G20 Fiddles While Planet Burns and Economy Fizzles


With the G20 political leaders preparing to gather in Toronto this June, the outcome of the palaver can already be predicted with certainty: failure to resolve either the global economic or environmental crisis.

The U.S.-coordinated global strategy of funneling public funds into financial institutions and other beleaguered sectors likely staved off a depression of 1930s dimensions, but even so EU industrial output dropped by nearly 10 percent in 2009, Japan by 17 percent, Canada by 8 percent, and U.S. by 5.5 percent. Only in China and India did it rebound with barely a dip.

As for the prospects of sustained recovery, the gains to date are only temporary, deriving mostly from inventory bounce and fiscal stimulus. With industry awash in excess capacity, investment will be meager for some years to come. With a huge oversupply of housing, office and retail space, residential and commercial construction will also stagnate. Consumption spending is crippled by unprecedented levels of household debt and by crushing unemployment rates (a real rate of more than 18 percent in the U.S. and over 12 percent in Canada).

The prevailing opinion is that with an improved global trade balance and a re-regulated banking system, the global economy will right itself, providing public debt does not jack up interest rates and produce a run of sovereign defaults. This is magical thinking.

By means of bailouts and fiscal stimuli – measures that socialize the cost of capitalism’s crisis – public debt has largely replaced private debt as the engine of the capitalist economy. Without it, the global economy is likely to go back into the tank. Yet deficit fetishism is inducing governments to roll back public expenditures by trimming staff and programs and freezing or reducing public sector wages and benefits, including pensions. This is capitalism’s dilemma: it can’t live with ever rising public debt and it can’t live without it.

The U.S.-China currency scuffle will loom large at the Toronto talks: some U.S. analysts contend that China’s policy of undervaluing its currency has cost the U.S. alone 600,000 to 1.2 million jobs and the Americans want China to allow its currency to appreciate. But inflating China’s currency will not bring production back to the USA, especially as China has other levers at its disposal to protect its share of the world’s market. Moreover, when the Chinese allowed for a 21 percent rise in the yuan against the dollar between July 2005 and July 2008, the government intensified its repression of workers, pushing down labour costs to offset the currency change. So, pressuring the Chinese state to adjust its currency will only bring more misery upon the country’s exploited working class.

There is also much discussion now of the need to re-regulate the banking system to prevent the kind of undisciplined speculation that nearly brought down Wall Street. A plan is in the works, called the Volcker Rule. Formulated by White House economic advisor Paul Volcker and backed by the U.S. President it is designed to prohibit banks and large financial firms from buying and selling investments for their own profit. This plan has as much chance of getting past the bank lobby riddled U.S. Congress as did the public option plan in Obama’s health reform. And forget about the proposed transaction tax on the trading of securities or strict regulation of credit default swaps (derivatives that allow traders to bet on the health of bond issuing companies and countries).

What this economic crisis clearly shows is that every feasible solution, even within the limits of “actually existing capitalism,” is blocked by corporate interests whose lobbyists manage to shape legislation and regulations so as to preserve their privileges.

No Relief From the Heat

The same dismal conclusions can be drawn in connection with the climate crisis – the pivotal difference being that while the economic crisis is cyclical, the climate crisis looks to be terminal. As we lurch towards the terrifying tipping points, the targets for cutting GHG emissions remain pathetically inadequate. And even those targets will likely never be met because the methods chosen, like cap and trade and carbon offsets, are “hokey,” to borrow the expression used to describe them by the world’s number one climate scientist, James Hansen. Paradoxically, the volatile derivative market is being blamed for the economic crisis, while derivative trading in a solution to the climate crisis.

Market mechanisms and hope for new mitigation technologies are what’s on offer precisely because they don’t disrupt business as usual. Indeed, they create new opportunities to cash in big time. It’s a shame if not a surprise that mainstream environmental organizations have largely bought into the green capitalist agenda, beholden as many of them are to the big polluters who contribute to their funding.

The problem of supplying the world’s growing energy demand without resort to GHG producing fossil fuels is not yet solved. Clean energy in sufficient quantities is years, if not decades away. The capitalist solution is resource imperialism and price regimes that deny energy to the poor. The ecosocialist solution is to invest fossil energy profits in solar, wind and tidal power; rapidly phase out burning fossil fuels for energy; and allocate reduced energy supplies in such a way as to assure that everyone’s basic needs are met.

Here are some elements of a transitional post-carbon program:

  • an immediate moratorium on tar sands production and an early termination of all tar sands operations.

  • abandoning all fossil fuels by 2050 with specific targets for every five year period.

  • a 100 percent tax on excess profits on existing oil and gas, half to be invested in renewable energy sources; the other half to be distributed to First Nations and to fund just transitions to a post-carbon society – including alternative jobs for workers in fossil fuel industries and rebates to low income people to ensure that higher energy prices do not block them from gaining access to adequate food, home heating and transportation. Funding for these purposes to be augmented by re-allocating two-thirds of Canada’s military budget to them.

This article appeared in the May/June 2010 issue of Canadian Dimension (Mayworks).


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