Tag Archives: finance
G-20 Nations: Race to the Bottom will Continue

G-20 Nations: Race to the Bottom will Continue

I have been writing about the G20’s austerity plans for the past few weeks (here and here for example.  Well, it has been approved by the G20.

I’ll be writing more about the austerity and other G20 declarations tomorrow.

Here is Dawn Paley’s excellent piece on the Toronto declaration.  Read the original from Vancouver Media Coop here


G-20 Nations: Race to the Bottom will Continue A critical analysis of the G-20’s Toronto Declaration

As the G-20 summit winds down behind the fences surrounding fortress Toronto, there are at least 560 folks in jail, and anyone left out on the streets is facing detentions, beatings, searches and arrests.

This is the context in which the Group of 20 gathered to write the Toronto Summit Declaration, a 27 page document released earlier this evening. An early critical reading of this text makes it evident that those who have taken great risk to mobilize against the G20 have done so on behalf of the health of communities, and the planet.

Because though the Toronto Declaration begins with a populist appeal to sustainability, job creation and financial regulation, it enshrines a commitment to force the poor and working class around the world to tighten their belts yet again as states implement strict new austerity programmes.

The Declaration proposes an ambitious new structural adjustment agenda, designed by the IMF and the World Bank, that aims to halve first world deficits by 2013.

Shoring up financial sector abuse of public funds is likely one of the most pressing concerns of publics, who have been denouncing the bank bail out all around the world. But the language in the Toronto Declaration does little to guarantee meaningful public oversight of the financial sector.

The Declaration welcomes the recently passed US Financial Reform Bill, which according to Newsweek “effectively annoints the existing banking elite,” without putting a cap on executive compensation. Nor does the bill crack down on the banks that are supposedly “too big to fail,” including J.P. Morgan, Goldman Sachs, Citigroup, Bank of America and Morgan Stanley.

Financial oversight will remain with elites, led by the IMF and other Multilatral Development Banks (like the Inter American Development Bank and the African Development Bank), which the declaration proposes should become “even stronger partners” in the future.

The Declaration indicates that G20 countries will pump $350 billion into Multilateral Development Banks, doubling their lending capacity, so that they can “focus on lifting the lives of the poor, underwriting growth, and addressing climate change and food security.”

The move towards putting MDBs on the front lines of global lending could be a response to the growing global rejection of International Financial Institutions like the World Bank and the International Monetary Fund. This shift is reminiscent of a move away from global trade and regional agreements like the Free Trade Area of the Americas and the World Trade Organization, and towards smaller regional deals and bilateral agreements.

The Toronto Declaration makes a point of noting that Haiti’s debt with International Financial Institutions will be cancelled, but avoids mention of the larger debt that the country owes to the Inter American Development Bank (IADB). Haiti owes less than $200 million to the World Bank and the IMF, while their outstanding debt to the IADB is upwards of $441 million. The IADB has also positioned itself to become the lead development bank behind the $10 billion reconstruction of the country.

In addition to an increased role for the IADB and other regional development banks, the Toronto Declaration promises more privatized “development financing” for low income countries. This could mean further subsidies for transnational corporations active in resource extraction and the maquila sector.

Language in the document around increasing global output, create tens of millions of jobs, and reduce global imbalances flies in the face of recommendations for countries with higher debt loads to continue a regulatory race to the bottom by “maintaining open markets and enhancing export competativeness.”

The Toronto Declaration also welcomed the launch of the Global Agriculture and Food Security Program, which proposes to create food soverignty between public and private partnerships. This flies in the face of demands from peasent groups, including Via Campesina, who stated at the end of 2009 that “The absence of the heads of state of the G8 countries has been one of the key causes of the dismal failure of [the November 2009 Food and Agriculture Summit]. Concrete measures were not taken to eradicate hunger, to stop the speculation on food or to hold back the expansion of agrofuels””

The Declaration asks that the OECD, the ILO, World Bank, and the WTO facilitate their version of events by having them “report on the benefits of trade liberalization for employment and growth” at their next meeting. States are cautioned to stick with World Trade Organization measures and avoid new “barriers to investment or trade in goods and services.” Items that potentially included among these barriers are new environmental legislation and new forms of taxation on corporate activity.

On the topic of climate change, G-20 countries that support Cophenhagen issued a weak call for other nations to “associate with it.”

