G-20 summit ‘punts’ till April
Following the wrap of the G-20 summit, The Real News Network spoke to Prof. Leo Panitch, and economist, Doug Henwood about what was proposed at the meeting and what was accomplished. Henwood says its very difficult to imagine these varied countries coming together and ceding sovereignty to an international economic body. Panitch says it’s time to democratize the financial system while they’re on their back heels.
Why I support the REAL News
(a short message from a member)
BELLA LAM, REAL NEWS MEMBER: It offers a deeper analysis from different sources, and it gives a space, I think, for people’s voices to be heard.
G20 ‘punts’ till April
Producer: Carlo Basilone
CARLO BASILONE, TRNN: At the G-20 economic summit in Washington on the weekend, world leaders endorsed a series of broad goals to fend off future economic calamities and to revive the world economy. At the conclusion of the two-day emergency summit, the joint communique outlined five tasks before a future meeting in April: strengthen transparency and accountability; enhance sound regulation; promote integrity in financial markets; reinforce international cooperation; reform international financial institutions. Questions remain, however, about what was really accomplished.
HENWOOD, EDITOR, LEFT BUSINESS OBSERVER: I think the world leaders got together and had a dinner, had a few chats, and issued a communique that basically said they’re doing what they were doing already. Most of the countries involved are undergoing large public stimulus programs. They didn’t really add to any of that. They made some high-minded noises about cooperation with each other, but there’s no institutional setup, no institutional changes, to promote any kind of international cooperation, either for economic stabilization and recovery or for regulation in the future. So I think that’ll wait till the next conference. They’ve kind of punted it till April, because, well, the US government is changing hands very, very soon, and Bush is, I think, the lamest lame duck in history. He’s on the way out the door. The new administration will have a fairly different ideological cast as well. So it’s just nothing serious could be done with the US in transition. And what really needs to be done over the longer term, some kind of coordinated financial regulation, it’s going to be very difficult for 20 or more different countries with different institutions, different interests, different philosophies, different political systems, then to come together and agree on something and cede some degree of sovereignty to some kind of international body, it’s very difficult to imagine. It’s really no surprise at all that they did what they did and said what they said, which was not much of anything. At least there were no fights. Nobody called each other names. Nobody spilled soup in anybody’s lap. So at least they avoided disaster.
BASILONE: A proposal was also made to reform international financial institutions, such as the World Bank and the International Monetary Fund, ensuring that they have sufficient resources to continue playing their role in overcoming the crisis.
LEO PANITCH, POLITICAL ECONOMY, YORK UNIVERSITY: I don’t think that we’re going to see the IMF in any sense displace the central role that the Federal Reserve Bank above all, and to a lesser extent the other central banks, are playing as the real world central bank. The key thing that’s being done these days is the Federal Reserve swaps to countries like Turkey and Hungary and so on, which [inaudible] they give them dollars for their currencies, and which they don’t need and don’t want, but it keeps their banking systems going on the basis of American dollars. But the IMF is not about to become the world central bank, and it would be an illusion to think so.
HENWOOD: The IMF can’t go on the way it has. It’s funny. In the last five or six years, the IMF has been pretty irrelevant to world politics and economics. You know, back in the ’80s and ’90s it was the center of everything, and then it just kind of ran out of a mission; now the talk of making it into some kind of, if not a global central bank, some kind of global coordinating body, global regulatory body. But, you know, the situation in which it’s totally dominated by the United States as it has been, that just cannot go on. The US is just a shrinking share of the global economy. Its economy now is troubled; its economic model is troubled. The IMF was sort of an export agent of the American style of doing capitalism, and now that is deeply discredited. And the US, [inaudible] the structure of voting within the IMF has veto power, and the very large countries, very large economies, have virtually no say at all, and that just cannot go on that way. I think the United States would just like to use the Asian countries and the Middle Eastern oil exporters as ATMs and have them just be as passive as an ATM, but that’s not going to work out. So they’re going to have to find some way to make this a more collegial institution than it is now. But it’s very difficult to imagine the US agreeing to anything like that. We’re so used to and our governments are so used to running the show that it’s going to be very hard to think of the United States coming around, just being one of the guys now. That’s going to take a big leap, and I don’t think we’re anywhere near ready for that.
PANITCH: And what’s being avoided here is what needs to be on the agenda after this unbelievable banking crisis, and that is turning the financial systems of the whole world, but above all starting in the Western world, to turn those banking systems into public utilities. Money and credit ought to be subject to democratic control and accountability. And all of this is about avoiding this. And putting more money into the hands of the IMF only makes it worse, because the IMF represents the orthodox view of bankers. And as they’ve lent money to Hungary, for instance, they have required that Hungary vastly cut back its social expenditures, which has been the typical kind of structural adjustment advice the IMF has tended to give. And I see no evidence that they’re changing fundamentally in that respect.
HENWOOD: Some wit said that the Bush administration entered office as social conservatives and they’re leaving as conservative socialists, ’cause they effectively nationalized parts of the banking system. But they’re doing so, at least in this country, without any kind of control, and the government is handing outï¿½so far they’ve handed out about $250 billion to the financial sector just through the Treasury program (I’m including what the Fed has done on its own,) and they’re getting no say at all over how these institutions are run. So if the government is going to pump in all this money, the government should have a much larger say in how things are run. So I think, you know, some combination of nationalizing failing institutions and aggressively regulating the surviving ones is absolutely essential to turn around, to get them to contribute to economic recovery by lending again instead of hoarding their money. The way Paulson has run it is he doesn’t want to step on any toes, and my God, if anybody’s toes needed to be stepped on, it’s the chief executives of American finance.
PANITCH: The financial markets are confused, they’re incoherent, they’re dispirited, and what democratic people need to be calling for at this type of moment, when they’re on their back heels, is that their power needs to be taken away from them, rather than just be participants watching this game of musical chairs, which is really about reestablishing financial power. Democratic forces ought to be calling precisely for bringing banking into democratic public control.
HENWOOD: This could be some degree of nationalization and stricter regulation, even in the United States. That’s just inevitable. The Bush administration is putting up rearguard, last-ditch efforts to prevent that from happening, but I think it’s virtually certain we’re going to see much more active involvement in the financial sector. And the only question is: Which form is that going to take? Is it just going to be, "We’ll take it over long enough to fix it and then hand it back to them"? Or we create some kind of new institutions that will last for a few years or more, non-profit institutions, cooperatively owned ones, locally owned ones, public institutions that could use their resources to fund local economic development, offering basic financial services to poorer people? Could we experiment with the financial sector in socially creative ways because we’re spending all this public money? Or [inaudible] spend all this public money in an attempt to restore the status quo [inaudible]. The way American politics works, you’d expect that any expenditure of public funds are just designed to return to the old way of doing things. But let’s hope that we’re not going to have a rerun of that movie.
Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy.