Brisbane

Making Sense of the 2014 G20 Summit


Jon Kofas*

Kokomo, USA, November 17, 2014 (Alochonaa):On 16 November 2014, the G-20 leaders issued a final report from Brisbane Australia. After some disagreements about what topics the conference must include besides economic ones, and after bitterly criticizing Russia as one would expect from a US-EU dominated group, the G-20 reached a number of conclusions that sound well enough on paper. Turkish Prime minister Ahmet Davutoglu caused a bit of stir when he argued there was an absence of discussion on essential political matters interconnected with the world economy. He also noted that 20 nations essentially decide the fate all of the rest without consultation, implying the rich decide the fate of the poor.

The core group within G-20 is made up of the G-7 that prevails in its views and for that reason the meeting is always a success for the richest nations. Judging the G-20 conference from the broader perspective of the middle class, working class and peasant interests round the world, G-20 has very little to offer. No matter what the final wording about G-20 goals, the purpose is never to discuss horizontal economic development geared to benefit the broadest possible segments of the world’s population across the globe, but vertical economic growth intended to help keep capital concentrated in the strongest banks and corporations. Because they are “too big to fail”, the strongest banks and corporations, most of them sheltering money in various tax havens like Luxemburg, are the real winner of the meeting in Brisbane, just as they have been the winners of all meetings in the last eight years.

While everything from food security to global warming have been core issues, the G-20 want to make certain that these are addressed within the context of neoliberal policies and continued globalization. Before I analyze the goals of the G-20 it is important to have an overview of the group’s short history and its purpose for existing. Under the leadership of German finance minister Hans Eichel, in 1999 the idea was born to have consultation of the world’s 20 richest nations. The G-20 represents 87% of the world’s wealth, 78% of the world’s trade, and two-thirds of the world’s population.

The first meeting took place in 2008 amid the US-based recession where finance ministers and central bankers were as committed to neoliberalism and anti-Keynesianism as they were in Brisbane. The G-20 always focuses on global governance under a neoliberal model of economic integration that the richest nations pursue with the help of various international organizations like the IMF, OECD, etc. In so far as the impact on the banks and the corporate world which governments of the richest nations want to maintain healthy, G-20 is just another international coordination-management mechanism to reinforce the neoliberal model under globalization.

The goal is never to address issues pertaining to human rights in all countries and not just the ones the US targets for its own political reasons. There is not much about social and economic inequality and social justice in general because these issues clash with the neoliberal model that the IMF, World Bank, OECD and other international organizations espouse. Nor is there much concern about the question of democratizing society because as long as there is a healthy banking and corporate sector. Political and social issues are only significant to the G-20 if they impact the banks and corporations and/or the political system that helps to sustain them for the duration. In other words, the G-20 representatives confer to make sure that governments continue to support the corporate welfare state.

It seems that the G-20 have swept under the carpet the underlying causes for the last recession that started toward the end of 2007 in New York (Lehman Brothers) and spread to the rest of the world. Just a few years ago, the US and EU leaders were crying out for structural reforms that would not permit a repeat of the decadent and corrupt banking-insurance-investment sector crisis that took down with it the world economy, put enormous downward pressure on middle class and working class living standards and raised unemployment to double-digit levels in much of the Western World.

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It is indeed rare in 2014 to hear elected officials speak about structural reforms that would place greater state regulation and controls over a neoliberal model that the political and financial elites do not question. Brisbane did raise the issue of everyone paying taxes and trying to fight corruption, but this was necessary to be addressed so people continue having faith in the system that brought us the banking crisis. Against the background of a revived banking and corporate sector, the talk now is how to proceed with even greater vertical growth that concentrates wealth because capital concentration that Keynes once argued was the root cause of the problem the neoliberals now see as the panacea.

Even after the latest revelations involving corporations and individuals sheltering money in Luxemburg and other places with offshore accounts so they would avoid paying taxes in their own countries, the EU remains silent. This is because EU commission president Jean-Claude Juncker is also the prime minister of Luxemburg. How can the ordinary person have faith in capitalism and democracy where the inexorable link between the political class and the economic elites converge and they reinforce each other so they can maintain a system catering to the interests of the rich through legal and illegal practices? What then is the G-20 but an international system of managing wealth for the richest countries and richest people in the world?

The Bretton Woods system that the US-led coalition established in 1944 with the creation of the International Monetary Fund and World Bank was to help manage the world economy to the extent possible through fiscal, monetary, trade and investment policies. Although the capitalist system has built-in cycles of expansion and contraction owing to market saturation and concentration of capital, the state is able to do some things to help manage the “free enterprise” system by injecting more liquidity, easing on taxes of the mass consumers and collecting higher taxes from the wealthy, providing public spending as a stimulus to growth to fill the gap in private investment.

Besides the issues mentioned above, there are even larger ones that include international coordination on energy and environmental policy, creditor countries providing funds to debtor nations to stimulate growth, and limiting public and private debt in the international economy when inflation goes out of control while pouring more credit when there is contraction leading to deflationary conditions and high unemployment. In all cases the ultimate goal is not just saving the capitalist system under corporate welfare, but also saving it while maintaining an elected political regime in which the masses have confidence and do not question to the degree of demanding the end of capitalism as a socially unjust system.

