Red Pepper magazine has put together an interesting series of articles in the light of the financial crisis which are available on their website as well as their magazine:
TNI fellow Hilary Wainwright makes an appeal, to go beyond Keynesian solutions to tackling the rise and unaccounable power of the City and of corporations
Martin Ryle and Kate Soper ask if we dare to imagine “a non-capitalist economy, where security of employment and welfare provision would no longer be dependent (as they are now) on constantly expanding private profit”
Walden Bello argues in Foreign Policy in Focus that economic and political elites, from Prime Minister Gordon Brown to economist Joseph Stiglitz, are converging on Global Social Democracy as a solution to the current economic crisis. But this assumes a continued emphasis on global integration over local alternatives, the primacy of the market, technocratic top-down approaches and the continuation of monopoly capitalism. Progressives should not accept these limitations but instead aspire to paradigms of social organisation that aim for equality and participatory democratic control of both national and global economy.
Not surprisingly, the swift unraveling of the global economy combined with the ascent to the U.S. presidency of an African-American liberal has left millions anticipating that the world is on the threshold of a new era. Some of President-elect Barack Obama’s new appointees – in particular ex-Treasury Secretary Larry Summers to lead the National Economic Council, New York Federal Reserve Board chief Tim Geithner to head Treasury, and former Dallas Mayor Ron Kirk to serve as trade representative – have certainly elicited some skepticism. But the sense that the old neoliberal formulas are thoroughly discredited have convinced many that the new Democratic leadership in the world’s biggest economy will break with the market fundamentalist policies that have reigned since the early 1980s.
One important question, of course, is how decisive and definitive the break with neoliberalism will be. Other questions, however, go to the heart of capitalism itself. Will government ownership, intervention, and control be exercised simply to stabilize capitalism, after which control will be given back to the corporate elites? Are we going to see a second round of Keynesian capitalism, where the state and corporate elites along with labor work out a partnership based on industrial policy, growth, and high wages – though with a green dimension this time around? Or will we witness the beginnings of fundamental shifts in the ownership and control of the economy in a more popular direction? There are limits to reform in the system of global capitalism, but at no other time in the last half century have those limits seemed more fluid. [Read more →]
All the papers are full of reviews of 2008 which not surprisingly focus on the financial and economic crisis. Not all admit that they failed to predict the crisis in their reviews the previous year. Perhaps the Financial Times is keen to forget its headline a year ago in its predictions for 2008: “No US recession.”
Dean Baker of CEPR on “Beat the Press” does a good job of showing how US newspapers are still misunderstanding the nature of the crisis that goes deeper than a credit crunch.
Richard Murphy of Tax Research UK has his own review of 2008 which notes some of the openings for actions on tax havens, the possibility of a Green New Deal that have arisen from the crisis.
Meanwhile in a few other articles that you might have missed:
Here are two videos from the TNI seminar held in Brussels on 10 December. The first is a presentation by Francois Houtart, a member of the UN High Level Task force on the Financial Crisis in which he calls for tackling the root causes of the crisis. Journalist Sue Branford reports back on Latin America’s response to the crisis.
Global Labor Strategies have written an interesting series of posts analysing the Beijing Declaration (posted on this blog, now with more than 470 sign-ons). The first piece analysed the vision, the second the programme for change, and most recently they have put forward some great ideas on next steps including exposing perpetrators of the crisis, building allies in places of power and amongst certain countries, projecting concrete demands, and helping people at the grassroots meet their survival needs by organizing themselves and connecting with each other.
In terms of finding allies, one place to start could be the little reported meeting of financial ministers of the six Alba countries (Bolivia, Honduras, Nicaragua, the Dominican Republic, Venezuela, Cuba, with Ecuador) in Caracas in November, that looked to respond to the financial crisis. The meeting resolved to look into establishing a common currency (the ‘Sucre’) to diminish dependence on the dollar, to bolster the Bank of the South to weaken influence of the IMF and World Bank, and to strengthen the alternative trade block, the Bolivarian Alternative for the Americas (ALBA). They also gave backing to Ecuador who have said they will not pay back illegal and illegitimate debts.
