of the global economy than that of a World War II German U-Boat depth-charged in the North Atlantic by British destroyers. It's going down fast, and the crew doesn't know when it will hit rock bottom. And when it does hit the ocean floor, the big question is: Will the crew be able to make the submarine rise again by pumping compressed air into the severely damaged ballast tanks, like the sailors in Wolfgang Petersen's classic film Das Boot? Or will the U-Boat simply stay at the bottom, its crew doomed to contemplate a fate worse than sudden death?
The current capitalist crew manning the global economy doesn't know whether Keynesian methods can re-inflate the global economy. Meanwhile, an increasing number of people are asking whether using a clutch of Social Democratic-like reforms is enough to repair the global economy, or whether the crisis will lead to a new international economic order.
The G20 meeting has been trumpeted as a new "Bretton Woods." In July 1944, in Bretton Woods, New Hampshire, representatives of the state-managed capitalist economies designed the postwar multilateral order with themselves at the center.
In fact, the two meetings couldn't be further apart.
The London meeting will last one day; the Bretton Woods conference was a tough 21-day working session.
The London meeting is exclusive, with 20 governments arrogating to themselves the power to decide for 172 other countries. The Bretton Woods meeting tried hard to be inclusive to avoid precisely the illegitimacy that dogs the G20's London tryst. Even in the midst of global war, it brought together 44 countries, including the still-dependent Commonwealth of the Philippines and the tiny, now-vanished Siberian state of Tannu Tuva.
The Bretton Woods Conference created new multilateral institutions and rules to manage the postwar world. The G20 is recycling failed institutions: the G20 itself, the Financial Stability Forum (FSF), the Bank of International Settlements and "Basel II," and the now 65-year-old International Monetary Fund (IMF). Some of these institutions were established by the elite Group of 7 after the 1997 Asian financial crisis to come up with a new financial architecture that would prevent a repetition of the debacle brought about by IMF policies of capital account liberalization. But instead of coming up with safeguards, all these institutions bought the global financial elite's strategy of "self-regulation."
Among the mantras they thus legitimized were that capital controls were bad for developing economies; short-selling, or speculating on the movement of borrowed stocks, was a legitimate market operation; and derivatives - or securities that allow betting on the movements of an underlying asset - "perfected" the market. The implicit recommendation of their inaction was that the best way to regulate the market was to leave it to market players, who had developed sophisticated but allegedly reliable models of "risk assessment."
In short, institutions that were part of the problem are now being asked to become the central part of the solution. Unwittingly, the G20 are following Marx's maxim that history first repeats itself as tragedy, then as farce.
The most problematic component of the G20 solution is its proposals for the International Monetary Fund (IMF). The United States and the European Union are seeking an increase in the capital of the IMF from $250 billion to $500 billion. The plan is for the IMF to lend these funds to developing countries to use to stimulate their economies, with U.S. Treasury Secretary Tim Geithner proposing that the Fund supervise this global exercise.
If ever there was a non-starter, this is it.
First of all, the representation question continues to exercise much of the global South. So far, only marginal changes have been made in the allocation of voting rights at the IMF. Despite the clamor for greater voting power for members from the global South, the rich countries are still overrepresented on the Fund's decision-making executive board and developing countries, especially those in Asia and Africa, are vastly underrepresented. Europe holds a third of the chairs in the executive board and claims the feudal right to have a European always occupy the role of managing director. The United States, for its part, has nearly 17% of voting power, giving it veto power.
Second, the IMF's performance during the Asian financial crisis of 1997, more than anything, torpedoed its credibility. The IMF helped bring about the crisis by pushing the Asian countries to eliminate capital controls and liberalize their financial sectors, promoting both the massive entry of speculative capital as well as its destabilizing exit at the slightest sign of crisis. The Fund then pushed governments to cut expenditures, on the theory that inflation was the problem, when it should have been pushing for greater government spending to counteract the collapse of the private sector. This pro-cyclical measure ended up accelerating the regional collapse into recession. Finally, the billions of dollars of IMF rescue funds went not to rescuing the collapsing economies but to compensate foreign financial institutions for their losses - a development that has become a textbook example of "moral hazard" or the encouragement of irresponsible lending behavior.
Thailand paid off the IMF in 2003 and declared its "financial independence." Brazil, Venezuela, and Argentina followed suit, and Indonesia also declared its intention to repay its debts as quickly as possible. Other countries likewise decided to stay away, preferring to build up their foreign exchange reserves to defend themselves against external developments rather than contract new IMF loans. This led to the IMF's budget crisis, for most of its income was from debt payments made by the bigger developing countries.
Partisans of the Fund say that the IMF now sees the merit of massive deficit spending and that, like Richard Nixon, it can now say, "we are all Keynesians now." Many critics do not agree. Eurodad, a non-governmental organization that monitors IMF loans, says that the Fund still attaches onerous conditions to loans to developing countries. Very recent IMF loans also still encourage financial and banking liberalization. And despite the current focus on fiscal stimulus - with some countries, like the United States, pushing for governments to raise their stimulus spending to at least 2% of GDP - the IMF still requires low income borrowers to keep their deficit spending to no more than 1% of GDP.
Finally, there is the question of whether or not the Fund knows what it's doing. One of the key factors discrediting the IMF has been its almost total inability to anticipate the brewing financial crisis. In concluding the 2007 Article IV consultation with the United States, the IMF board stated that "[t]he financial system has shown impressive resilience, including to recent difficulties in the subprime mortgage market." In short, the Fund hasn't only failed miserably in its policy prescriptions, but despite its supposedly top-flight stable of economists, it has drastically fallen short in its surveillance responsibilities.
However large the resources the G20 provide the IMF, there will be little international buy-in to a global stimulus program managed by the Fund.
The North's response to the current crisis, which is to revive fossilized institutions, is reminiscent of Keynes' famous saying: "The difficulty lies not so much in developing new ideas as in escaping from old ones." So, in Keynes' spirit, let's try to identify ways of abandoning old ways of thinking.
First of all, since legitimacy is a very scarce commodity at this point, the UN secretary general and the UN General Assembly - rather than the G20 - should convoke a special session to design the new global multilateral order. A Commission of Experts on Reforms to the International Monetary and Financial System, set up by the president of the General Assembly and headed by Nobel Prize laureate Joseph Stiglitz, has already done the preparatory policy work for such a meeting. The meeting would be an inclusive process like the Bretton Woods Conference, and like Bretton Woods, it should be a working session lasting several weeks. One of the key outcomes might be the setting up of a representative forum such as the "Global Coordination Council" suggested by the Stiglitz Commission that would broadly coordinate global economic and financial reform.
Second, to immediately assist countries to deal with the crisis, the debts of developing countries to Northern institutions should be cancelled. Most of these debts, as the Jubilee movement reminds us, were contracted under onerous conditions and have already been paid many times over. Debt cancellation or a debt moratorium will allow developing countries access to greater resources and will have a greater stimulus effect than money channeled through the IMF.
Third, regional structures to deal with financial issues, including development finance, should be the centerpiece of the new architecture of new global governance, not another financial system where the countries of the North dominate centralized institutions like the IMF and monopolize resources and power. In East Asia, the "ASEAN Plus Three" Grouping, or "Chiang Mai Initiative," is a promising development that needs to be expanded, although it also needs to be made more accountable to the peoples of the region. In Latin America, several promising regional initiatives are already in progress, like the Bolivarian Alternative for the Americas and the Bank of the South. Any new global order must have socially accountable regional institutions as its pillars.
These are, of course, immediate steps to be made in the context of a longer-term, more fundamental and strategic reconfiguration of a global capitalist system now on the verge of collapsing. The current crisis is a grand opportunity to craft a new system that ends not just the failed system of neoliberal global governance but the Euro-American domination of the capitalist global economy, and put in its place a more decentralized, deglobalized, democratic post-capitalist order. Unless this more fundamental restructuring takes place, the global economy might not be worth bringing back to the surface.
* This article first appeared in Foreign Policy In Focus. Walden Bello is president of the Philippines Freedom from Debt Coalition, senior analyst at the Bangkok-based Focus on the Global South, and professor of sociology at the University of the Philippines.

Leo Panitch



After The Summit: What Was Accomplished & For How Long?

Apr 03, 2009 By Danny Schechter

Danny Schechter's ZSpace Page / ZSpace

Summits Come and Summits Go As The Economy Continues Its Slide

The eyes of the world have been on the Economic Summit in London but the ideas of the world were mostly conspicuous by their absence. Here we have a global crisis. The house is on fire. Unemployment is climbing. The real estate contagion is now claiming condos and even shopping malls. It's bad and by most accounts, getting worse. And, all the "leaders" of the world can do is devote ONE DAY to a forum that must have cost millions to stage.

Our media and politicians love spectacles and political celebrities. The spin was on what Michelle was wearing, not on what Barack was thinking when he was so unwilling to agree to an international regime of regulation which is so clearly needed in a globalized world economy.

The New York Times was properly critical of the Summit for falling "short," mostly focusing on the failure to commit to a larger stimulus package-what the US wanted but didn't get. They went lightly on their criticisms on the regulatory issue. The group also agreed to crack down on tax havens and, on a country-by-country basis, impose stricter financial regulations on hedge funds and rating agencies - necessary though insufficient steps to avoid a repeat of the current disaster." They never asked nor did they fully report on why Obama is "fiercely resistant to the idea of a global regulator." (Bob Jackson of Arizona offered one plausible explanation: "'The one smart thing the President did in London was to establish that the U.S. would not be regulated by global politicians. Our own politicians are corrupt and imcompetent enough, without overt collusion of the politicians from the rest of the world.")

