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The Dow of the G20


In quick succession, the World Leaders shall gather, first at Los Cabos (Mexico) for the G20 summit and then at Rio de Janeiro (Brazil) for the UN Conference on Sustainable Development. Frantic discussions are being held by the sherpas, the bureaucrats whose task it is to create the Zero Document out of which will come the final declarations. Wrapped in an unyielding air, the United States and its North Atlantic allies have brought their red pens to scribble firmly on the tentative documents. The old Rio formula from 1992 “common but differentiated responsibilities” has been struck down several times in the Rio draft, and the Europeans (who once again seem to be doing the dirty work for the North Atlantic) are adamant that the phrase “in accordance with the Rio Principles” be softened to “should be based on the Rio Principles.” The point is to dilute the implications of the 1992 Earth Summit, pushing for Green Capitalism rather than the colorless, but nonetheless focal, idea of Sustainable Development.

The North Atlantic’s obduracy in the Rio process is the planetary cognate of the Republican’s behavior in the US: its stubbornness on its ideological platform prevents any movement, and then this stasis is used to paint the UN forum as too cumbersome. Government (in the US) and the UN (on the world stage) are blamed for problems that have more proximate causes: the hard-hearted self-interest of the national 1% in the case of the US, and the planetary 1% (who mainly have residences in the North Atlantic) in the case of the UN.

Before Rio, the G20 meets at Los Cabos. The G20 Summit was created as a response to the Great Credit Crunch that began in 2008. The leaders of the North Atlantic knew that they had neither the resources nor the political will to solve capitalism’s greatest challenge in two generations. The G7, the political arm of the North Atlantic and Japan, had itself been created in 1974 to answer a major recession that challenged capitalism’s self-understanding. Between 1970 and 2008, the capitalist economies suffered a series of torrential crises: 124 systematic banking crises, 208 currency crises, 63 sovereign debt crises; 42 twin crises, 10 triple crises, a global economic downturn every decade, and several prices shocks bookended by the two oil shocks of the 1970s and the food and energy price shock of 2008 (this data is from the IMF and the ILO). It was fear that sent the Europeans, the Japanese and the US in search of allies amongst the emergent economies, mainly the BRICS states (Brazil, Russia, India, China and South Africa), Saudi Arabia, South Korea and Turkey. In June 2010, the G7 promised to wind up its own operations and to allow the G20 to be the world’s executive body (outside the purview of the UN).

As confidence returned to the G7, its leaders buried their promises made in Pittsburg (2009) and Toronto (2010). India and China were good for their cash infusions, but were of little consequence in terms of the politics. In 2011, the Asian Development Bank wrote wistfully, “Asia should and will play a greater role on the global stage” (their report is called Reshaping Global Economic Governance and the Role of Asia in the Group of Twenty). The Asians had their own (almost similar) view of the Credit Crunch. They argued that there was not only too little regulation, but also very poor risk management and hubris in the Northern financial world when it comes to economic fundamentals. The Asians in the G20 wanted a much more robust regulatory infrastructure for finance and a greater role in the international financial institutions. Li Dakoui, a member of the Chinese Central Bank policy committee, said in 2011, “If we inject money, we must have certain controls. We cannot say that we give you money and you spend the money at will. You are rich, you borrow money from the poor. It’s not right for you to continue to lead a luxurious life.” The South wanted Growth policies to lead over Austerity policies. It would not have its way.

Between the Cannes meeting (November 2011) and the Los Cabos meeting (June 2012), the news from the international bodies has been grim and the prognosis startling. The International Labour Organization reports (World of Work Report 2012) that the employment situation is abysmal. It could be worse. “Countries that have chosen job-centered macro-economic policies have achieved better economic and social outcomes,” said Raymond Torres (Director of the ILO Institute for International Labour Studies). “Many of them have also become more competitive and have weathered the crisis better than those that followed the austerity path.” The World Bank’s Global Food Price Index notes that after four months of consecutive price declines, food prices have once more threatened an upward march.

Finally, the IMF’s April report (World Economic Outlook) is titled “Growth Resuming, Dangers Remain.” Its lead author Olivier Blanchard suggests, “The search must be for reforms that help in the long term but do not depress demand in the short term.” In other words, IMF orthodoxy needs to be set-aside for the present. The safe harbor for the moment, Blanchard notes, are the Asian countries. “For the most part,” he points out, “emerging economies have enough policy room to maintain solid growth.” In other words, the Asians are not wedded to the cocktail of toxic derivative-driven finance, a debt-financed consumption boom and loose money policies from the Northern central banks. The general sentiment is that the North’s model is bankrupt, that the South has some good ideas, but that the politics are against rational solutions. The North is too powerful to admit to its culpability and to collaboratively work out policies for the present.

The G20 came into being as a salvage organization in 2008. It was a Siren, to attract Asian surpluses. Nothing more was expected of it. This Los Cabos meeting will not be an adequate forum for the BRICS states to articulate their call for financial regulation and for growth-related policies. Two issues will overshadow the normal agenda: Syriza and Syria.


Anticipating pressure at Los Cabos, German Chancellor Angela Merkel already scoffed at ideas such as German-backed Euro-bonds or a new banking union. There will be no coordinated stimulus measures and only tepid help for southern Europe from a skittish IMF (its chief had already burned her tax-free hand with nasty comments about the culture of work and taxation in Greece). Spain’s 10-year bonds are now going to cost 7%, beyond the capacity of the country to pay them back. Italy will also find that money is now more expensive than before. The normally placid Swiss National Bank chief Thomas Jordan warned that his country might have to set up capital controls to calm down the Swiss Franc (which, with Mayfair properties, has become a useful port for frightened Euro millionaires).

It is likely that the anti-Austerity forces will triumph at the Greek polls. This victory might not solve Greece’s problems immediately, but it will certainly open a new horizon of political possibility around the continent. It is the politics that takes Merkel back to Germany from Los Cabos, not her recognition that the Rio summit is going to be a bust. The fear is that the radicals in Greece are closer to the general temperature of the European voters and that these radicals have ideas that might actually promote job-growth rather than the kind of inequality-driven policies that has fattened Richistan at the expense of the population. Francoise Holland (France) has joined hands with Barack Obama (US) for a pro-Growth agenda against the Merkel (Germany) and David Cameron (UK) Austerity alliance. This is the G20 Idol version of things. None of these four are serious about a jobs agenda. If they were, they’d have to come to terms with the fact that it is labor arbitrage on a planetary scale that has driven out jobs from the heartland of the North Atlantic. They have no solution to this problem because to confront it is to recognize that their entire ideology (neo-liberalism) is bankrupt.

Greater Syria

Instead, Hollande and Obama have promised to hornswoggle Putin (Russia) over the question of Syria. Absent any serious policy discussion about the jobs crisis, the North Atlantic would like to save face by seeming serious about Syria. A poorly handled story about Russian helicopters to Syria has not dented the self-righteousness. France’s Foreign Minister Laurent Fabius pushed the UN to pass a resolution on Syria under chapter VII of the UN Charter (which authorizes the use of force). This is far outside what the US would like, despite the protestations of US ambassador Susan Rice. The US has already suggested that it is afraid that the Syrian conflict might spill over into Lebanon and Iraq, threatening to set the entire region into pandemonium. Obama and Hollande have indicated that they are going to “test Putin’s resolve” over the question of Bashar al-Assad. The Russians, meanwhile, have let slip that they are looking for an alternative to al-Assad.

All this is theatre. In Syria, the regime of al-Assad continues to pummel his opponents with heavy force. The Saudi and Qatari backed rebels have discolored the peaceful opposition (that ran for eleven months under heavy state repression in 2011 – not one sound from the North Atlantic in its defense at that time). In Lebanon, there is genuine worry that this kind of rebellion will set alight the always-fragile tinder of sectarianism. Bomb blasts in Iraq are a sign of what might come. The UN confirmed on Monday that the former US Ambassador to Beirut, Jeffrey Feltman would be the new Under-Secretary General for political affairs (a story I covered at Counterpunch on May 25). As one UN official told me, “Supporting a Sunni extremist against Shi’ite Iran is the consensus civilized Western position.” Concern for the Syrian people is minimal. Other, more deadly games, are afoot.

The Asians do not want Los Cabos to be turned into a platform for the North to appear as World Leaders, when they are patently no longer capable of this function. Chinese Vice Foreign Minister Cui Tiankai said that the G20 summit is not the best forum to discuss Syria. “The situation in Syria is of concern to everyone globally,” he said. “However the G20 is a platform for global economic governance and so far we haven’t seen political and security issues on the agenda of the G20.” The Chinese recognize that Syria is a distraction from the core agenda. The North Atlantic will use “Syria” to get away from the problems of economic governance, and to get away from a real discussion about its cynical interests in West Asia (egging on the Gulf Arabs to drive the counter-revolution to the Arab Spring).

In late May, UN Secretary General Ban Ki-moon bemoaned the lack of progress on the Rio + 20 negotiations. It is unlikely that anything will come of the Rio + 20 meeting. At one preparatory session, the US delegate said, “We have a problem with the word ‘commit.’” Without commitments, the entire exercise is a circus. Much the same is forecast for Los Cabos. Beautiful weather for whale watching. Little from the conference rooms.

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


Vijay Prashad’s most recent book is No Free Left: The Futures of Indian Communism (New Delhi: LeftWord Books, 2015).

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