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Illusions of Growth

Empty Talk From the G8

by VIJAY PRASHAD

WHEN the Group of Seven (G7) was formed in 1974, its charge was to provide confidence to a global population uncertain about the major structural features in the world. The members of the G7 were Canada, France, Italy, Japan, the United Kingdom, the United States and West Germany. They came together at a time of grave economic trouble, with unemployment rates skyrocketing, labour unions becoming restive and economic policies unable to control haemorrhaged growth and inflation. The then U.S. President, Gerald Ford, told a private meeting of the heads of government in Rambouillet (France) that they must “ensure that the current world economic situation is not seen as a crisis in the democratic or capitalist system”. A British Foreign Office report on that first summit noted: “The participants were conscious that they had to make a convincing and demonstrative gesture of solidarity.” Little has changed since 1974.

President Barack Obama left the May 18-19 Camp David conclave of the G8 to say that things were “so far so good”. He underlined the “emerging consensus that more must be done to promote economic growth and job creation, right now”. Behind him was the newly elected French President, Francois Hollande, who had run on a platform of growth over austerity. With Hollande was Britain’s David Cameron, who hoped, as Financial Times put it, “to repair strained relations with Mr Hollande by supporting his growth plan”. On the surface, it looked as if the growth wing had won out over the austerity wing. But this was an illusion.

German Chancellor Angela Merkel appeared isolated, but she did not bend from her commitments. “Budget discipline” in deficit countries remained high on her agenda. There was to be no public deal with Greece before its second election. Before the G8 meeting, European Commission President Jose Manuel Barroso had placed high odds that Greece would leave the eurozone, and the Fitch Ratings agency had reduced
Greece to the level of junk (CCC grade). Talk of growth in the public forums and in the first line of the Camp David Declaration (“Our imperative is to promote growth and jobs”) seemed hemmed in by more fleshed out obligations. A few lines down, the G8 took the Merkel or neoliberal view that governments had to push for “reforms to raise productivity, growth and demand within a sustainable, credible and non-inflationary macroeconomic framework”. The declaration mentioned the importance of “confidence” and “fiscal responsibility” to strengthen economic recovery. All this verbiage (sustainable, credible, confidence) masked the policy of austerity. What it means is that the financial markets must have confidence that their investments will be protected and bailed out and that the governments must balance their budgets responsibly.

The main difference between the forces of growth (Obama, Hollande) and austerity (Merkel) are not strategic but tactical. Obama had the U.S. economy in mind, not the Greek people, when he promoted growth in Europe. The U.S. was worried that a second collapse of the European banking system would adversely threaten U.S. banking institutions. U.S. banks have already reduced their exposure to the Greek financial system by 40 per cent. A Greek exit from the eurozone might infect the rest of southern Europe (Italy and Spain), in whose financial markets the U.S. banks are more heavily leveraged both directly and indirectly. A Europe-wide collapse would devastate the U.S. financial firms. In order to prevent this outcome, Obama was insistent that the European Central Bank create a cushion for a credit crunch and provide “confidence” to investors not to abandon the Euro. This is less about a growth agenda for Europe than a firewall to prevent a financial tsunami that mimics the one that took hold after Lehman Brothers closed down in 2008.

The Camp David Declaration dwelt at length on the importance of intellectual property rights and on hunger in Africa. Nothing was said of the major social crisis that had overtaken much of the world. The question of intellectual property rights is a parochial one for the interests of the Atlantic world, which has converted its intellectual property into one of its major sources of revenue. “Africa”, on the other hand, has become a symbolic way for the G8 to appear concerned about poverty. At the 2005 Gleneagles (Scotland) summit, the group launched the Make Poverty History campaign, which was a celebrity- and non-governmental-organisation-driven circus tagged onto the Millennium Development Goals. There was little about it that was serious. If the G8 was serious about some of the trials of Africa, it would suspend its insistence upon intellectual property rights and allow pharmaceutical companies to produce off-patent drugs. These drugs would be able to enter countries in Africa where their current patent-driven prices make them unaffordable. But “Africa” in the G8 is not about the real people of the continent. It stands as a proxy to show that the G8 is not heartless.

