• Welcome to Community Labor News Forum. Please login or sign up.
July 14, 2020, 11:47:23 pm


If you are a member of the original vbulletin forum and wish to post with your former username you'll need to Reset your password  If you need help remembering your username or the email address you used to register, please feel free to contact Tony using the CLNEWS Contact Form

April’s Meeting of the Thieves Won’t Solve the Problem

Started by Richard Mellor, March 23, 2009, 05:34:37 pm

Previous topic - Next topic

0 Members and 1 Guest are viewing this topic.

Richard Mellor

The market economy has seen its best days.

Richard Mellor
AFSCME 444 retired

The leaders of the world's 20 largest economies will be meeting in London in April in an effort to avert disaster and put the present economic crisis to rest.  Almost everyone has heard of the G7, or Group of seven, comprised of the US, Britain, France, Germany, Italy, Japan and Canada.  The finance ministers of these countries meet a few times a year to discuss economic policies, or more accurately, to figure out how to plunder the world's wealth without too much trouble from the workers who create it. They are desperately trying to form some sort of global governance in a world of competing nation states.

The fact that the Group of 20 is taking center stage reflects the change in world relations since the collapse of the former Soviet bloc.  Most threatening for western capitalism is the rise of Asian nations, in particular China and India.

Even before the meeting has begun there are increasing tensions between the different nations represented.  A hot issue is the present crisis and how to avert further damage and the social unrest that will inevitably accompany it.  Working people often feel that these issues, economics and politics, are beyond us, are too complicated for us to worry about. We are discouraged from delving in to this realm. But we do run families, pay bills, and handle the finances of everyday life, so we are economists in our own right.

A major source of the tension is what the strategists of capital call "global imbalances". Some countries have surpluses and others have deficits, a deficit nation being one that spends more than it takes in and has to go in to debt to maintain its living standards. The US has huge deficits; it is a debtor nation..  The US, prior to the present crisis had to borrow about $3 billion a day to maintain its consumption.  It gets this money, or a huge portion of it, from China, a country that has huge reserves, around $2 trillion or two thousand billion.

The capitalist class in the deficit countries, notably the US, says that the problem is that the Chinese save too much. The Wall Street Journal reports today that Mervyn King of the Bank of England and Ben Bernanke of the US Federal Reserve bank are arguing that it's not just greedy bankers, American consumers or lax regulation that has caused the present economic crisis, one of the major causes is the Chinese who, through growth in exports and currency manipulation have "socked away trillions of dollars in the form of foreign currency reserves".  (they say Asian nations and would include India but China is the elephant in the room).*  

The Chinese have lent much of this extra cash to the US.  It "flooded" western markets with cash they say and, as with any other commodity, if there is lots of it, the law of supply and demand kicks in and the price of it decreases. The Chinese are to blame for all this cheap money, they argue.  

It's somewhat comical to read the way they express themselves.  Western Bankers stepped in  and"..took advantage of these global imbalances by putting savers and borrowers together" "Debt was building up at an alarming rate" the WSJ states.

We know the consequences of this. A debt bubble built up and eventually burst leading to the present state of affairs.  Americans were living beyond our means.  The Wall Street Journal says, "..if some way can't be found to get more Asians to save less and Americans to save more, economists warn that the world will inevitably find itself in trouble again."  

This is laughable coming from the US where every minute of every day some attempt is being made by the capitalist class to get us to part with our hard earned money; we live in a 24-hour marketplace here.  The fact that people don't have money or want to save it doesn't matter.  If you don't have money, they'll lend it to you.  In fact, they spend millions in advertising convincing people that you are a failure if you have bad credit.  Having bad credit can prevent you from getting a roof over your head.  Credit cards are the key to freedom we are told.  Immediately after the attacks of 911 we were encouraged to, "go shopping". We are bombarded every minute of every day with mind numbing ads telling us to own this or that device that will make us a better human being, that will get us the girl, or will ensure we have a great sex life.**

The Chinese bureaucracy, the capitalists that call themselves communists, have responded in kind. It's not their fault, they say; Americans need to curb their spending habits.   The problem with that argument is that the growth in China that has created a new rising bourgeois and middle class is largely due to the export trade, much of that bolstered by Americans. If the Chinese bureaucracy lent less money to the US, that money could be spent on improving the lives of the Chinese people, many of who still live in abject poverty. But if they lent less, the US would buy less, and they would end up with less.  Doesn't that make sense?

Asian capitalists and their governments are a bit peeved.  They are also not stupid.  They lived through an economic crisis of their own ten years ago.  At that time it was them that were living beyond their means. Not in quite the same way we were.  Beyond means in some countries can mean spending too much on food or medical care for the poor.  The important point is that they were beholden to western capitalists who lent them the money they needed to run society basically.

As debt built up, western investors were afraid that they would not be able to pay back their debts so they fled, taking their capital with them.  Actually, it was the capital that fled.  Just like the absentee landlords in British occupied Ireland, investors are absent from the arena they profit from; it is their capital that is there.  This flight of capital led to currency devaluations and a recession with the massive poverty and misery that accompany these by products of the market economy.

The Asian capitalists decided it would be best to be a lender of money rather than a borrower of it. The danger of social unrest concerns them too. They kept their currencies low which boosted exports and built up a big bank account or huge foreign currency reserves. The only difference being, and a difference that their western counterparts consider unfair play, is that the capital accumulated is not in the hands of private individuals but in the hands of the state.  But for the weaker capitalist class of the former colonial countries, this was the only alternative left to them they felt.

So the G20 meeting is all about trying to figure some way out of all this.  The old G7, the western capitalists and Japan that have had the ball to themselves, have to share it now, that is for sure.  The Chinese and most likely India, will want more say in international institutions like the World Bank and the IMF.  

The western capitalists want the Chinese to spend some of that money.  After all, they are taking great risks and increasing class antagonisms at home by pumping trillions of dollars in to their economies in an effort to boost demand. This is money that will have to be paid back by US workers and the middle class in the form of tax increases and cuts in services; in other words, a lower standard of living.  As the Wall Street Journal correctly points out, this inflames protectionist sentiment from western capitalists as it amounts to them taking all the risks, incurring class hatred and creating social unrest aimed at them as they subsidize their competitor's exports.  They will be forced to divert this class anger towards foreigners like the Chinese.

The problem is that there is no way out of this.  Protectionism, nationalism as well as inflation are major dangers ahead of us.  What an absurd situation.  We Americans are told to save.  But we are also told to spend-----and told, and told.  Not only do we need not spend, we need not lend.  The massive surplus of capital, the surplus wealth created by Labor, is enough to provide every human being on the planet a decent life.  Movies like Slumdog Millionaire would be a thing of the past.  But capitalism works this way; it is anarchy of the market place.

The Wall Street Journal quotes Richard Portes, professor of economics at the London Business school and president of the Centre For Economic Policy and Research.  Professor Portes seems to make some sense when he says that, "..bankers have always been avaricious."

Wow!  I wish I had went to university.

Maybe that United We Stand stuff they bombard us with whenever there's a war or when we "all" have to sacrifice to make the economy better is not the best thing for us.  After all, it means we are united with other Americans like bankers, or even coupon clippers like Warren Buffet.

I think uniting with the Chinese worker in that factory in Shanghai is a better deal for me.

•   Imbalance in Nations' Savings Clouds Forecasts For Recovery: WSJ 3-23-09
** There is a reason for this obsession with selling commodities that, when understood makes perfect sense to working people but space puts it off for another time.