World Economy: London G20 summit provides no solution to world economic crisis

Workers’ struggles point way forward – Fight for a socialist future

“They are not talking about us. They don’t care about people like us.” This is the verdict on the London capitalist G20 summit of a worker occupying, together with others, the Visteon car parts firm in Enfield. He represents the workers’ answer – the ‘G3’ of occupied plants, Enfield, Basildon and Belfast – to the rich capitalist club that met in London. He was also speaking for the world working class and poor who have been given to believe that this gathering has begun the ‘fightback’ against the frightful world economic crisis.

In truth, the meeting achieved very little, apart from perhaps temporarily papering over the divisions between the nations and regions that make up the G20.

The International Labour Organisation says that an additional 30-50 million workers will be made redundant. The G20 have done little to avert this. A pledge for a $1.1 trillion boost was the main ‘achievement’. But it is not certain how much of this is new money or part of the stimulus packages which capitalist governments throughout the world are already implementing.

The IMF, representing world capitalism, is to see a trebling of its resources to $500 billion. This will merely allow it to deal with ‘emergencies’ where there are chronic balance of payments problems, particularly in eastern Europe and the ‘submerging’ countries of Asia, Africa and Latin America. But it will do little or nothing to fundamentally alter the downward spiral of world capitalism. Economist Joseph Stiglitz, for example, has estimated that the cost of the crisis so far will drive 200 million more people into poverty, mostly in the neo-colonial world.

The US alone has committed a colossal $11.6 trillion in lines of credit and ‘rescue initiatives’, the equivalent of “four wars, a moon landing and the [post-1945] rebuilding of Europe: all that and more could have been paid for with the cost of the US government’s proposals for saving its banking industry” (Observer).

Yet, unemployment in March, in the US, increased by a ‘headline figure’ of 663,000. This is now 8.5% of the workforce. But, if those working part-time or not claiming benefits were included, then over 15% would be unemployed!

Most of the IMF’s resources will probably be concentrated in the collapsing east European region. Here, Turkey, Ukraine, Serbia, Latvia and Romania, already have the economic status of zombie countries. But they threaten to drag down Austria, whose bank exposure in the region is equivalent to 75% of the country’s GDP, as well as Italy and Belgium.

Gloom stakes

As the G20 met, the institutions of world capitalism sought to outdo each other in the ‘gloom’ stakes. The IMF, for instance, estimated that global GDP fell by an unprecedented 5% in the fourth quarter of last year, with the ‘advanced economies’ contracting by around 7%. The US, still the Atlas of world capitalism, declined by 6% on an annualised basis, while Japan plummeted by 13%. Little wonder that the London meeting was declared a “summit of irrelevance” by the chief economist at UNCTAD.

Global industrial production is due to collapse by an astonishing 30-35% on an annualised rate in the first quarter of this year. This represents a speeding up of the crisis, which Paul Volcker, economics adviser to Barak Obama in the US, declared before the summit as plunging at “a faster rate” than even during the 1930s great depression. The IMF boss himself, Dominique Strauss-Kahn, said on the eve of the London event: “Bluntly, the situation is dire.” He went on to say that millions of people will be pushed into poverty and hardship which will “affect dramatically unemployment and beyond unemployment for many countries it will be at the roots of social unrest, some threat to democracy, and maybe for some cases it can also end in war”.

This is a more realistic appraisal for the prospects of capitalism than the soothsayers gathered in London. Nicolas Sarkozy, the French president, can claim the meeting as a triumph over ‘Anglo-Saxon unregulated capitalism’. He undoubtedly scored a bulls-eye when he took this tilt at Gordon Brown. As recently as June 2007, Brown praised London City financiers, lauding their innovative skills and development of “the most modern instrument of finance”. He added that it was vital “to advance with light-touch regulation, a competitive tax environment and flexibility”. But before the crisis, Sarkozy was also a signed-up member of the world capitalist unregulated neo-liberal club, along with the rest of the 20 leaders gathered in London.

They have only been compelled to switch tack, to propose a number of minimal ‘regulations’ because of the fear of the social upheaval which this crisis has unleashed. Most of the economies of the capitalist world “face bankruptcies and unemployment [which] are about to rise to the highest levels since the great depression” (Wolfgang Muenchau, Financial Times). US president, Obama, for instance, offers a trillion dollars ‘cash for trash’ of government money for the banks’ dud loans. Previously, these were ‘toxic’, then a ‘problem’, and now merely a ‘legacy’. Yes they are a legacy of unrestrained, neo-liberal capitalism, particularly the greedy who are now set to be bailed out by ordinary workers, both in Britain and the US, for their economic crimes.

Nothing that was done in London will quickly recusitate house prices, down 30% in the US. The collapse in world trade was estimated by the IMF at 9% before the summit and is now put at a likely staggering 13% by the OECD. This will have a profound effect on exporting countries, such as Japan, China, Germany, and eastern European countries such as the Czech Republic, where exports account for around 80% of GDP. Asia will also be seriously affected with, for instance, Malaysia’s exports exceeding 100% of its GDP.

All parts of the world affected by crisis

There is not one part of the world which remains unaffected by this crisis and it will be the working class who will be called upon to pay the price. In Britain, it is estimated now that 100,000 people a month will be thrown out of work if this crisis continues at its present rate for the rest of this year. Currently, 200 shops a day are closing. There are 600,000 school leavers due to come onto the jobs market in the summer. A total of 3.5 million unemployed in this country now looms as the ‘cost’ of this crisis.

Moreover, there is the collapse in government income; because of unemployment, lower taxes, etc, the strategists of capital are already talking about ‘years of austerity’. In the first instance, this will mean slashing public expenditure, particularly aimed against the rights, conditions, pensions and pay of “greedy” public-sector workers. The budget deficit for Britain, the difference between government income and expenditure, could be 13% of GDP in 2010. This could mean that Britain, along with Greece and possibly Spain and Ireland, could sink to ‘pariah’ status in the bond markets for the buying and selling of government debt. Along this road, as Iceland indicates, is ‘national bankruptcy’, which is a real possibility for Britain and other countries arising from this crisis.

With this background, the debate between capitalist economists on the meaning of ‘recession’ or ‘depression’ becomes meaningless for its victims, working-class people. In the modern era, 10% unemployment is, in effect, a depression. Moreover, there is little solace for the working class in the promised economic ‘sunny uplands’. The effects of the crisis could permanently affect the lives of millions, so long as this system survives. There has been the dramatic deterioration already in the US, for instance, of net household ‘wealth’, arising from the collapse in house prices: “The wealth effect has reversed with a vengeance” (Financial Times).

The former Treasury secretary in the Clinton administration, also bluntly states: “The scale of lending needed to support a normal cyclical recovery will not materialise”. In other words, even when there is an economic revival at a certain stage, it will leave in its wake, not the ‘rock pools’ of unemployment, as in previous recessions, but great oceans of unemployment and its associated depredation. We already see in the US the beginnings of shanty towns in California and elsewhere, as well as in Italy and even in Britain with Polish immigrants.

In other words, a grey future, at best, of social deprivation looms for significant sections of the population of Britain and the world. And nothing that the G20 has proposed will alter this. Yes, a certain cushioning could develop – a slowing down in the rate of growth of unemployment, for instance – as a result of the various stimulus packages and the printing of money (quantitative easing) which are now being undertaken by the capitalist governments. But the underlying problems will remain, of insecurity, no jobs, or only ‘precarious’ jobs, stagnant and falling wages, and all the social ills that flow from these.

Rising tide of anger

Before the G20 meeting there was a rising tide of anger, signified by the toppling of governments in eastern Europe – Latvia, Czech Republic, Estonia, Hungary – as well as the mass uprisings in France against the Sarkozy government, and the Fianna Fail government in Ireland. Such is the mood today, even in the US, that a friend of Obama’s economic guru, Tim Geithner, declared: “There are times, nowadays, when you think Hugo Chávez could win an election in America.”

Obama himself warned the bankers that he alone stood between them and ‘pitchforks’. The indignation and mass anger against the bankers are symptomatic of this. Therefore, the verdict on the London G20 summit must be, from the standpoint of working-class people and the labour movement, that it has solved very little, that the crisis is likely to get worse, and that this means more suffering and pain for those who produce the wealth, the working class, and the poor.

Not only in the books of Karl Marx – which now are increasingly turned to, even by capitalist commentators, to make some sense of the contradictions of their system – but in the living reality of economic failure and all that flows from this, it is revealed that the capitalist system offers no way forward. We, the working class and the poor must prepare for a socialist future by building a powerful point of reference for workers in struggle so that the initiatives taken in Basildon, Belfast and Enfield do not run into the sand but, on the contrary, become a new benchmark for struggle against diseased, rampant capitalism in this country and worldwide.

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April 2009