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Leo Panitch: Free movement of capital and strengthening power of global elites G-20 objective

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay, reporting from Toronto in the aftermath of G-20. And other than the police and perhaps over 1,000 arrests, one of the other things to emerge from this weekend is 27 pages of a statement from the leaders of the 20 biggest economies of the world. And now joining us to help us understand this document is Professor Leo Panitch. He teaches political economy at the York University in Toronto. Thanks for joining us.


JAY: So what jumped off the page for you, first of all, in this document?

PANITCH: Well, the one that you’re holding is issued by the White House. I think that’s not insignificant.

JAY: It’s just a draft, but [inaudible]

PANITCH: You know, we should remember that the G-20 doesn’t have it’s own secretariat, doesn’t have its own civil service. The G-20 in its modern form was launched by the US Treasury after the Asian crisis of 1998. It was revived when this crisis began in 2007 and began to play a role in the last couple of years. And the first item, the first clause in there, is that this is now declared to be the premier forum for international economic coordination. So, you know, what this was all about, you know, in which a major world city was turned into a police camp—what was the significance of this meeting in order to do that? The significance of this meeting was to get every major capitalist state onside in committing themselves to continuing with neoliberal capitalist globalization.

JAY: Now, this is about a public declaration thereof, ’cause, I mean, they can get these guys onside, or they are onside, because of the web of how economies work together. This is about a public face and sending a message. So what message did they want to send to [inaudible]

PANITCH: Well, that’s the message they wanted to send. They wanted to—they say very clearly, we made the right choice over the last three years since the greatest crisis in 70 years in keeping markets open, and they commit themselves for the next three years to do nothing that will interfere with investment and trade. And they go further then and say, we also commit that our domestic economic policies, including our fiscal policies and our policies vis-à-vis banks, will do nothing to prevent the free flow of investment [inaudible]

JAY: What policies are they worried about? What are they trying to stop?

PANITCH: Well, back in the 1930s, one of the things that broke down 19th-century globalization was that states responded to their inability to fund their populations, or for that matter fund their imports, by defaulting on their debts and by introducing limits on imports. This is when the countries of the South introduced what was known as import substitution industrialization. And in Latin America in particular you saw the first major industrialization in growth rates going on, and this is what India emulated after World War II. What globalization has been about is doing away with that type of capitalist development. Now, it’s been marginal, you know, vis-à-vis the countries of the South. The main coordination—the G-20 goes back to a group called the G-10 in the 1960s, when the arrangement made after 1945 to use the American dollar as the global currency but tie it to gold began to fall apart after the European countries recovered and there wasn’t this big surplus of dollars anymore that they needed. So the G-10 countries, which was the European countries, Japan, and the United States (and even amongst those, the main meetings were held between the United States, Germany, France, and the United Kingdom, right?), they turned that into, in the mid-’70s, a meeting where heads of state could come. And they began to endorse in 1975-1976 the ideology of neoliberalism, right? But the main meetings are not taking place amongst these leaders—what can they get done in half a day? The main meetings are amongst finance ministries and permanent finance officials. They get to know each other. They get to know each other well. They get to know their wives well. They go to dinners together. They have their personal phone numbers that they exchange to do international firefighting and coordination. And as they’ve often said—[Paul] Volcker has said this (he was at the center of this from the ’60s on, right?)—it’s not the communique that matters; it is getting to know each other that matters, it’s developing a commitment to each other that matters, and indeed committing ourselves to convince our heads of state to do things that we think is necessary for coordination.

JAY: So, in terms of this commitment—there’s obviously the austerity issue, which we’ll talk about in a second, but in terms of this free flow of capital and open markets and all the stuff they’ve been fighting so hard to establish for the last 20, 30 years, and say, oh-oh, this crisis has nothing to do with any of that, and so they’re not taking any responsibility for how that neoliberal global policy led to this (or it certainly was one of the main factors), on the other hand, what are they worried about? Like, what country’s planning to do what that they don’t want to happen?

PANITCH: Well, it’s not, you know, if a country does find it difficult to sell its bonds. I mean, if you’re running a big deficit in your trade, if you’re running a big fiscal deficit, unless you’ve got the US dollar and the US state behind you—which is seen by all capitalists in the world as the guarantor of property, right?—but if you’re not the US state and you’re not operating with the US dollar and you’re not selling US Treasury bills, right, and you’re an investor, say a pension fund, you’re going to worry about whether Greece will be pushed into a position, because of the strength of its left, right, where they will not be able to pay their debts.

JAY: So they might default.

PANITCH: So they might default on their debts. They might introduce capital controls, which would stop capital flowing out of their banking system. Right? So that’s what at all costs they want to prevent. So the thing about austerity is not so much austerity as an objective. It isn’t because capitalists want to see people starve. That’s never what it’s about. It’s about that in terms of the problems that states, capitalist states, run into in an open-market system, that they not do anything to undermine the freedom of capital. That’s what it’s about.

