Vol. 73/No. 14      April 13, 2009

Among the issues in dispute is whether governments should pump more “stimulus” funds into their economies or focus on better regulation of financial institutions. Both approaches fail to get at the root of the crisis, which is a crisis of the capitalist system itself with declining profit rates, steep production cuts, and a rapid drop in trade.

The Czech Republic’s prime minister, Mirek Topolanek, who is also the current European Union president, blasted Washington’s economic policies in an address to the European parliament in Strasbourg, France, March 25. The U.S. government “is repeating mistakes from the 1930s, such as wide-ranging stimuluses, protectionist tendencies and appeals, the Buy American campaign,” he said. “All these steps, their combination and their permanency, are the road to hell.”

Protectionist measures by European governments are also on the rise. Steps taken by the European Union (EU) include a ban on imports of U.S. beef containing hormones. In mid-March the EU imposed stiff tariffs on imports of biodiesel fuel from the United States.

Topolanek’s comments come as government representatives from the Group of 20 nations prepare to meet in London April 2. The G20 includes the leading imperialist powers—Canada, the European Union, France, Germany, Italy, Japan, the United Kingdom, and the United States—as well as Australia, Argentina, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, and Turkey. These countries account for 85 percent of worldwide production.

The EU president’s comments struck a chord among government officials in a number of other European nations, including France, Italy, and Spain, where no U.S.-style “stimulus” packages have been implemented.

In Germany, Prime Minister Angela Merkel has rejected calls for further stimulus spending. The government is already required to provide unemployment benefits, covering two-thirds of workers’ wages when the bosses lay off or force employees into shorter workweeks.

According to the German Federal Labor Office, some $2.85 billion will be spent for unemployment benefits this year for more than a quarter of a million workers, up from $270 million last year. This includes nearly 70,000 employees at the Daimler auto company. In February, some 17,000 companies requested these government wage subsidies for 700,000 workers. The official unemployment rate in Germany is now 8.1 percent or 3.5 million workers.  
 
IMF bailout funds to Eastern Europe
With rising threats of economic collapse, the International Monetary Fund is increasing bailout funds to governments in Eastern Europe. The fund, which is bankrolled by Washington, Tokyo, and the EU, provides loans tied to stiff austerity demands to reduce government budget deficits with cuts in wages and social expenditures. Over the last two weeks of March, the IMF loaned the government of Romania $26 billion; Serbia, $4 billion; and Hungary an additional $3.2 billion, bringing that country’s total to $9.6 billion.

Serbia’s economy minister, Mladjan Dinkic, told the media that the IMF agreement will most affect the more than half a million public workers. “We will reduce funds for cities and local administrations,” he told the daily Vecernje Novosti newspaper. “There will be no new jobs, and those who retire will not be replaced.”

Indicating that a lot more bailout funds must be deployed, IMF managing director Dominique Strauss-Kahn in a March 23 address to representatives of the International Labor Organization stated that the economic crisis “will be at the roots of social unrest” and “in some cases, it can also end in war.”

U.S. treasury secretary Timothy Geithner has called for expanding IMF resources by $500 billion to a total of nearly $1 trillion. President Barack Obama, who is attending the G20 meeting, has made increasing these funds one of his administration’s “primary goals for the meeting,” reported the New York Times. Washington is discussing contributing another $100 billion, as have Japan and the EU.  
 
Plummeting world trade
A report recently released by the World Trade Organization projects that exports worldwide will decline by 9 percent this year, as production declines to levels not seen since the 1930s. This drop will have a big impact on the world’s largest exporters—Germany, China, the United States, and Japan. Trade had grown unabated since 1982. Last year its growth slowed to 2 percent at $15.8 trillion. In Japan, exports in 2007 were rising by 20 percent, but this February dropped by nearly 50 percent.

Responding to declining confidence in the U.S. dollar, a leading Chinese official has called for an eventual alternative to the dollar as the world’s reserve currency. Zhou Xiaochuan, governor of the People’s Bank of China, has proposed instead a basket of currencies that would include euros, sterling, and yen.

Geithner responded March 25, saying that Washington will do whatever it takes to maintain the dollar’s dominance. The Chinese government is one of the biggest “investors” in the United States, holding $1 trillion of U.S. government debt. These funds have been essential for financing Washington’s wars in Iraq and Afghanistan.
 
 
Related articles:
N.Y. socialist speaks out against cutbacks
Workers have no stake in capitalist trade policy
Bosses announce big job cuts in Australia  
 
 
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