The Keynesian model of the New Deal in the 1930s and other models of quasi-statism since then managed to accomplish the goal with some degree of success. However, all of this came to an end when the UK and US in the 1980s decided to abandon the Keynesian model and embrace the neoliberal model that would essentially begin to chip away at the social safety net different governments had built up for decades. It is not that world political leaders, central bankers and analysts who take the time to study the issues do not know about the shrinking middle class in the West, about high unemployment and high structural underemployment especially in the EU. Treasury Secretary Jack Lew has spoken of an EU lost decade, as have the International Labor Organization, the OECD, and even the IMF. Although they agree about the “lost decade” and high youth unemployment, they have not and will not deviate from neoliberal orthodoxy and corporate welfare capitalism that creates and perpetuates these conditions.

The G-20 in Australia announced that the first conclusion they reached was to work toward higher living standards and lower unemployment. Clearly, this is a lofty goal with which no one would argue against, but how to reach the goal is the essential question. Recognizing that the global recovery is very slow, the G-20 concluded that consumer demand is part of the problem. But it is austerity policies that the IMF and the G-20 governments support which led to the slashing of consumer demand because the goal was to strengthen currencies and bring inflation under control. So what does the G-20 propose? Strengthening international organizations that are fully committed to neoliberalism and austerity; a solution that has proved it concentrates capital, raises unemployment, and creates socioeconomic and political polarization.

Stressing that debt-to-GDP ratio must be sustainable the G-20 agreed that a more flexible fiscal policy is in order to address deflationary pressures. However, this means something different for every country – Japan is at 200% debt-to-GDP ratio and Portugal at 80%, but it is Portugal that must suffer fiscal restraints and be placed under IMF austerity, not Japan that has a reserve currency and enjoys monetary and fiscal sovereignty. Portugal along with the rest of the Southern European countries are in essence monetary and fiscal colonies of Germany determining policy across the board for them. When the G-20 comes along and proposes a cookie-cutter solution that pertains to all countries from the richest to the poorest, the conclusion is that such a solution could not possibly best serve both with different abilities and needs.

Another goal of the G-20 is to raise the GDP of its member nations collectively by 2% in the next four years. A 2% growth rate may be just great for North America, Australia, Japan and northwest Europe. However, 2% hardly addresses problems for the rest of the world coming out of a deep recession and need growth rates above 5% to reduce unemployment and raise living standards that have been dropping in the last six years. One could argue that $2 trillion is a huge figure in GDP growth by 2018, until we realize the world GDP is about $73 trillion. The 2% solution was deliberately modest because the neoliberals want to maintain a regime of monetarism that keeps inflation low, unemployment high and wages low.

A commitment to infrastructural development is another goal of the G-20. This is indeed a positive step toward stimulating jobs growth. However, handing out out contracts in many G-20 countries simply link corrupt politicians to corrupt contractors that accounts for a clientist system. Advocating privatization, neoliberals overlook the reality of how the economic theory actually works in practice and what narrow interests it serves, arguing that it is best for all of society. As a political phenomenon, clientism in G-20 and other countries tends to retard economic growth and development because funds do not go for their intended purpose, thus we have the phenomenon of parasitic capitalism.

Foreign investment is another G-20 goal that does not really work in practice as it does in theory. For example, investing in Turkey is hardly the same as investing in Australia where everything from the bureaucracy to labor and environmental laws are very different. It is one thing to state that trade and investment will deliver quality jobs, and another to realize that such jobs differ substantially from one G20 country to the other, and especially in developing nations. Along the same lines of a gap between rhetoric and reality, G-20 stated that they wish to reduce “the gap in participation rates between men and women in our countries by 25 per cent by 2025, taking into account national circumstances, to bring more than 100 million women into the labour force, significantly increase global growth and reduce poverty and inequality.”

Who in the world would be against such a goal? However, this is not very different from the UN goal to reduce world poverty in a set timeframe. This is just more lofty rhetoric that actual policies the G-20 advocate cannot possibly realize. In short, the contradiction of corporations chasing cheap labor invariably found in women in many countries is a reality of the capitalist economy and unlikely to change very much at all with rhetoric. That the G20 mention it as a problem simply confirms the reality of inequality the marketplace creates. The same holds true for youth unemployment that G-20 agreed to reduce. If neoliberal policies are the ones creating youth unemployment in the first place, how can the root cause to the problem be the solution? Considering the G-20 refuse to change these policies, I fail to see how there can be a radical reduction of youth unemployment no matter how much progress there is in science and technology.

With all of the emphasis on creating jobs and higher living standards one would think the G-20 conference was convened by governments interested in social justice. It is well known to all of these governments that small and mid-sized businesses create most jobs in an economy. It is true that the definition of small and mid-sized business is very different in the US than it is in South Africa, but the model is the same.

Under globalization, the policies of neoliberalism and capital concentration destroy small and mid-sized businesses. Therefore, we are left with higher unemployment and structural underemployment, wider rich-poor gap because of the shrinking middle class and people becoming apathetic about their institutions because they represent the rich. The G-20 conferences are intended to strengthen a system of geographic and social inequality on a world scale. Toward this goal they are a success. However, leaving behind a society where more and more people feel that the state is violating the social contract intended for the welfare of all will entail social unrest and this would mean that elected governments will be using more coercive measures not very different from those of authoritarian regimes.

*Jon Kofas is a retired Professor . He has published many works including; Independence From America: Global Integration And Inequality, Under the Eagle’s Claw: Exceptionalism in Postwar U.S, Greek Relations and The Sword of Damocles, and The IMF, the World Bank, and U.S. Foreign Policy in Colombia and Chile, 1950-1970.

** Alochonaa.com is not responsible for any factual mistakes (if any) of this analysis. This analysis further is not necessarily representative of Alochonaa.com’s view. We’re happy to facilitate further evidence-based submissions on this topic. Please send us your submission at alochonaa@gmail.com

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Categories: Brisbane, Economic Inequality, G20

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