The 11-12 November meeting of the heads of the G20 group of countries ended in failure. The world economy faces crisis: massive unemployment exists internationally, there are huge global trade and investment imbalances, and the shadow of a future financial crisis looms large. Yet by the end of the meeting, all they could agree about was a collection of platitudes, hopes, wishes and fine words about the desirability of co-operation.
The background to this is globalisation and the financial crisis. The United States accuses China of keeping its currency artificially low. China, Germany, Brazil, Turkey and the Russians accuse the US of adopting policies which make the US dollar artificially low. The United States is pursuing a policy of ‘quantitative easing’, printing money and using it to buy bonds. The policy, which has been tried before and failed, is supposed to help boost the US economy. Although this won’t be happening without a serious increase in exploitation and massive cuts in state spending, it has other effects. One of these is to increase the supply of available money which, unable to find a profitable outlet in the US, pours into ‘emerging markets’, depressing the value of the dollar relative to other currencies. The low value of the dollar cheapens the price of US products and increases the prices of other countries’ products. For countries like Germany, which runs a trade surplus – exports more than it imports – this is a threat to its economy and its capitalists’ profits. It will also increase inflation in those economies. Wolfgang Schäuble, the German Finance Minister, has described the policy of quantitative easing as ‘clueless’ and other countries have spoken out too.
In Europe, Ireland has had to be rescued by the International Monetary Fund and the European Union, but the uncertainty about Irish acceptance of austerity and about the debt situation of Portugal and Spain threaten to push the value of the Euro down.
The consequences of this will be competitive attempts by countries to lower their currencies in the hope of pushing the burden of the US action onto others. It will also lead to a global trade war. For all their fine words about co-operation, the imperialists continue to stab each other in the back!
Steve Palmer
FRFI 218 December 2010/January 2011