Fortunately, other Times Readers were ahead of the paper and the politicians in comments that could have been but weren't probed in most media outlets.

Jacob Olsson writes: "The lack of deep understanding of economics on the part of American journalists seems to be one explanation for the cheerleading of fiscal stimulus. It is the only solution that has been offered to them by people they trust. The reason this solution has been offered is that it is the only one that is seen to be able to preserve the financial oligarchy, which both Republicans and Democrats hold so dear."

Dwight writes from Brazil: "The US and UK could likely have gotten more concessions on stimulus if they'd admitted that the epi-center of this man-made quake was New York and London, and that thus the US and UK would assume a disproportionate share of the burden.

The Times editorial is full of continued American hubris. Vaguely euro-bashing. No assumption of America's leadership in creating a disaster."

Patrice Ayme writes from Switzerland: "The fundamental cause of the crisis is that the financial sector sucked up all the available world financial credit, and more. Then it lost it all in a fury of ill considered entanglements.

The way out is to outlaw it all retroactively (bankruptcy judges do this all the time at their own scale, so there is no constitution problem to do this, whatever Mr. Summers grumbles about "abrogation"."

Kevin writes from Georgia: "The Europeans were not going to agree to larger stimulus packages for one very good reason. They do not need to have very large stimulus packages. Most G20 European countries have robust safety nets that already take care of their citizens when the economy falters. They also do not have the crumbling infrastructure that America has with regards to transportation, especially mass transit and technological infrastructure."

Butler Crittendon adds from San Francisco: "You seem in denial about America's role in creating the financial disaster we now face. Sure, other global capitalists participated, but in general it was a failure of neoliberal economic policies, spearheaded by U.S. and British bankers. You mention hedge funds, etc., but the only reason we had these monsters was because we permitted it. The exact details of the causes of the crisis are still unknown -- and probably unknowable after so many rats hid their money in secret foreign accounts and had in place a $1000 Trillion of derivatives, CEOs, and the alphabet soup of concocted poisonous 'instruments.'"

These are all important issues but most were buried in the fine print when covered at all. Of course, as is so often the case, high flying rhetoric-and Gordon Brown threw out that old canard about a "new world order"-will not be remembered. What countries do, or fail to do will.

As former CBS correspondent Tom Fenton wrote from London, "The agreements reached at the summit depend on the willingness of individual countries to carry them out. There will be a follow-up summit this fall to check on progress. President Obama said it will take a year or two to tell whether the summit has been successful in lifting the world out of recession. He was right to be cautious."

He was also right to recognize that he didn't accomplish his goal, as veteran British journalist Andrew Neil wrote on the Daily Beast: "For a start, the President did not get what, for him, was the original purpose of this G20 summit: a coordinated global fiscal stimulus. The British media may still fawn before the Obamas the way the US media used to, the First Lady can even touch the Queen in Buck House without being sent to the Tower of London; but the Obama charisma and character could not get an extra cent out of the world community."

So we are back to square one. The markets rose the day after the Summit not because of what was said there but because interest rates were cut in Europe and China released a positive report.

Many politicians have been complicit in the policies that led to the crisis. A banker who was there. Stephen Roach, chairman of Morgan Stanley Asia, said he was worried that "many of the world leaders had gotten into something that was over their heads." Probably true.

What was accomplished? Some windows were broken . A demonstrator died, The police, as usual, overreacted. The media has moved on.

In all, not too encouraging.

News Dissector Danny Schechter blogs for Mediachannel.org. He is making a film based on his new book PLUNDER: Investigating Our Economic Calamity (Cosimo Books at Amazon.com) Comments to dissector@mediachannel.org


After the G20 Summit
Capital's New World Symphony


The G20 summit in London has seen the first redrawing of the global economic map since Bretton Woods in 1944, which officially announced the United States as the major global capitalist power, the axis around which every other nation was to revolve economically in the postwar world.

The fact that a G20 summit was convened for the first time, with twenty of the world’s largest economies meeting to decide a new economic template in response to the global recession instead of the usual eight (though Russia’s inclusion in the G8 was merely in deference to her strategic weight rather than her economic size or strength), is significant in itself, an acknowledgement by the postwar capitalist order that the emerging economies of China, India, and Brazil, etc. will be key players in the coming period, not only as sources of cheap labor and resources but as markets for exports.

In effect, emerging from the G20 summit has been the admission that the formerly major markets of Europe and the US can no longer supply the demand for commodities which underpins the global capitalist system, and at bottom the financial system responsible for the economic collapse that has swept the globe.

As the largest economy in the world, the US, under the Obama administration, has embarked on a new strategy as it adapts to the economic reality of the disappearance of the free market from the stage of capitalist history. Managed demand, the adoption of Keynesian doctrine on a global scale, is to be the way ahead, with global institutions such as the IMF and World Bank, formerly twin pillars and enforcers of the Washington free market consensus, now to play the role of ballast of the global economy through the disbursement of aid in order to maintain demand among nations of the G20.

