Leo Panitch: G20 trying to patch up the ‘old world order’
PAUL JAY, SENIOR EDITOR: Welcome to The Real News Network. The G20 finished, and Prime Minister Brown announced an earthshaking moment. Here it is.
GORDON BROWN, BRITISH PRIME MINISTER: I think that a new world order is emerging, and with it the foundations of a new and progressive era of international cooperation. We have resolved that from today we will together manage the process of globalization to secure responsibility from all and fairness to all. And we’ve agreed that in doing so we will build a more sustainable and more open and a fairer global society. Thank you all very much. Thank you.
JAY: To help us deconstruct whether or not we are in fact in another new world order, I’m joined by Professor Leo Panitch. He’s a professor of political science at York University, and he’s the author of The American Empire and the Political Economy of Global Finance. Thanks, Leo.
LEO PANITCH, PROF. OF POLITICAL SCIENCE, YORK UNIVERSITY: Hi, Paul.
JAY: So is this a new world order?
PANITCH: No, it’s an attempt to keep the old new world order going, the one that was around in the ’80s and ’90s and led us into this crisis.
JAY: And what did they decide? And are they going to succeed to keep the old world order [inaudible]?
PANITCH: Well, it’s impressive that the 19 leading world states, including the states of the south, not just the ones in the north and the European Union, have not fallen apart during this tremendous crisis. And they’ve come together with an agreement around a bunch of rhetoric, but also around some measures. The rhetoric is that they are united in attempting to deal with this, which, given what happened in the ’30s, is not insignificant.
JAY: What happened in the ’30s, quickly?
PANITCH: [inaudible] what happened in the 1930s was that the capitalist governments all turned on each other—the massive trade war, the breakdown of the London conference, the equivalent of this one in 1933. Roosevelt walked away from it, said it was a banker’s conference. Keeping all of this together is not insignificant. Of course, it has to do with the fact that fascist governments haven’t been elected in these countries, that the working classes aren’t mobilized into communist parties. You know, it’s the same old class and state structure as existed when this crisis broke out, and we haven’t had that kind of a break yet. Now, what they’ve done in terms of measures is not insignificant. They have agreed that they will provide significant funds to the IMF—not enough to deal with the problem, but more than was predicted they would put in in order to help bail out those many countries—.
JAY: How much are they putting in?
PANITCH: Well, they’re putting in $500 billion. They said they were only putting $250 billion in. And that’s not insignificant, given that Eastern European countries, a number of Latin American countries are going to tank. They aren’t going to be able to sell their bonds in order to cover their deficits. Their banking systems, which have been bought up by Western banks, are now being drained as Western banks are pulling funds out of them.
JAY: And is $500 billion significant enough to do it?
Our work can only happen with the sustained support of our viewers. Will you join our campaign for independent radical journalism by making a gift today?
PANITCH: It’s not insignificant. Obviously the attempt, as it is with the bailout of the banks here, is an attempt to induce capitalists to keep their money in or to put some money in, insofar as there’s also public funds going in. And it’ll depend on different countries. They’ve also put in—and this is not insignificant, not nearly enough—a provision for a $250 billion credit fund for trade. What has happened that has really exacerbated this crisis is that banking loans to firms that are engaged in international trade has dried up. If you want to get a loan to allow you to meet a contract you have to sell something on the other side of the world, the interest rates are exorbitant. And that has meant that trade with countries of Africa, and for that matter the trade of southern California, has dried up. This $250 billion will help unleash some of that.
JAY: But it seems a pittance when you’re talking global trade.
PANITCH: It’s a pittance. Nevertheless, it’s something; it’s a measure. But clearly this is not the kind of thing that is going to get us out of this crisis. Look, the central problem is that banks aren’t lending and all of the brouhaha in all of the run-up to this meeting about whether there was going to be more regulation for when the banks start lending again, right, ’cause right now it doesn’t matter. It’s not that they’re engaged in speculation. They aren’t speculating. They aren’t lending at any level of risk.
JAY: Yeah, so the problem’s not regulating the speculation.
PANITCH: It’s not that, and the fiscal stimulus doesn’t address that either. The trouble with the fiscal stimulus is that unless the banks are lending, then the multiplier effect of that fiscal stimulus doesn’t kick in. So they have to get the banks lending. And there’s nothing that the G20 is doing that is really addressing that, except ensuring that the bankers don’t get more frightened. And they would have gotten more frightened if they’d not been able to come to some form of an agreement with the—.
JAY: Now, you used the phrase off-camera “it’s more bribing the bankers to loan.”
PANITCH: Yes, it’s bribing the bankers to loan. Of course. This is an attempt to keep the capitalist, old world order going. And the way you keep it going, given that the banking system has frozen up, is to provide enough taxpayers money and enough guarantees of confidence to the bankers, you know, that you in fact—. Some of them will suffer, some of their shareholders will suffer, but you’ll try to keep the fraction of the capitalist class that is the financial fraction—you’ll try to keep them in business. And people should realize that that’s what Roosevelt did in the 1930s. JPMorgan took a big hit, but Goldman Sachs was saved and became one the great banks, investment banks, of the next 70 years to this day. And the banking legislation of the 1930s provided a system of regulation, price supports, interest-rate controls, etcetera, which diminished competition in banking, let the banks recover. And then they eventually grew bigger than the incubator. The baby grew up and has broke out of the old regulations. It grew too big for the old regulations. It wasn’t that anybody had to deregulate; it just outgrew them. And one of the phrases in here about what they’re going to try to do in the future—.
JAY: “In here” meaning what?
PANITCH: This is the G20 statement, their communique. One of the interesting phrases is that—as they say, they’re going to regulate in the future—is that the regulators will try to keep pace with innovation in the marketplace. And what they now see is that they didn’t keep pace with it, that finance outgrew the old regulations, and they didn’t keep up credential regulation for this vastly increased global financial system.
JAY: Well, isn’t the whole global economy outgrowing the entire financial and regulatory and legal system?
PANITCH: Yes, except, you know, people tend to think of that in terms of escaping the regulators or escaping the state. This is something that states have promoted and that these governments who were at the G20 did everything to promote. The export-oriented global economy is something that goes back to the 1960s, to Kennedy trying to get third-world countries not to rely on aid from the first world, but to rely on exports to the first world. Right? And they’d only get credits for trade, rather than redistribution and direct aid from the first world. So they push them into a export-oriented society. Now, what that means, Brazil is producing a few kinds of soy, but they don’t have the kind of agriculture that’s able to feed their 200 million people.
JAY: Well, in the next segment of our interview, then, let’s talk about what a new world order would look like. If this is an attempt to patch up the old world order, which may or may not succeed and in the longer term is probably unlikely to really succeed, then what’s a new world order look like? And if the banks got too big to live within the existing regulation, maybe the whole economy’s gotten too big. Certainly some of the enterprises, like auto industry and other sectors, have gotten too big for the whole system of ownership. So let’s talk about that in the next segment of our interview.
PANITCH: Sounds like fun.
JAY: Please join us for the next segment of this interview with Leo Panitch on The Real News Network.
Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy.