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Vol. 73/No. 15      April 20, 2009

 
G-20 powers meet amid
mounting economic crisis
Conference marked by rivalry, protectionism
(feature article)
 
BY JONATHAN SILBERMAN  
LONDON—A declaration adopted by the Group of 20 meeting here was described by its host, UK prime minister Gordon Brown, as a “new world order.”

Within hours, news emerged—if it were needed—that gave the lie to this and other similar claims made about the event. Rather than growth, what lies ahead is further contraction in industrial production and trade; rather than “international consensus,” sharpened international rivalry and conflict; rather than order, growing disorder.

The G-20 includes the leading imperialist powers—the United States, Germany, Japan, United Kingdom, France, Italy, Canada, and Australia—as well as Argentina, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, and Turkey. These countries account for 85 percent of worldwide production.

Meeting April 2, the G-20 leaders heralded the summit as the day the world “fought back against the recession.” But closer inspection revealed that even the main concrete measure agreed to—that they would pump $1.1 trillion into the International Monetary Fund to aid government bailouts—was in large part a repackaging of commitments already made or deals only half-done. As to providing stiffer international regulation of the banking and finance sector, the Financial Times reported sharp behind-the-scenes disputes as to what this entailed and “little new on monetary policy action or efforts to clean up bank balance sheets.”

Within 24 hours of the event more than 3,000 job cuts had been announced in the United Kingdom, with workers in aerospace and other manufacturing and insurance companies especially affected. Forecasts published this week by the Organization for Economic Cooperation and Development (OECD) suggest that Britain’s economy will continue to shrink for the rest of the year, pushing gross domestic product down by 3.7 percent in 2009, easily the biggest decline since the Second World War.

The same week the U.S. government announced that bosses there had cut 663,000 jobs nationwide in March alone, bringing total U.S. job losses in the last 16 months to more than 5 million. Unemployment in the United States now stands at 8.5 percent, according to official figures, the highest since 1983. In a telltale sign of what the future holds, the new chief executive of General Motors, Fritz Henderson, refused to rule out bankruptcy for the auto giant.

In direct contradiction to the G-20 decision to tighten international regulation over banks and other financial institutions, the U.S. Financial Accounting Standards Board softened rules for banks that would allow them to massage their bottom line by down-valuing their bad debts, often referred to as “toxic assets.” The move, taken the day after the G-20 summit, will inevitably prompt other countries to do likewise, to safeguard the competitiveness of their banks.  
 
Growing protectionist measures
In the wake of a strongly worded declaration against protectionism adopted by the G-20 meeting in Washington last November, no fewer than 17 of the G-20 countries have already adopted protectionist measures. The auto industry is the sector most protected by national governments, with the United States, Canada, France, Germany, United Kingdom, China, Argentina, Brazil, Sweden, and Italy providing direct or indirect subsidies. Australia is giving support to its car dealers and South Korea and Portugal support to their component suppliers. A report by the World Bank stated that the 47 protectionist measures adopted by the 17 governments is threatening food provisions in the semicolonial countries.

Negotiations on international trade—known as the Doha Agenda, after the town in Qatar where they began eight years ago—remain stalled, sunk by continued disagreements over trade tariffs.

In a post-G-20 interview, José Manuel Barroso, president of the European Commission, told the Daily Telegraph that tensions among EU members under the impact of the sharpening crisis had threatened the single market. Different European countries had taken unilateral action to bail out banks, national politicians turned toward protectionism, and governments embarked on national “recovery paths” without reference to European Union rules, the EU leader said.

The UK government’s business secretary, Peter Mandelson, said that Gordon Brown had been “excessively ambitious” in his aims for the summit. Brown and U.S. president Barack Obama failed in their efforts to secure any further promises for more government fiscal spending in an attempt to combat the deepening world recession, largely in the face of opposition from the governments of Germany and France.
 
 
Related articles:
Thousands protest G-20 summit in London  
 
 
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