Conditions, of course, are to be attached to such aid in order to ensure that none of the G20 economies adopt protectionist measures to block imports and thereby interfere with that holiest of holies – free trade.

Be that as it may; this new strategy of the US has been adopted with the same priority of global hegemony which has dominated the actions of US administrations since the end of the Second World War. With a 2008 GDP of just under 14 trillion dollars, the US economy continues to stand head and shoulders above its nearest economic rival, Japan, with a GDP of just under 4.5 trillion dollars. In order to maintain this gap, and with it the lifestyles of US consumers, the US realises that it has to ensure that markets for US exports don’t dry up, else demand at home will fall, leading to an increase in unemployment, poverty, and economic slump domestically.

The continuing role of the US dollar as the major international reserve currency, used for the purchase of primary goods such as oil, gas, minerals, and so on by global economies, will continue to allow the US to ramp up huge deficits in order to service a national debt of 11 trillion dollars and continue to fund its monstrous expenditure on defense and war, as well as continuing to meet its diminishing social spending requirements without taxing the rich proportionate to their income.

In other words, attacks on the poor and the working class which have defined US society under both Democrat and Republican administrations since the end of the Vietnam War will continue, though less aggressively than under previous administrations going back to the Reagan years, when the free market structural adjustment of the US economy was unleashed.

By far the most significant aspect of the G20 summit has been the formal inauguration of China as a First World economic power. China’s growth over the past few years has been staggering. The huge growth in Chinese exports over the past few years ($900 billion in 2006) has seen China overtake major export economies such as Germany and Japan, with some economists predicting that China will eclipse the US by 2010 as the world’s major exporter, despite the slowdown caused by the global recession.

However, it is China’s foreign exchange reserves that have increasingly been a major cause for concern to US economists, politicians, and military planners. By the end of 2008 they amounted to $1.9 trillion, a trillion of which is in US treasury bills and notes, making China a major financier of the US deficit. The danger this poses to the US is that if China were to stop purchasing US treasury bills, or worse start dumping them on international markets, the value of the dollar would plummet, the value of US stocks would hit the floor, and an economy already in major recession would fall flat on its back.

But with the current recession being global in scope, and with China’s main export market the US, it is neither in Chinese nor US interests to act in a way that would impact negatively on the other in the current period.

The Obama administration understands this, which is why it has sought to replace the aggressive macroeconomic strategy vis-à-vis China, pursued by the Bush administration, with a more conciliatory one.

The invasion and occupation of both Iraq and Afghanistan was part of this aggressive grand strategy, when using 9/11 as a pretext, the US set out to seize control of Iraq’s vast oil reserves in order to break OPEC’s monopoly and control of oil prices, whilst at the same time being able to control the ever-increasing energy requirements of emerging economies such as China and India. Afghanistan’s role in this process was as a vital transhipment route of energy reserves located in the Caspian Basin.

The economic drain of these military adventures in the short term has had a deleterious impact on the US economy, however, which is why that section of the US ruling class represented by the Obama administration is desperate to pull out as soon as is it is feasibly possible to do so.

As for the majority of the world’s population living throughout the so-called developing world, despite the usual rhetoric about alleviating global poverty, etc., immiseration and despair looks set to continue. Free trade between the G20 economies will not extend to the exports of the world’s poorest economies - economies which for so long have been plundered and ravaged mercilessly by the developed world, making them reliant on loans and aid with a welter of free market conditions attached.

This in effect has turned governments of the developing world into enforcers acting on behalf of global corporations against their own populations, forced to implement the wholesale privatization of social services along with the destruction of domestic agro-economies unable to compete with the subsidised agro-economies of the West.

The end result of this process has been a race to the bottom as workers throughout the developing world have been forced to compete for poverty wages, a direct consequence of those same global corporations scouring the globe looking to drive down production costs in order to maintain profits.

So whilst the global recession is far from over, the complete collapse of capitalism - ruefully predicted by free market ideologues and gleefully predicted by anti-capitalists and socialists - looks to have been averted.

John Wight is a writer and political campaigner based in Scotland. 

G20 slammed for 'shortsighted' deal

02 April 2009


Thursday, 2 April 2009 G20 summit ends in London

Millions will suffer from summit failure, says charity

The anti-poverty charity War on Want today condemned Gordon Brown and other G20 leaders for throwing money at the global economic crisis rather than addressing its root causes.

According to War on Want, the G20 has used the London summit to resurrect the failed policies and institutions of the free market era, in a deal which prioritises short-term action at the expense of fundamental reform.

It called for a new world economic system based on principles of public benefit not private profit, achieved through democratic control and a fair redistribution of the fruits of globalisation.

War on Want executive director John Hilary said: "Millions of people will pay a high price for the G20's refusal to address the root causes of the current crisis.