G20 & deficits: Banks Cause The Crash, The World’s Poor Pay

G20 & deficits: Banks Cause The Crash, The World’s Poor Pay

G20 deficit cutting wrong approach to fix crisis

A major turn took place at the G20 finance ministers meeting in Busan, South Korea over the weekend, as the G20 reasserted deficit and spending reduction its top priority, marking the final step in the (re)triumph of neoliberalism as global economy’s modus operandi. Britain and Canada were the major proponents at the meeting of this deficit warrior approach to recovery while China has cautioned against too rapid an end to stimulus efforts.

This deficit reduction approach is extremely significant given that, following the economic crisis, the neoliberal model itself underwent an identity crisis, as many began to openly question the orthodoxy of deregulation, cutting spending and deficits at all costs, etc…   Even the most conservative governments, as a means to help build an economic recovery, advocated for fiscal stimulus (lower interest rates, increases in government spending to help bolster demand and reduce unemployment, etc…), and the G20s stimulus approach continued right up to April of this year, where  called for continued stimulus until the recovery becomes “more entrenched”.  With the G20 announcement, that approach appears to be over.

What is wrong with this switch to austerity?

There is an argument that this austerity is just bitter medicine that must be taken to cure the economy of its ills.   However, even if you are one to accept the idea that austerity is necessary at times to right the ship, Nobel economist Paul Krugman points out that this is clearly not one of those times.  The economy, though there are signs of recovery, is still depressed – bogged down by high unemployment in most of the largest economies, including the EU and the US.  And when the economy is depressed, slashing spending to reduce debt is both “an extremely costly and quite ineffective way to reduce future debt” because it depresses the economy even further and it reduces the tax dollars received (which could be used to pay down the debt in the future).

Krugman is not saying deficits should be ignored, just that it is wrong and counterproductive for deficits to be the sole focus.

Also, the austerity simply hurts poor (working or unwaged) and middle class people, and we can not lose sight of that. Having started with Greece, it seems that the plan is to go country by country, one-by-one, and force these measures which will diminish social programs, decimate the public sector and dramatically increase poverty and unemployment.

In fact, the G20 pointedly told indebted nations that they must ‘speed up’ their austerity drives.  And, just today, British PM David Cameron brought the point home, announcing his drive to cut the deficit in the UK through massive cuts.  He warned that Britain’s ‘whole way of life’ will change due to the most drastic public spending cuts in 20 years.

It is worth reflecting on the value an economic system that can continuously and callously demand more from its population, undermining their futures in the process, to pay for the sins of financiers whose risky speculation made them billions of dollars before the bubble burst.

Now it is on the people’s backs to clean up the mess.  It is post-crisis shock doctrine for all of us. A clear reason to challenge the G20 agenda.

Euro crisis and response: shock and awe

Euro crisis and response: shock and awe

A lot of the talk this past week has been on how to deal with the Euro crisis, and it will be a key topic at the G20 meetings.

The favored approach is to call out Greece as an example of bloat, cut state budgets, let markets work their magic, and do anything to keep the stock market on track. The 1 trillion dollars to offset the crisis is seen as swift action, but this is public money once again spent to ensure that private creditors are paid. It is always in the form of “we have to, or it will all collapse”, but shouldn’t we start looking at the root causes and long term-effects? What a roller coaster. And the ride has barely begun.

Here are a few articles for context:

  • Can the Euro be Saved? Germany (and its Constitutional Court), partly following popular opinion, has opposed giving Greece the help that it needs.

To many, both in and outside of Greece, this stance was peculiar: billions had been spent saving big banks, but evidently saving a country of eleven million people was taboo! It was not even clear that the help Greece needed should be labeled a bailout: while the funds given to financial institutions like AIG were unlikely to be recouped, a loan to Greece at a reasonable interest rate would likely be repaid.

  • Financial Reform “Fighting to reduce government budget deficits during the worst recession in over 80 years is not only bad, it is insane — unless you are an opposition political party trying to prolong the recession for partisan political gain.”

“Failing to provide fiscal stimulus today will prolong the recession, continue to depress tax revenues indefinitely, and increase the national debt over the long-run.”

Greek crisis background links

Greek crisis background links

Articles and links on the Greek crisis.

[*latest updated – June 29th, 2010]

Developments in Greece, such as the bailout, the forced austerity program, the protests and strikes, are being followed closely by the G20 as they try to mold the economic recovery. Greece is not in the G20, so they are unlikely to have much say in any G20 plans of their recovery.

