G20's pledges will worsen crisis for the poor

March 21, 2009

A March 20 Sydney Morning Herald article reported that the International Monetary Fund (IMF) is now predicting that world economic growth for 2009 will be negative for the first time in more than 60 years — shrinking by as much as 1%.

This is a further drop in expectations from the IMF's January 28 estimate, which put expected global growth at 0.5%.

On March 14, in this gloomy context, finance ministers and central bank governors of countries from the Group of 20 met in the English town of Horsham to prepare a framework for the meeting of G20 heads of government. The meeting will be held in London on April 2 and will seek to combat the crisis.

The G20 groups together the 19 largest national economies, plus the European Union.

"We have taken decisive, coordinated and comprehensive action to boost demand and jobs, and are prepared to take whatever action is necessary until growth is restored", a communique released by the finance ministers declared.

The communique explained how the G20 intended to achieve this aim: "Our key priority now is to restore lending by tackling, where needed, problems in the financial system head on, through continued liquidity support, bank recapitalisation and dealing with impaired assets, through a common framework.

"We reaffirm our commitment to take all necessary actions to ensure the soundness of systemically important institutions."

In plain English, this means the G20 finance ministers committed to continue giving taxpayers' money to the corporate financial institutions responsible for the crisis in the first place.

The ministers and bankers also committed their respective governments to continue to take responsibility for the financial institutions' unprofitable ("impaired") assets — using taxpayers' money to buy worthless assets to compensate these institutions.

The logic behind this was explained in another statement released by the Horsham meeting: "Our key priority now is to address the uncertainties around the value of assets held on banks' balance sheets, which are significantly constraining banks' lending.

"This uncertainty, and the extent to which banks are holding capital to protect themselves from further potential extreme losses, is preventing them from restoring lending to business and households, with damaging consequences to our economies."

However, this observation, that the banks were holding capital and not restoring lending, comes after trillions of dollars have been spent by governments bailing out financial institutions in Europe and the US.

As private corporations, they may spend their taxpayer-funded gifts as they see fit — even when they use the funds for the opposite purpose to what was intended.

The scandal surrounding US insurance giant AIG (which has so far received a staggering US$270 billion in taxpayer-funded bailouts) suggests the financial institutions' prefer to give multi-million dollar bonuses to their executives.

The G20 communique also pledged "to fight all forms of protectionism and maintain open trade and investment" and to strengthen international financial institutions such as the IMF and Asian Development Bank.

Rich-nation politicians maintain that the IMF, World Bank and their regional equivalents such as the ADB are concerned with "poverty reduction strategies". But their aggressive promotion of "open trade and investment" results in the opposite.

Debt relief, loans and access to world markets are made contingent on the elimination of restrictions on the international movement of capital, "flexible" labour market conditions, privatisation of basic social infrastructure (including water), enforcement of intellectual property rights and creating a "business climate" conducive to foreign investment.

These rules prevent Third World countries from manufacturing cheap generic drugs to combat malaria and HIV/AIDS, which between them kill more than 4 million people each year.

The privatisation of water infrastructure makes safe drinking water and adequate sanitation unaffordable to the Third World poor, which is a major factor contributing to 11 million preventable child deaths each year.

Forcing Third World countries to become low-wage manufacturing centres or raw material suppliers for Western economies has left them vulnerable to the effects of the West's financial crisis.

This crisis is devastating the low-wage industrial economies of China and South East Asia — 20 million Chinese workers were layed off over the lunar new year holiday period in late January.

The focus of the G20 on "fighting protectionism" is not directed at Western governments giving taxpayer-funded handouts to private industry.

The March 17 Wall Street Journal, said since the financial crisis began, $48 billion has been given to the environmentally destructive car industry worldwide, including $17.4 billion in the US alone.

The G20's fight against protectionism is, instead, designed to stop Third World countries from renationalising infrastructure, regulating food prices or returning land to local communities for ecologically sustainable food production.

Such policies were advocated in a January 26 statement by agrarian social movements and NGOs, led by the peasant farmers group Via Campesina, which can be viewed at http://www.foodsovereignty.org.

The anti-corporate governments in Venezuela and Bolivia are pushing such policies, including advocating the creation of an alternative global financial system. In response, the US government and corporate media have sought to demonise these governments, and the US government has funded opposition groups that have organised failed coup attempts.

It is clear that no solution to the crisis that will benefit the poor and ordinary people globally will emerge from the G20. Instead, mass movements for anti-corporate polices aimed to meet the needs of the poor, not the corporate elite that caused the crisis, are needed to force change.

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