THE JOBS PROBLEM

Everyday life has become difficult, something that seemed off the G8 radar. The urgent situation is for the youth. The International Labour Organisation (ILO) released a report on May 22 entitled “Global Employment Trends for Youth 2012”. The findings are stark. Seventy-five million young people cannot find jobs, four million more than in 2007. These numbers do not tell the full story, as the ILO concedes. “Discouraged by high youth unemployment rates,” the ILO notes, “many young people have given up the job search altogether, or decided to postpone it and continue their stay in the education system.” More than six million young people withdraw from the labour force every year. Where they have been able to find jobs is in the temporary labour market. One in three youth surveyed said that having been unable to find a permanent job, they had to take temporary work and internships.

Such “precarious” work leads to exploitation of the workers and at the same time wariness about joining a union. “A young person who enters a company with a precarious contract and hopes to be taken on permanently one day does not naturally think of joining a union,” says Thiébaut Weber, a youth leader in the European Trade Union Confederation. These young people are not reassured by the G8 Declaration, which soothingly notes, “The global economic recovery shows signs of promise.” There is little indication of that in the unemployment centres.

The jobs problem is acute in the G8 and in the wider G20. A study finds that the G20 countries will need to conjure up 42 million jobs a year to absorb their youth. Unemployment is not a symptom of the financial crisis. It is a major crisis in itself. There is no plan on the table that will directly address this question of jobs. Neither Hollande’s commitment to growth nor Angela Merkel’s pledge to austerity has anything that speaks to those young people who will be systemically set outside the circuits of accumulation.

There is no public stimulus on offer that could underwrite an employment programme along the grain of the ILO’s Global Jobs Pact. The declaration was hesitant on commitments of public money for jobs. “Investment initiatives can be financed using a range of mechanisms,” the G8 noted, “including leveraging the private sector.” Public money will once more be used as insurance for private investment, rather than put to work by itself to create jobs.

A few days before the G8 summit opened, the France-based market research firm IPSOS released its Economic Pulse of the World. The firm conducted surveys in 24 countries, asking people how they saw their economy and how they anticipated its future. Only 14 per cent of those surveyed felt that their economy would be stronger six months hence. Southern Europe was gloomy, with Spain and Italy leading the pack. Britain was not far from the despondency. Elections in France, the Netherlands, Greece and Serbia and in the German provinces delivered a mandate against austerity in the run-up to the G8 meeting. Alexis Tsipras, the leader of the left-wing Syriza coalition in Greece, told CNN that if his country followed the bailout agreement “we are going directly to hell. To save Europe we need to change direction.” The pressure from below could not be clearer.

Gloom about the future did not translate into voter apathy and malaise. Electoral contests continued to bring out the voters, so that the French presidential election saw 73 per cent of voters at the polls, while 66 per cent of the Greek electorate came to deliver an anti-austerity mandate. The lines outside polling booths were matched by large anti-austerity demonstrations across Europe. The Greek anti-austerity protests began in 2010 and continue to date, with the Indignant Citizens Movement (Kínima Aganaktisménon Politón) as the spur. They echoed the Spanish indignados, whose protest began on May 15, 2011 (from which they took the name 15M) and then spiralled into manifestations in the centres of Spanish cities and a people’s march in the summer of 2011. The dynamic for the protests spread outward from southern Europe. The Occupy movement in the U.S. took inspiration not only from Tahrir Square but also from the Spanish.

When the powers that be announced that they would hold the G8 and the North Atlantic Treaty Organisation (NATO) summit in Chicago in mid-May 2012, a massive protest was forecast against both austerity and warfare. Hastily, the Obama administration moved the G8 to the more secluded site of Camp David. They feared the protest, which brought tens of thousands of people nonetheless to march against NATO and austerity in Chicago on May 20. The anarchist slogan defined the atmosphere, “A….Anti….Anticapitalista”.

In Quebec, over a hundred thousand people took to the streets against a pig-headed policy over protests and against the implications of austerity. In Frankfurt, despite the police’s attempt to constrain the demonstrations, 20,000 people gathered for the Blockupy protests. The organisers said that Blockupy sent a “clear and visible signal of international solidarity against the authoritarian crisis management and the poverty inducing policies of the European Union, the European Central Bank and the International Monetary Fund”. The message could even be simpler: those in charge had no idea what they were doing. Their attempt to appear united and confident seemed illusiory. If it worked in 1974, it was not working in 2012.

Vijay Prashad’s new book, Arab Spring, Libyan Winter , is published by AK Press.

This essay originally appeared on Frontline.