JAY: Now, there’s another piece of austerity. One of the things I thought was interesting in this document is, more than I’ve seen out of any of the American press or any of the conferences on the economy that take place in Washington, they really did acknowledge the link between wages and consumer demand and that there needs to be some upward pressure of wages in order to have consumer demand. But then they look at China, because when they’re talking about their own countries, even though there’s this, like, [inaudible] countries could try to have wages increase alongside productivity, the real talk is about raising the age of pension requirement. It’s all—in the United States, we know they want to cut Social Security, we know they want to have a goods and services tax, which is all about actually decreasing purchasing power.

PANITCH: Yeah. But, well, look, apart from this long-term commitment to keep capitalist globalization going, they’re very short-termist. What they ran into this year was this problem in the European Union, with Germany as a massive surplus country, with the peripheral countries of Europe unable to continue importing German stuff without causing a tremendous financial crisis, perhaps [inaudible] from defaulting on their very large debt that the European banks, as well as many New York banks, are holding [inaudible] Canadian banks are holding, but especially European banks. And would this cause—and Harper said this: the greatest danger is another Lehman Brothers. Would this cause a European bank to collapse? Okay. So the response to this is that we need to impose austerity in Europe. Right? We’ve got to prove to the markets that we’re fiscally responsible. But where the hell is Germany going to sell its stuff to if Greece is going to impose austerity, if Italy’s going to impose austerity, right?

JAY: The United States is going to.

PANITCH: Well, but that’s the point: the United States can’t impose impose austerity.

JAY: But Obama’s been saying, we can’t be the consumer engine anymore, ’cause we’re doing it on credit cards.

PANITCH: So then you need to switch what has been the main policy vis-à-vis the countries of the South in a financial crisis, which is, since the 1980s, since the debt crisis of the 1980s, you’ve got to impose austerity. Right? But now that China has come in as a major surplus country and exporter—the first main developing late-developer in the Third World, right (we see Japan as an advanced capitalist country), to be a major exporter with massive surpluses—in order to tide over the American burden of being the world consumer of last resort, they do have to see the Chinese working class become a consumer. And you have to remember that a lot of multinationals are in China for that very purpose. General Motors was never bankrupt in China; it was flourishing in China. Right? So while there are certain multinationals that we want to rely on cheap labor, right, there’s another group of multinationals, and sometimes sectors within the same multinational corporations, right, that have a strategy of increasing their sales to the Chinese masses. Right? So what’s going on here is can the United States last? And I don’t think it’s going to rush into austerity. There’s pressure from the Republicans to do so, but it’s an election year—.

JAY: No, I think the document’s quite clear: we all acknowledge there may still need to be, depending on the country, periods of short-term stimulus; we’re just all agreeing, at some point, and before 2013, we’re going to make the people pay for the stimulus.

PANITCH: You see, the Americans don’t have this pressure, because there’s no pressure on the American Treasury bill. They have no trouble, this—the massive size of their deficit covering it. On the contrary, right?

JAY: ‘Cause the world has nowhere else to go for a reserve currency.

PANITCH: Yeah, and for safety, and also for safety. And so they have no trouble. So the pressure isn’t there for the bond markets. There’s pressure from the Republicans, right? But the Democrats don’t have a particular interest in privatizing Social Security. That’s not what’s going on. It could happen if there was pressure on the Treasury bill. Obama needs to say, as he said, astonishingly, I violently agree with the need to correct our fiscal situation—given the violence that this bloody G-20 meeting caused. It was odd that he should have used that word, violently agree. Right? But having said that, he said countries need to stick to their stimulus plans, we need to see them through; we can’t all engage in austerity at the same time, ’cause that would indeed lead to another depression. That really would lead to the Great Depression again—not the Great Depression—.

JAY: But the document is quite clear on that, plus—

PANITCH: As a long-term objective.

JAY: —plus—

PANITCH: But how quickly?

JAY: —the day will come when we all have to get our books in order, and we’ll do it through attacking the social safety net.

PANITCH: Well, they may do it through attacking the social safety net. It depends on what—

JAY: [inaudible] taxing the wealthy.

PANITCH: I mean, there’s—2016’s a long way away.

JAY: [inaudible] cut deficits by 50 percent by 2020.

PANITCH: If the left were to get its stuff together, if it wasn’t only—and here I do think that we have to say a critical word—showing up at protests of these meetings and not organizing political forces in between them to really change the balance of political power in these states, then it might very well be that, yes, you could get to a fiscal balance, but you could get to it through shifting the system of taxation, doing away with tax loopholes, stop the enormous subsidies that go to multinational corporations, etcetera—and, I might say, the war and the $1 billion that went to the security apparatuses. What the G-20 in Toronto was about was the world security apparatuses leading the Canadian state around by the nose. Not only the Canadian security apparatuses, every one of them was leading the Canadian state around by the nose. They operate together; they have very close links together. And [for] that $1 billion, you could have run free transit in Toronto—no fares, free—for a full year.

JAY: Thanks for joining us.

PANITCH: Happy to talk to you, Paul.

JAY: Thank you for joining us on The Real News Network.

End of Transcript

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