This list will continue to be updated, so bookmark it and check back.

Broad background of crisis

Understanding the Greek debt crisis [audio]
Bankruptcy, massive protests and accusations of corruption have dominated the media’s coverage of the Greek economic crisis. Belt-tightening is the proposed solution. Costas Panayotakis disagrees.

Greece: Driven into Crisis
Highly informative background on the factors that led to the crisis in Greece. It looks at what is expected of Greece in order to receive the bailout orchestrated by the IMF and G20

Cutting Public Debt: Economic Science or Class War?
This is an excellent background on the ideological underpinnings of pushing for deficit reduction at all costs. It asks the fundamental question: “Is cutting the public debt really an objective economic necessity, or is it actually a deeply political stance, reflecting the interests of the business and financial élites?”

Greeks, Germans and Bankers: The Return of the Ancien Régime
The German press is saturated with reports intended to verify the myth of the slovenly, lazy and corrupt Southern European countries which virtuous and hard-working northern European countries mistakenly admitted to the European Union. The role of the most felonious corporation on the planet today is trivialized since the harmless fraud investigations in the US against the “mother of all racketeers“ (along with JP Morgan) are never reported in connection with their advisory and trading “services“ in Greece or throughout Europe. Yet there are numerous strands to the fabric of confusion being woven in the Greek dilemma. The criminals are at large and their business continues.

The protests

Clashes Break Out Once Again as Greeks Protest ‘Austerity’ Push – June 29th, 2010

Clashes have broken out between demonstrators and police at a protest against government spending cuts in Athens, the Greek capital.

Riot police fired tear gas at activists chanting “burn parliament” on Tuesday, just hours before politicians were to begin debating a pension reform to tackle the nation’s debt crisis.

The Greeks Get it
A wonderful article from Chris Hedges at Truthdig.com who argues that the Greek protesters  are doing exactly what the rest of us need to be doing – fighting back against austerity cuts. They are being put in place everywhere as the means to deal with the economic crisis (that we didn’t create), and the G20 agenda has these cutbacks at the top of the list:

“Here’s to the Greeks. They know what to do when corporations pillage and loot their country. They know what to do when Goldman Sachs and international bankers collude with their power elite to falsify economic data and then make billions betting that the Greek economy will collapse. They know what to do when they are told their pensions, benefits and jobs have to be cut to pay corporate banks, which screwed them in the first place. Call a general strike. Riot. Shut down the city centers. Toss the bastards out. Do not be afraid of the language of class warfare—the rich versus the poor, the oligarchs versus the citizens, the capitalists versus the proletariat. The Greeks, unlike most of us, get it.”

The international significance of the Greek general strike
[It is] a sign of coming class struggles in Europe and around the world…As speculation rises against Portugal, Spain, and other European countries, it is increasingly clear that workers around the world face a common enemy: a parasitic ruling class that has enriched itself through the bailout of the financial system and wants to enforce huge cuts in jobs, pay, and benefits everywhere.

Senior Greek Official: “We may have an uprising in the making”
“You write that – angry, angry, angry, angry,” said [Stella Stamou, a civil servant] after participating in one of the biggest ever rallies to rock the capital since the return of democracy in 1974. “Angry with our own politicians, angry with the IMF, angry with the EU, angry that we have lost income, angry that we have never been told the truth.”

Protests in Greece in Response to Severe Austerity Measures in EU, IMF Bailout [VIDEO]
Wonderful video background dispelling myths, discussing rise of right wing populism, scapegoating, and the protests blanketing the country.
“as is usually the case with the International Monetary Fund, it’s…an attempt to indirectly bailout the German banks, French banks, and European banks that hold most of the Greek debt. So it is a very brutal, unprecedented program.”

The Guardian and Independent weigh in: “Economic crisis sparks violent Greek rallies”
and “May Day clashes in Athens as belt-tightening policies are set to reverse rights won by workers over 30 years”

Understanding the economics in Greece

The Eurozone Crisis: Macroeconomics And Class Struggle
History of the crisis and the sequence of events since October 2009 that led to it. Also looks at the underlying macroeconomic causes.  A bit of work for the those not inclined to economics, but it’s a good place to get a detailed understanding of the numbers and worth the effort.