"The world demanded a new economic system which puts the needs of people first. Instead the G20 have just thrown money at the failed institutions of the past."

War on Want said a stimulus package for the developing world is desperately needed. But the G20 decision to treble money available to the International Monetary Fund will resurrect an institution which lacks legitimacy and continues to impose crippling free market conditions on countries which turn to it for help.

The charity also attacked the G20 for its failure to take decisive action to close down tax havens. Tax dodging by corporations costs the UK economy £100 billion a year and deprives developing countries of an estimated £250 billion a year - money which could meet the UN anti-poverty goals several times over.

The charity warned that the G20 leaders' renewed insistence on a conclusion to the Doha world trade talks will deepen unemployment already soaring due to the global economic crisis. This puts 7.5 million workers at risk in Argentina, Brazil, Colombia, Costa Rica, Indonesia, Mexico, Philippines, Tunisia and Uruguay, and millions more in other countries.



The G20, the Financial Crisis and Neoliberalism

April 03, 2009 By David Harvey
Source: Democracy Now!

AMY GOODMAN: For some analysis on the G20 summit in London and the financial crisis overall, I'm joined now by a leading thinker on the global economy, David Harvey. He's a Marxist geographer and distinguished professor of anthropology at the Graduate Center of the City University of New York. He's author of several books, including The Limits to Capital and A Brief History of Neoliberalism. He has a lengthy interview on the financial crisis in the latest issue of n+1 magazine, nplusonemag.com. David Harvey joins us now on Democracy Now!

We welcome you to Democracy Now!

DAVID HARVEY: Thank you.

AMY GOODMAN: What do you think is the—what is being proposed by the G20 leaders? And what needs to be done in this country?

DAVID HARVEY: I think Tony Benn was exactly right in the earlier segment, and it's a great pleasure to be here after him. I was always an admirer of his.

What they're trying to do is to reinvent the same system. And I think this is a collective concern, and there's a lot of squabbling on the details, as it were. But the fundamental argument they are making is, how can we actually reconstitute the same sort of capitalism we had and have had over the last thirty years in a slightly more regulated, benevolent form, but don't challenge the fundamentals? And I think it's time we challenge the fundamentals.

AMY GOODMAN: What are those fundamentals?

DAVID HARVEY: The fundamentals have to do with the incredible increase in consolidation, if you like, of class power. I mean, since the 1970s, we've seen a tremendous increase in inequality, not just simply in this country, but worldwide. And in effect, the assets of the world have been accumulated more and more and more in few hands. And I think when you look at the nature of the bailout programs, the stimulus programs and all the rest of it, what it really does is to, in effect, try to keep those assets intact while making the rest of us pay. And so, I think it's time we stopped that and kind of said, well, actually, we should actually be getting more of the assets and, you know, much greater equality.

AMY GOODMAN: And how would we get more of the assets? How would there be greater equality?

DAVID HARVEY: I think, for example, the nature of the bailout of the banks and the sort of restructuring that is going on is, in effect, about saving the banks and saving the bankers, while actually sticking it to the people. I mean, we're the ones who are going to have to pay for this in the long run. So what I'm kind of arguing for is a political awareness that that is happening.

In fact, it has been happening over the last thirty years, sort of step by step. It's been disguised in this kind of rhetoric about individual liberty and freedom of markets and all those kinds of things. But if you look backwards, you will see that this is not the first financial crisis we've had. We've had many of them over the last thirty years, and they all have the same character. We had our own savings and loan crisis back in the 1980s. There was a Mexican debt crisis back in 1982, when, in effect, Mexico was going to go bankrupt. And if they had gone bankrupt, then the New York investment banks would have gone under. So what did they do? They bailed out Mexico, therefore bailing out the New York investment bankers, and then they made the Mexican people pay.

AMY GOODMAN: Why would the banks in New York have gone under?

DAVID HARVEY: Because they had lent the money to Mexico in the first place. And if Mexico had just defaulted on its debt, what would the—you know, what would the bankers have done? They would have lost a tremendous amount.

AMY GOODMAN: If you were Timothy Geithner, if you were the Treasury Secretary—

DAVID HARVEY: Yes, if I was Treasury Secretary.

AMY GOODMAN: —what exactly would you be doing?

DAVID HARVEY: Oh, I would take a lot of that money, and I would put it into some kind of a national reconstruction corporation. And I would say, "Look, your first duty is to take care of the foreclosure crisis and the people who have been foreclosed upon. So go into cities like Cleveland and so on that have been devastated, and go into sort of areas in California and so on and take care of the foreclosure crisis."

AMY GOODMAN: How would you do that?

DAVID HARVEY: Well, I think one of the ways you could do that is to start to buy out all of those houses that are about to be foreclosed on and put them into some kind of, I don't know, municipal housing association or some collective form of that kind, and then allow people to remain in those houses, even though they're no longer necessarily owners. So the ownership rights would shift.

