After the G20 – what next?

3 04 2009

Low expectations have been met

The first line of The Times editorial today sums up what most of us must feel about the G20. The big issues which existed before the G20; the toxic debt problem, the changing balance of world power and the absence of any alternative to managerial capitalism, remain.  Beyond that we can only be grateful that the world’s leaders are still all talking to each other and not (yet at least) going down the road to rearmamant and war to settle their differences. 

There are big battles ahead. Already more and more voices are being heard calling for austerity and questioning whether economic growth and free trade is something to strive for.  Although the violent nature of the demonstrations was highly overblown, you only need look at some of the demands made by these protestors to hear these voices.  Check out the newspiece below from the online news channel WORLDbytes which looks at  the protests and ensuing summit, and where I gave an interview:

The voices of those who encourage austerity and reject economic growth are getting stronger at the same time as developing countries in Africa and elsewhere are experiencing economic disaster as a result of the collapse of world trade. Those of us who believe that economic growth is the basis for human freedom will have a tough task arguing against the new advocates of austerity, particularly as the public debt balloons.

In the UK we have to face up to the consequences of having lived beyond our means for the past ten years. But this should not mean that we accept austerity. We need to renew our collective efforts to encourage new kinds of economic growth. It may be that we need to take a long hard look at the huge amount of resources that go into the public sector and decide whether this is all money well spent.  There are undoubtedly areas , particularly where the state has invaded the family,  where we could do with some savage cutbacks.  But overall, cutting public spending only makes sense if any resources freed up are invested productively elsewhere.

If you are interested in taking part in a serious debate about the future of the economy, you should attend The Battle for the Economy conference on May 16. We have a great line up of speakers and ample time for discussion about the best way forward. There has been far too little serious debate so far about where we wish to go as a society and we need to change that.

This blog is on holiday for the next ten days. Despite all the bad news the sun is out and spring is on the way. Fortunately, as Leonard Cohen said, cheerfulness keeps breaking in.

The three interlocking crises of global capitalism

1 04 2009

As the G20 leaders begin their deliberations today it is worth trying to assess the problems that face them, and us. Everybody has been competing to describe this recession as the worst since the 70s/30s/black death, yet the full scale of the crisis has yet to be properly discussed.  The world is facing three interlocking crises.


The recession is severe, but what makes it worse is that it is happening when the coherence and the credibility of the political elites is at an historical low ebb.  The coexistence of a political with an economic crisis is what makes this recession so dangerous.

The entwining of the political and the economic crises has meant that the world’s response to the recession has been slow and lacking coherence. For example,we are nearly two years into the toxic debt crisis and still the bank bailouts appear to be having very little impact. The weakness and isolation of the political elites has led them to scapegoat  bankers, and by extension the whole financial system of capitalism, as the cause of the problem. This has in turn undermined the bailouts of the banks as investors have become wary of being seen to be making money out of the crisis and governments have become constrained about what they can do for fear of upsetting their voters.

A key element of the crisis is the changing balance of world power. The imbalance between productive economies like China and the less productive economies in the west lies at the heart of the recession. China and others built up huge financial surpluses which were recycled into consumer debt in the west. Now China is demanding that it be recognised as a new global power and wants to see its economic clout recognised by changes in global institutuions like the International Monetary Fund. The very fact that it is now the G20, which includes China and other developing nations, that are meeting today is a recognition of the shift in the balance of power. But changing the way the world is run will be a tricky process as there will be losers as well as winners.

There is an absence of any alternative to the status quo. This may seem an odd thing to say. Why should an absence of any critique of capitalism be a problem for the system? The answer is that in the absence of contestation the global elites have lost their way. For most of the 20th century the west was driven on by its conflict with the Soviet Union. The technological and scientific breakthroughs that came with the space race, for example, came about because of the US’s determination not to let the Soviet Union put a man on the moon first.

The absence of opposition of any kind to capitalism today has contributed to a sense of drift and general loss of impetus in society in general and has also affected the political elites. The global elites have themselves begun to lose faith in the market system, so much so that the G20 looks to be dominated by arguments about how much global regulation the system needs.

There are other social and natural problems facing the world of course. Huge numbers of people in the world still live close to the breadline. We need to develop new, cheaper and cleaner energy sources. But the three interlocking crises mean that developments in these areas will be held back until politics and politicians themselves are given a new lease of life.