G20 Breakdown

Above is Naomi Klein on Democracy Now on the G20 plan to cut deficits in half by 2013.

“What actually happened at the summit is that the global elites just stuck the bill for their drunken binge with the world’s poor, with the people that are most vulnerable,” Klein says.

As I described (G20 and Deficits) in the week’s leading up to the G20 summit, the push was for austerity and cuts to social spending, regardless of how much it would hurt the poor and could easily, according to some economists lead us to a new depression.  Canada (with France, Britain and Germany, among others) led the charge.  Well, it happened.  Austerity reigns.

Here are a number of excellent articles on the aftermath of the G20 meetings themselves.

Sticking the Public With the Bill for the Bankers’ Crisis How else can we interpret the G20 communiqué that includes not even a measly tax on financial transactions?

As Canada’s Democracy Trembles, a New Global Architecture Emerges

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

The G20’s prescriptions for the global crisis will only worsen the situation for Africa

Bank lobby says no to G20 reform

I dug up this nugget from a couple of weeks ago – it seems that banks are back on the offensive – despite having caused the economic crisis.

The Institute of International Finance (IIF), a bank lobby group representing over 400 companies, said “a need to hold more capital, pay more taxes and other possible reforms could hit economic growth hard.”  Thus, they urge the G20 to back off on regulation and reform. Convenient.

The G20 has certainly left the door open for this.   It’s reorientation towards deficit cutting to satisfy financial markets, as well as the waning of G20 discussion of the bank tax, are both indications to financial institutions that they are in the drivers seat and might as well start driving.  The banks know that G20 governments are already on their side and willing to give them what they want.

This is all very troubling, and says a lot about the extent to which we are held hostage to those that created the economic mess in the first place.  If reform of any kind will hurt growth, doesn’t that mean we have set up a system in which we are handcuffed from doing anything that banks don’t want?  Isn’t it time for a fundamental rethink given the deep crisis that the banks put us in?

There were dissenting voices at the conference where the IIF made its push against reform.  “We find ourselves in a situation eerily reminiscent of the 1930s,” billionaire U.S. investor George Soros said. “Many governments have to reduce debt under pressure from financial markets. This is liable to push the global economy into a double dip.”

G8 countries have fallen $10B short of commitments: report

The report from Oxfam said the Group of Eight countries account for about 70 per cent of official development assistance, suggesting the G8 share of the $10-billion shortfall from 2005 summit pledges in Gleneagles, Scotland, is about $7 billion.

Given circumstances, there is a deep need for this aid, as it represents, in the words of Oxfam’s Mark Fried,”vital medicines, kids in school, help for women living in poverty and food for the hungry”

Calls for the aid must also come with demands for economic justice and autonomy. Trade and investment rules are stacked against the poorest countries of the world and then the G8 actively works to undermine self-sufficient initiatives puts forth by southern countries.  Then they offer aid where they get to fully control the agenda and use it for political purposes (‘you want aid, do this…’). And they can’t even fulfill those aid commitments.

The money talk on the inside leading up to the G20 summit

• The G20: Fiscal Austerity or Coordinated Recovery? Excellent backgrounder by Andrew Jackson on the ‘state of play’ leading up to the summit, on whether countries should be working to expand demand (stimulus) or contract (ie spending cuts, deficit reduction).   The overall push is for deficit reduction as I have written about here, but some countries are going to have to expand domestic consumer demand in order for there to be a market out there.  The US has traditionally played this role, expanding deficits and credit to ensure growth in consumer demand, but there are signs that the U.S. may end this role at the G20.  Which countries might take it on?  Will it be the ones with large surpluses (esp. China) who can handle it, but may not want to?

• China doesn’t want the G20 to chastise them about their currency valuation (background here), and warns that focusing on them could derail the G20.  China also reiterated their warning about over-focus on deficits at the G20 and that stimulus should not be fazed out all at once.    Background on the G20 renewed focus on cuts and deficit reduction and the serious repercussions that will likely have for the world – here, and here.

• Canada wants the reform focus at the G20 to be on adjusting bank capital and leverage standards to reduce risk and increase solvency.  Canadian Finance Minister Jim Flaherty said this is “the main issue, we shouldn’t be distracted by side issues”.  By ‘side’ issues, he is clearly making another push to keep any form of  bank tax or levy off the agenda and quite possibly might also be hinting at not letting climate change get in the way either.

Other G20 news:

• Toronto Community Mobilization Network convergence space grand opening – Thursday June 17th

• Speak the f**k up. Great event Wednesday night in Toronto breaking down Canada’s G8 maternal health plan.  Watch panelist Antonia Zerbisias

• Toronto hotel workers plan strike:  The workers’ union is calling for the parent company, Accor to respect a previously signed trade union rights agreement.  Be there anytime all day to support or at 4:30 on June 24th for a planned rally!  Also, here is an audio interview on chronic understaffing at luxury hotels.