I mean, we have a myth in this country that homeownership is the gospel, as it were. But for a lot of people, homeownership is not a good idea. And I think, actually, it's not a good idea in general.


DAVID HARVEY: For two reasons. One is, it makes you actually very vulnerable if you're a heavily debt-encumbered homeowner. And actually, the initial legislation was kind of interesting, the debate around it back in the 1930s, when it kind of said debt-encumbered homeowners don't go on strike, and because it's—you know, you've got to pay your mortgage. And so, this becomes, as it were, a millstone around your neck. And that then makes you very vulnerable to fluctuations in the market like we're seeing right now, particularly if you have variable rate mortgages, things of that kind, and you can really easily get caught out. So, in effect, what we've seen in the housing market is a tremendous plundering of the assets of some of the most vulnerable people in the country. I mean, this has been the biggest loss of asset wealth to the African American population that there's ever been.

AMY GOODMAN: And the response of some that, well, they should never have bought houses to begin with, because they couldn't afford them?

DAVID HARVEY: Well, some of them, so that's right, you know, but this is a familiar story. The first wave of foreclosures was really in impoverished neighborhoods, African American, immigrant and very often single-headed household women. And, yeah, they probably should not have become homeowners. But on the other hand, they were taking a risk. But who took the real big risks in this economy, if it wasn't the bankers? So, in a sense, they're being made to pay, while the bankers are still walking away with a tremendous amount of money.

AMY GOODMAN: What is the connection between gentrification and the mortgage crisis?

DAVID HARVEY: The gentrification process in here in New York and the like was again about kind of reconstructing urban environments in such a way, and a lot of that reconstruction entailed, particularly when it was corporate-led, entailed a big investment in housing. You then have the problem of who's going to buy the housing. And it's not only gentrification, it's also a lot of that new development, new condominiums and all the rest of it.

And it's kind of interesting. Finance controls both the creation of housing, the production of housing, and also its consumption. You lend money to the developers. They go in and gentrify a neighborhood. You lend them money to the people who are going to occupy it. And even if they don't have—you've got to find that market for the gentrification once that process goes on. And so, the connection there in this, the financial operators are working on both ends of this game, if you like.

AMY GOODMAN: Can you talk about what you mean by "the right to the city"?

DAVID HARVEY: What I mean by the right to the city is that we have, I think, a real need right now to democratize decisions as to how a city shall be and what it should be about, so that we can actually have, if you like, a collective project about reshaping urban—the urban world. I mean, here in this city, effectively, the right to the city has been held by the mayor and the Development Office and the developers and the financiers. Most of us don't really have a very strong say. I mean, there are kind of community organizations and so on. So I think the democratization of the city, of city decision making, is crucial. And I think we want to reclaim the right to the city for all of us, so that we can all actually not only have access to what exists in the city, but also be able to reshape the city in a different image, in a different way, which is more socially just, more environmentally sustainable and so on.

AMY GOODMAN: What does this current crisis mean for the future of capitalism, David Harvey?

DAVID HARVEY: You know, crises are terribly important in the history of capitalism. They are what I would call the kind of irrational rationalizers of the system. What happens is that capitalism develops in a certain way, has real problems, then it goes into crisis, and it comes phoenix-like out of it in another form. We went through a long crisis in the 1970s. There was a long crisis in the 1930s. So a crisis, then, is a moment of reconfiguration of what capitalism is going to be about. And right now, as I've said, the powers that be are more about trying to reconstruct the pre-existing power structure or save the pre-existing power structure without intervening in it in any way.

The way I see it right now is, however, we may be in a different kind of world. Put it this way. Capitalism historically has grown at a 2.5 percent compound rate of growth since 1750. OK. And in good years, it's growing at three percent. Obama, the other day, said, "Well, in a couple of years, we'll be back to three percent growth." Gordon Brown says, "Well, actually, the economy will double in the next few years." Now, when capitalism was constituted by everything going on around Manchester and a few other hot spots in 1750, three percent compound growth rate was no problem. You're now looking at a situation where you're going to say three percent compound rate of growth on everything that's going on in East and Southeast Asia, Europe, North America and everywhere in the world. We're looking at a different kind of world.

The total economy back in, say, 1750 was about $135 billion. It was $4 trillion by the time you get to 1950. It's $40 trillion by the time you get to 2000. It's now $56 trillion. If it doubles in the next year, we're talking about $100 trillion. And by 2030, you're going to have to find three trillion employment, if you like, profitable opportunities for capital to operate at that point.

Now, there are limits, if you like, and I think we're hitting those limits environmentally, socially, politically. And I think it's time we started really thinking about an alternative. In other words, we have to think about a zero-growth economy.

AMY GOODMAN: What does that mean?

DAVID HARVEY: It means that instead of growing at three percent per year, you just keep it constant.

AMY GOODMAN: And how do you do that?