Greece’s debt must be restructured
The Greek government is being asked to implement austerity measures that will cause a major decline in incomes and employment not just now but in the foreseeable future, and which will not correct the existing imbalances but actually worsen them.
The heavily-indebted poor countries (HIPCs) of Africa could tell the Greeks a thing or two about this process.

Canadian response – Carney, Harper worried by Greek debt crisis
Wider emergency would delay rebound of fragile economies, increase global borrowing costs, central bank warns.
The G20 is nervous about the Greek crisis and they are trying to find ways to stem it in their interests.

No Wonder the Eurozone is Imploding

Greek debt crisis: Germany would make money from bailout
The bailout proposed (now reality) for the Greek debt crisis would actually earn money for Germany and other EU lenders.

The Inevitability of Greek Default

The government subprime bomb continues smoldering

Greece: The European Union’s Dangerous Game
The EU’s plan for Greece guts Greek society, but sets up the same crisis to happen again.
The problem is one of irrational economic policy. “The projections show that if their program “works,” the country’s debt will rise from 115 percent of GDP today to 149 percent in 2013. This means that in less than three years, and most likely sooner, Greece will be facing the same crisis that it faces today.”

“Thumbs Down” on EU Bailout: Why Rescue Bankers?
No country large or small has managed to close a fiscal gap as large as 10.9 per cent  of GDP (which is what Greece is being asked to do.) It’s cruel, especially in an environment where deflation is gradually tightening its grip. Greece needs counter-cyclical fiscal stimulus to get out of the hole its in and to grow its way out of recession.

The austerity plan

Greece: List of new austerity measures
A full compendium of all of the measures – it’s severe to say the least.

No analysis of ‘Greeks bearing debts’ story
It’s all about supporting European bondholders over the people of Greece. “In an unprecedented move, the ECB has agreed to guarantee the value of debt issued by euro-zone members, and to intervene in bond markets as necessary. The EU has mobilized loans and credit facilities of nearly 1 trillion euros to support the European bond market.”

Greece’s George Papandreou announces €140bn bailout deal

A Baltic future for Greece?
Latvia and Estonia show us what Greece may look forward to if it follows the advice it gets from the IMF and European Union

*The Heresy Of The Greeks Offers Hope
Another fine challenge to the orthodoxy that Greece is a ‘junk country’ with a ‘bloated public sector’ that must be taught a lesson through deep cuts.  He dismisses the idea that ordinary people paying the debts of crooks is “fiscally responsible” and compares the demands on Greece to the UK’s neoliberal austerity program of the past 30 years.


Anti-Authoritarian Economy in Greece
A look at some of the alternatives being proposed by anti-austerity organizers

G20 bank tax fallout: What happened, who’s happy, who’s not

G20 bank tax fallout: What happened, who’s happy, who’s not

The bank tax idea have fallen off the G20 radar a bit with Canadian finance minister Flaherty’s ‘victory’ at the recent finance minister’s meetings. There is an uncritical sense in the news that Canada has won something big here by fighting the tax and getting some backing from other G20 countries, but not everybody agrees. Let’s do a brief rundown of who is celebrating and who is not.

Who’s happy

Canadian Banks
Domestic banks welcome global bank tax opposition

The Securities Industry and Financial Markets Association (SIFMA)
SIFMA Statement on IMF Bank Tax Proposals
This the central US/Can lobby association for the financial industry. Here’s their membership. And to get a better sense of them, they are also considering suing the Obama Administration for his own US focused bank tax proposal.

Canadian government itself
Canada’s banking system a G20 model: PM

And, in case you are wondering where strategy is clarified and decisions are made, it’s not Parliament, it’s here at the G8/G20 business summit Also see, the Chambers of commerce set agenda for G8/G20 summits

Who’s not

Walkom: Canada’s myopic approach to bank taxes‎.  “a financial meltdown anywhere in the globe can harm even the most virtuous of nations. Canada, whose entire manufacturing sector was zapped by the U.S. mortgage crisis, bears witness to that…if Canadian banks are as conservative as they claim, speculation taxes shouldn’t much affect them.”

G20 shuns bank tax: Jim Flaherty’s “victory” leaves taxpayers holding the tab. Excellent analysis from Mel Watkins

It’s time for high finance to come to the rescue.  If social and political pressure from around the world can build awareness of what this amazing initiative represents, much bigger players than Harper might make some real progress.

Bottom line: Canadian banks should pay their fair share. Financiers are economically and morally obliged to make a larger contribution to the cost of running our government.

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