• G20 & capitalism – see, the G20 is bringing economic benefit to some people in the city:

• But I’m just a sapling. You’ve no doubt heard about the trees being uprooted in the security zone for the G20. But here it is again, humourously…

I noted in a previous post that esteemed economist Paul Krugman is against the deficit cutting orientation of the G20,  arguing that it will lead to a lost decade of extremely high unemployment.

An article by market analysts Marshall Auerback and Rob Parenteau, “The G20 votes for global depression” takes the argument even further, suggesting that deficit mania at this time will lead to a new Great Depression.

Their contention, like many others (including Krugman), is that government must ‘increase spending (either directly or via tax cuts) to arrest the downward spiral of private spending’.

However, instead of increasing spending, G20 governments are cutting it to pay down deficits. The authors argue that given current levels of high unemployment, these spending cuts will undermine the ‘reasonable level of demand’ for goods and services necessary for recovery.  This will cause the economy to plunge further into recession and ultimately into sustained depression.

All, in the words of the authors, to serve the bankers’ interest.

The article ends with this troubling warning:

The more the bankers’ interest is served, the worse and more debt-burdened the economy will become. Their gains have been bought at the price of domestic austerity. The G20 Communique (PDF) irresponsibly and immorally ratifies this disgraceful state of affairs and we will all pay a severe price going forward.

The G20 policy makers, and their allies in finanzkapital, are like vultures picking over a dying carcass. And the rest of us are helpless because the institutions designed to serve broader public purpose have become subverted. We are making bond holders and big bankers whole at the expense of impoverishing the entire society.

It is hard to avoid drawing very dark conclusions. Our policy making elites have discovered that the underclass doesn’t matter politically anymore, so why respond to it? That indifference is extending to the middle class. Ordinary, struggling folks are all becoming so demoralized that they present:

1. No voting threat, because none of the major political parties in Europe or the US genuinely represent their interests (and haven’t for years). There have been, as a result, no political price to pay for such shameless predatory capitalism.

2. They present no power threat, because they have been systematically destroyed over the last 30 years and what is happening now in Europe represents the final assault on the residue of the 20th century welfare state (the US social safety net eviscerated well before this).

The message from the G20 seems to be this: We’re through with domestic spending to employ the underclass.

There are decent jobs for about 20% of the working-age population in the west. And for the rest? Poverty a la South America. It is extraordinary that voters around the globe continue to tolerate this corrupt state of affairs, but it’s getting increasingly hard to see a way out.

Proponents of the global bank levy tax (distinct from the Financial Transaction Tax or ‘Robin Hood Tax’-background here-which was already off the G20 table) suffered a major setback this past weekend in Busan, South Korea. The G20 finance ministers decided to drop the tax, under pressure from its chief opponent, the Canadian government, as well as Australia, Japan, and Brazil.  The decision was based on the usual argument that the levy would punish banks that had acted responsibly, and that other mechanisms such as increased capital requirements were more appropriate for dealing with future bank crises.

The pronouncement does not preclude countries from creating their own bank tax, and the G20 has stated that it is even willing to provide institutional support for countries to do so. However, without the buy-in across the board that a G20 agreement would have provided, it is difficult to see how a bank tax within one nation could work.  If taxed with in a given country, banks would have an incentive to begin shifting investment towards those countries that rejected the tax.

Instead, the focus must continue to be on building the global tax across the G20.  It is possible it will be discussed at the November G20 meeting in South Korea, especially if, rather than folding from this setback, civil society continues to amp up the pressure.

Instead of accepting defeat, activists can use this time before the Seoul summit to clarify issues and address concerns that were raised in the past few of months. Public awareness of both the levy and the financial transaction tax has increased significantly, and it moved further up the G20 agenda than anyone could have imagined even a year ago. Though the bank tax has been dropped off the agenda for the Toronto summit, the fight will continue.

One additional thought, and this is all speculation.  It seems to me that the levy probably never had any chance of passing at the G20 meeting in Toronto, but that the debate served at least two purposes for the G20 leaders.

First, Canadian Prime Minister Stephen Harper can say he was a strong crusader for Canada, was up against much opposition, stuck to his principles, and then won against all odds!  The papers even wrote about it in this manner – as a victory for Canada [though it actually isn't].

Second, the UK and French governments, under great pressure from their electorate to do something about the banks (and dealing with a much stronger bank tax movement), can say they fought hard and fought to the wire, but were unable to convince enough countries to join them to get the bank tax going.  They look good, and can now get at the business at hand: gutting social spending and fighting deficits at all costs.  The UK’s David Cameron already began the process this week.

Again, this is speculation and I will dig for more info, but it makes some sense, no?

More bank tax background here

[Photo from: www.flickr.com/photos/oxfamsol/sets/72157623566580145/show]