DAVID HARVEY: And that means a completely—it means it has to be non-capitalist, because that means there's not going to be any profit around for anybody to have. In effect, you're going to have to have a nonprofit economy. And how you do that, of course, is a big, big question. I'm not—I don't have the blueprint for it. But I think that this is one of the key questions we should be thinking about right now. And what disturbs me is we're going through this crisis right now, and we're not asking those kinds of big questions that we should be asking.

AMY GOODMAN: What do you make of the massive protest against the, well, smallest percentage of the bailout money, which is going to the executives, certainly something people can identify with?

DAVID HARVEY: Well, I got—actually, I got upset about all this fuss about the AIG. I mean, we're talking about $165 million in bonuses or 220? Last January 2008, the Wall Street bonuses collectively came in at $32 billion. OK. And at that time, two million people had already lost their houses. Figure, two million people have lost their houses; Wall Street rewards itself $32 billion. Nobody got angry about that. And I was extremely angry about that. It seemed to me this was class robbery. This is like the bankers going down into the hold of a sinking ship and grabbing all the gold and going up and getting on a lifeboat and then disappearing and then leaving everybody else on this sinking ship. And at that time, I thought that was outrageous. And that's $32 billion instead of this $165 or $235 million we're talking about.

That money is already gone. I mean, when this guy wrote in to the New York Times, kind of saying, "I'm not going to—I'm just going to give mine away"—he's going to give away $740,000 or something. And he said, "But my family is not affected." But there are people starving right now in many parts of the world. Children are starving because of this. Nothing's happening about that. And that seems to me—

AMY GOODMAN: So what's the difference between last year and now?

DAVID HARVEY: The difference between last year and now is that, actually, the thing has got much worse. I mean, the toxic assets, if you like, become more and more apparent. And we've had, of course, the destruction of the investment banks, Lehman going bankrupt and the others merging, and so on. So I think the difference right now is that Wall Street is clearly having to completely reconstitute itself.

But I don't think we should kid ourselves into thinking that actually there's not a lot of money—people are still making good money on Wall Street.


DAVID HARVEY: It's just it's consolidated now, as it were. We've got four major banks left in this country. And it's a tremendous centralization and consolidation of class power.

AMY GOODMAN: Professor Harvey, what is neoliberalism?

DAVID HARVEY: Neoliberalism, for me, was a political project, which formed in the 1970s. And it was a political project to try to consolidate and reconstruct class power. And it did it, if you like, through a whole kind of set of mechanisms about privatization, about free markets, individual responsibility, withdrawal of the state from social provision. But the state never withdrew from the economy. I mean, that's a myth. The state has been bailing people out all along. Actually, the savings and loan crisis, I mentioned earlier.

But as soon as the big guns get into trouble, the state bails them out. And this is what we call moral hazard, that actually because you're bailing out Wall Street all of the time, then Wall Street will take high risks. And they've taken immensely high risks over the last thirty years and again and again and again being caught out. And each time they get caught out, the state steps in and saves them. That's the connection, if you like, between the state and Wall Street. That's the connection that has to be broken.

AMY GOODMAN: What do you see as the role of social movements?

DAVID HARVEY: I think right now it's a desperate moment, in the sense that if we're going to come out of this crisis in any different kind of way, it's going to be because of the formation of very strong social movements that say enough is enough. We've got to change the world in a very, very different way.

Now, social movements of this kind don't sort of form overnight. They take a little while. I mean, it's interesting when you look back. In 1929, there's the stock market crash. The social movements didn't really start getting into motion until 1932, '33. It took about three years. Right now, I think we're in a legitimation crisis. They're trying to rescue the system as is. And I think more and more people are beginning to say this is an illegitimate system, and therefore we have to think about doing something different.

Out of that, likely to come, all kinds of different social movements. We have this movement, which is a relatively new movement, called the Right to the City movement. It's here in New York City, and it's several other cities in the United States. There's a national coalition. It's small right now, and it's getting its act together. But these kinds of things can grow very fast, very quickly. So there is likely to be many movements of that kind.

In other countries, there are already quite massive social movements. This country is a little bit behind on that trajectory.

AMY GOODMAN: And what would you identify as those massive social movements elsewhere?

DAVID HARVEY: In Brazil, for example, there are—there is a Right to the City movement in Brazil around housing provision and dwelling and so on. There's a landless peasants' movement in Brazil, which is very, very active and very successful in many of the things that it does. So, those movements are really very strong. There's a peasant movement in India, too, which is actually really quite, quite strong.

And so, I think there's a real moment here, where we also have to think about these things getting together globally, which is, of course, where the World Social Forum originated. And so, there are ways in which we can start to think about coordination between different parts of the world.

AMY GOODMAN: Professor Harvey, how does war fit into this? US is still pursuing the war in Iraq, though President Obama says that we will eventually withdraw there, but expanding the war now in Afghanistan, not just 17,000 more troops, then another 4,000—that made it 21,000—today the Pentagon asking for another 10,000 troops?

