Patrick Bond: Slow growth and inflation are taking a toll in developing countries
JAISAL NOOR, TRNN PRODUCER: Welcome to The Real News Network. I’m Jaisal Noor in Baltimore. And welcome to this latest edition of The Bond Report.
There’s been much talk in recent months, and years, even, of the economic surge of the so-called BRICS countries. That’s Brazil, Russia, India, China, and South Africa. But in recent weeks, many of the former rapidly developing countries are experiencing a range of economic problems, including crashing currencies, slowing growth, and extreme distortions in inequality.
Now joining us to discuss this is Patrick Bond. He’s the director of the Centre for Civil Society and professor at the University of KwaZulu-Natal in South Africa. Patrick Bond’s books include Looting Africa and Against Global Apartheid.
Thank you so much for joining us, Patrick.
PATRICK BOND, DIRECTOR, CENTRE FOR CIVIL SOCIETY: Thanks. It’s great to be back, Jaisal.
NOOR: So, Patrick, you were just at the G20, which is a global gathering of world leaders. Was any decisive action taken there to address these growing economic crises across the world?
BOND: Well, no. The attempt by the BRICS countries meeting separately on the sidelines was to steal the economic thunder with the announcements of the BRICS new Development Bank at about $50 billion capitalization and the $100 billion contingency reserve arrangement. That’s sort of an IMF type arrangement so that the BRICS countries can lend each other money in the event of an emergency, a financial meltdown. And that would prevent the IMF from having the kind of leverage.
And this is part of what the rhetoric is, BRICS representing an alternative to the Washington consensus, the institutions of the Bretton Woods system, the IMF and World Bank. And the rhetoric sounds very good. And it is perhaps most desperately needed now in the wake of big, big collapses of some of these currencies, the Indian rupee perhaps worst, with maybe a 30 percent crash in recent weeks, the rand also crashing about 15 percent here in South Africa. And these are countries now that are under a great deal of stress, where the illusory growth, particularly in India, is now unveiled for having extreme contradictions.
NOOR: So, Patrick, I wanted to ask you about the severity of this ongoing global crisis, and specifically the U.S. Fed’s decision to slow the money printing tactic known as quantitative easing.
BOND: Well, that’s right. Throwing money at the problem, something that first Alan Greenspan taught back in 1987, the first big of the recent crashes of the stock market, and then practiced very effectively by Ben Bernanke on behalf of the U.S. and European banks, meant that on three occasions, trillions of dollars were printed and just pushed in [incompr.] into the world financial system. And it meant that the U.S. dollar, which has the world’s sovereign currency status–it’s basically a fiat money, a currency that can be used all over the world–was therefore being abused, and the potential for great inflation is there.
So as a result, tapering off that quantitative easing, to use the technical terms, is required. And the question is how quickly. And that means there will be less Federal Reserve creation of money. And as a result, the interest rates in the U.S. soared, and as a result in August a huge outflow of money from the emerging markets, where there had been quite a bit, especially here in South Africa, of financial liberalization–the exchange controls had been dropped and hot money flows in and out very quickly. So we’ve had, as a result, terrible instability.
The hope by many of the elites going to the G20 was that there might be some way to organize a more stable system. With Syria on everybody’s mind as the first priority, however, that wasn’t possible, so we’re really looking at the U.S. Fed once again, as on so many other occasions, with the prerogatives really of the U.S. banking system foremost in mind, making life quite miserable for people elsewhere in the world.
NOOR: Patrick Bond, thank you so much for joining us for part one of this discussion.
BOND: Thank you.
NOOR: We’re going to continue this discussion and post it online at TheRealNews.com. Thank you so much for joining us.