DAVID HARVEY: Right, right. Well, interestingly, there's two aspects to this. First, you know, since 1945, what you call the military-industrial complex, it's been a terribly important vehicle in American development. It has been the center of what we call military Keynesianism. I mean, it's the one sector where deficit financing was thoroughly permitted, and it was the one sector under Reagan that expanded immensely and has never been let go, in spite of the end of the Cold War. So there's been a very important economic function to what the military is about.

The second thing is that, as we've seen over the last couple of years, commodity prices are very unstable. And command over commodities and resources becomes absolutely crucial. So, in my view, a lot of the interventionism in the Middle East and elsewhere has been clearly built around US interest in controlling oil supplies. And it's not only about that, but it's very strongly connected with that, so that then arguments are made about, well, we've got to get rid of a dictator. Well, there have been plenty of dictators around the world the United States has not taken any notice of, because it didn't control oil. And so, the kind of war machine, if you like, and the covert machines starts to become very important in terms of maintaining corporate access to the resources of the world and, at some point, also to the labor resources of the world, not only the natural resources.

AMY GOODMAN: How do you see the US in relation to the rest of the world, the balance of power? US versus Europe, US and China—do you see China emerging as the major dominant economic power?

DAVID HARVEY: No, I don't see it becoming the major dominant economic power. I think there was this National Intelligence Council report, which came out last year. It kind of said, basically, the US is no longer going to be the dominant power in the world. It's going to be a very important player in the world, but we have to look forward to a multi-polar world, in which East and Southeast Asia, for example, is economically as powerful as the United States. The European Union, if it gets its act together, is likely to be as powerful as the United States. So the United States has to look towards a multi-polar world.

That's actually both unstable and potentially rather dangerous. Whether we like what the US has done with its domination, at least there was only the US versus the Soviet Union kind of world. When you start to look at the multi-polar world, you start to think back to what happened to the 1930s, when the groups decided they were going to go it alone and got into economic conflict between each other. And I worry about the future—

AMY GOODMAN: What do you mean, "the groups"?

DAVID HARVEY: At that time, the Japanese Co-Prosperity Sphere; Germany, with its own kind of interests; the British. And, you know, everybody was going it alone. And I think the threat of the G20 is what we're going to see as sort of a fracturing of the global economy along those lines. And that could be a good thing, in the sense that if there is fracturing and coalitions emerging at the same time, that's one thing, but if it turns into fracturing and then rivalries between the power blocs, I think that would be very dangerous.

AMY GOODMAN: Your assessment of President Obama?

DAVID HARVEY: I think he needs a really, really strong, powerful social movement behind him to do the things he really needs to do. Right now, he has to deal with Congress. And, you know, there's a group in Congress I would call the party of Wall Street, that is deeply implanted in the Democratic Party, it's deeply implanted in the Republican Party. And so, he can't do battle with Wall Street, given the significance of the party of Wall Street in Congress. I mean, for example, our New York senator, Charles Schumer, has raised immense moneys from Wall Street, and he's a great friend of Wall Street. And so, the Democrats are not going to go against Wall Street. And one way or another, the Republicans are not going to go against Wall Street. So. I don't know exactly where Obama would like to go, but certainly he can't go against Wall Street, unless a whole bunch of people really force him to.

AMY GOODMAN: Do you see neoliberalism as dead? And what gives you the most hope?

DAVID HARVEY: I don't see the neoliberalism as dead, if you say that neoliberalism is about consolidation of class power, because actually we're seeing the further consolidation of it right now, rather than the lessening of it. And that's what I—when I talk about the bank bailout, that's what it was doing. So I'm kind of concerned.

AMY GOODMAN: Were you for no bank bailouts?

DAVID HARVEY: Well, I was in favor of solving the foreclosure crisis. You see, if you've solved the housing crisis, the banks wouldn't be holding any toxic assets. If you had gone in and bailed out all of the people, there would be no problem on Wall Street. They wouldn't be sitting there with all the toxic assets. You wouldn't have the foreclosures. So we should have gone in there right at the beginning and actually held down the foreclosure crisis.

AMY GOODMAN: And why didn't they?

DAVID HARVEY: Because that would mean bailing out poor African Americans and people of that sort, and they're not concerned with that. They're concerned with protecting the bankers, not with protecting the people.

This then gives me hope, you see, because I think now that people might see it, that that is actually what's been happening over the last thirty years and is really highlighted now—I mean, it hits you in the face straightaway. You know, this is what's happening. And something different has to happen. Some sort of movement has to come out and say, "Look, enough is enough. We're not going to continue in this particular way."

AMY GOODMAN: Professor David Harvey, I want to thank you very much for being with us.

DAVID HARVEY: I thank you.

AMY GOODMAN: David Harvey is a Marxist geographer and distinguished professor of anthropology at the CUNY Grad Center. That's the City University of New York. The Limits to Capital, one of his books, A Brief History of Neoliberalism.