Another place for potential allies in places of power is the new UN high level task force set up the UN General Assembly President Miguel d’Escoto, whose openess to more radical visions and advisors is causing some upset at Foxnews! Yet he is elected by the Assembly so his new taskforce chaired by Stiglitz will have considerable weight. See the Terms of Reference (PDF, 2.2 MB)
Daniel Bradlow for Foreign Policy in Focus argues that given that global elites are focused on financial regulation rather than broader issues of global governance and justice, popular movements should push a progressive agenda for regulatory reform based on community reinvestment, licensing requirements for hedge funds, sovereign wealth funds, introduction of impact assessments for lending, improving access to financial services for low-income population, and ensuring greater accountability in international financial coordination.
Ralf Martin on Open Economy argues that governments should seize this chance to promote fiscal stimulus that is also pro-environment and take the occasion to embrace pollution taxes (perhaps starting in 2 years) to pay for the borrowing that the stimulus undoubtedly requires.
Joseph Stiglitz in Vanity Fair argues that in the debate over remaking financial policy, it is crucial to get the history right about the causes of the crisis. He puts the blame on five key decisions and moments: Reagan’s appointment of free market zealot Greenspan as Chair of the Federal Reserve, the repeal of Glass-Steagall act and other laws that increased de-regulation of the financial sector, Bush’s tax cuts for the rich and unprecedented low interest rates that encouraged excessive borrowing and lending, failure to tackle stock options or incentive structures for rating agencies which instead encouraged everyone to hide the real figures, and finally the misdirected actions of the Bush administration to the crisis that bailed out bankers and shareholders but not those facing foreclosures of their homes.
“There will come a moment when the most urgent threats posed by the credit crisis have eased and the larger task before us will be to chart a direction for the economic steps ahead. This will be a dangerous moment. Behind the debates over future policy is a debate over history - a debate over the causes of our current situation. The battle for the past will determine the battle for the present. So it’s crucial to get the history straight.
What were the critical decisions that led to the crisis? Mistakes were made at every fork in the road - we had what engineers call a “system failure,” when not a single decision but a cascade of decisions produce a tragic result. Let’s look at five key moments. [Read more →]
The greatest financial crisis since the Wall Street crash of 1929 has been met by an unprecedented set of government actions to stem the tide of destruction. But is there also a coming sea change in economic theory and practice, as well as in politics, in the shift from a free market to intervention in the market? Is this the end of ‘capitalism as we know it? What are the power politics and prospects to achieve change? What are the alternatives to these catastrophically failed ideas behind the ‘neoliberal globalization’ and ‘corporate globalisation?
This crisis is very likely the beginning of a new phase of reform and adaptation in the history of capitalist development, but which direction will this take? Will the ‘markets’ emerge re-empowered and strengthened or will the state resume its role in guiding and restraining the markets, redistributing wealth in the interest of the welfare and security of all citizens? If a radical public response to the crisis can be mobilised quickly, the crisis can be an opportunity for radical transformation, argues Barry Gills in the article available on the website of Globalizations journal.
But workers are not taking this lying down: in Chicago, laid off workers have occupied a factory and say they won’t go home without assurances they’ll get severance and vacation pay. Their slogan: “You got bailed out, we got sold out” to Bank of America, who received $25 billion from the government’s financial bailout package and as creditors of the factory have refused to allow payments to the workers. The story is a microcosm of who has benefited and suffered from the crisis, but also a symbol of resistance that is likely to grow.
Ann Pettifor on Debtonationwonders why politicians have been so ineffective and wrong-headed in their approach and concludes it is based on their ties to the financial sector which prevents them from taking back control.
Banktrack have released an interesting new report, showing how the Chinese government have introduced regulations that cut lending to energy-intensive industries and increased funding to green projects. The picture on financing and results is a mixed one, but as Michelle Chan, one of the contributing authors to the report argues, it sets an important precedent: “China’s banking crisis led to massive government bailouts starting in the late ’90s. But it wasn’t ‘no-strings-attached.’ Banks had to make drastic changes, and new regulations forced banks to follow prudent lending practices, including taking the environment into account. Governments around the world should demonstrate the same vision as they nationalize their banks and reform their financial sectors.”
A new report released today by BankTrack analyzes green finance policies introduced in China over the past 18 months that are designed to curb the country’s growing environmental problems, such as pollution and climate change. [Read more →]
After the G20 managed to agree on little more than to meet again, and with few signs of radical proposals at an official government level elsewhere, it seems it has been left to the UN to push for deeper more structural responses to the crisis.
UN General Assembly President Miguel D’Escoto has set up a high level task force chaired by Joseph Stiglitz. The commission also includes some other potentially more radical voices such as: Francois Houtart active in the World Social Forum, Malaysian economist Jomo Sundaram who during the Asian financial crisis was an early advocate of capital control measures and Pedro Paez, Ecuadorian government minister who has spoken out in favour of shifting from models of economic growth to models of wellbeing.
“The international community has the responsibility and the opportunity to identify longer-term measures that go beyond protection of banks, stabilization of credit markets and reassurances for big investors,” said Mr. D’Escoto as he launched the UN task-force.
Of course it is doubtful whether the task force will have any traction, given the lack of support by major economic powers. An article listed below, which includes calls by UN economists for deep reforms, suggests that the US is against the initiative. Now there’s a surprise! Still it will be an important body to keep an eye on in terms of recommendations and whether they pick up on proposals, such as those in Beijing. [Read more →]
Myriam Vander Stichele, TNI fellow argues that the financial crisis in Europe resulted from a mismatch between liberalisation of financial services and lack of supervision of European cross-border financial conglomerates. Pressure from the UK government and financial corporations to compete with the US stymied attempts at regulation and led to the UK aggressively pushing financial services liberalisation in international trade agreements.
The issue is still very live with France recently watering down proposals at EU level for European wide supervision of cross-border insurance companies. Financial institutions not only need to be supervised, they must be required to invest in social and environmental areas to tackle the climate and food crises. [Read more →]
What the world needs right now is a rescue operation. The global credit system is in a state of paralysis, and a global slump is building momentum as I write this. Reform of the weaknesses that made this crisis possible is essential, but it can wait a little while. First, we need to deal with the clear and present danger. To do this, policymakers around the world need to do two things: get credit flowing again and prop up spending. Read more in New York Review of Books
Sami Mahroum
Many have drawn parallels between this G-20 meeting and the one involving 44 countries that took place 64 years ago in Bretton Woods, New Hampshire, to devise the post-war international monetary system. The meeting led to the creation of the International Bank for Reconstruction and Development, the General Agreement on Tariffs and Trade, and the International Monetary Fund.
One of the main achievements of these Bretton Woods institutions was allowing the rapid reconstruction of post-war Europe. But these same institutions failed elsewhere, particularly in bridging the wealth gap between the North and the South. A main reason for this is their inability to address the knowledge gap. When they next meet in April 2009, the leaders of the G20 countries should recognise this failure in globalisation and address it by the creation of a World Knowledge Fund. Read more on the website of Science&Business
Today’s Washington Post reports that World Bank President Robert Zoellick cited “Thanksgiving plans” as his excuse for dropping out of the November 29-December 2 Financing for Development Conference in Doha, Qatar. This year’s American turkey-eating fest falls on November 27.
Zoellick’s snub is just one more indication that the economic needs of the developing world are being pushed to the back-burner in the midst of a global financial crisis that originated in the richest nations. According to a new report by the Institute for Policy Studies, U.S. and European governments have committed about $4.1 trillion to rescuing their own financial firms. That’s 45 times as much as they spent last year in development aid. In fact, the U.S. government’s $23.2 billion aid bill last year is far less than the $29 billion bailout for just one investment bank — Bear Stearns. And while industrialized nations pledged to increase aid pledges in September, all bets are off now that they are plundering their coffers to prop up their failing financial institutions.
Dirigentes sociales de México, Colombia, Venezuela, Ecuador, Perú, Argentina, Bolivia y Chile, pertenecientes a la Alianza Social Continental, reunidos en Quito el 15 de noviembre de 2008 -al mismo tiempo que lo hacían los líderes del G20 en Washington- discutimos las implicaciones de la actual crisis financiera global y las acciones que deberán emprender los pueblos del Continente. Al evento invitamos al Ministro de Coordinación para la Política Económica de Ecuador, Pedro Páez; al Senador del Polo Democrático Alternativo de Colombia, Jorge Enrique Robledo; y al Embajador de Bolivia en Ecuador, Juan Javier Zárate, quienes expusieron sus apreciaciones ante el tema que nos convocaba.
Después de debatir ampliamente sobre las causas, los responsables, los impactos sobre la sociedad y las propuestas de solución, concluimos: [Read more →]
George Soros
The salient feature of the current financial crisis is that it was not caused by some external shock like OPEC raising the price of oil or a particular country or financial institution defaulting. The crisis was generated by the financial system itself.
This fact—that the defect was inherent in the system —contradicts the prevailing theory, which holds that financial markets tend toward equilibrium and that deviations from the equilibrium either occur in a random manner or are caused by some sudden external event to which markets have difficulty adjusting.
The severity and amplitude of the crisis provides convincing evidence that there is something fundamentally wrong with this prevailing theory and with the approach to market regulation that has gone with it. To understand what has happened, and what should be done to avoid such a catastrophic crisis in the future, will require a new way of thinking about how markets work.
By Sarah Anderson, John Cavanagh and Janet Redman, Institute for Policy Studies
The approximately $4.1 trillion that the United States and European governments have committed to rescue financial firms is 40 times the money they’re spending to fight climate and poverty crises in the developing world. Download the report [PDF]
Kevin Smith of Carbon Trade Watch/TNI argues, in a Guardian comment piece, that the the government should use its shareholder position in the newly recapitalised banks to end funding for fossil-fuel projects and to invest in a transition to a low-carbon economy.
In early November, representatives from 20 different organisations from around the world gathered in Spain as part of the BankTrack network to lay out a response to the banking crisis. The resulting El Escorial statement on banking and the financial crisis made a number of common sense recommendations as to the practical steps that need to be taken to provide a more stable, equitable and democratic banking system in the wake of the recent economic upheaval. In contrast, the UK government is planning to essentially let the banks get on with it, but using public money this time.
More than a month after it was announced that British tax-payers would be stumping up billions of pounds to bail out the banks, the two men responsible for overseeing the public investment, Philip Hampton and John Kingman, announced in an article in the Financial Times that they “must operate on a commercial basis at arm’s length”, and will act only “to manage the taxpayer’s investments, not to manage the banks”.
This “arm’s length” approach amounts to a monumental cop-out on the part of the government and a nigh-on unconditional bail-out for the beleaguered bankers. The banking crisis has clearly highlighted the fact that left to their own devices, financiers will always recklessly career down the road of short-termist profit maximisation. [Read more →]
Global Labor Strategies has a good analysis of the G20 summit, in which they argue that the vacuous statement not only indicated a kowtowing to Bush but also a fundamental inability to tackle a crisis that threatens their systems and the livelihoods of millions. The meeting was eerily reminiscent of a 1933 economic summit that disintegrated into trade wars and competitive devaluations. But the failure of the powers to address the crisis opens up the space for an initiative from below, from the alternative globalisation movement.
Original article is at http://laborstrategies.blogs.com/global_labor_strategies/2008/11/the-g-20-vs-the-g-6-billion.html but we reproduce it here below
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The message from last weekend’s G-20 summit meeting on the global economy must be a parody of Samuel Beckett’s Waiting for Godot: The game can’t go on. The game must go on.
In the face of the worst financial crisis since the Great Depression, European leaders had flirted with the idea of actually trying to change something. French President Nicolas Sarkozy said, “Laissez-faire, it’s finished. The all-powerful market that is always right, it’s finished.” As a result, it is necessary to rebuild the entire global financial and monetary system from the bottom up, “the way it was done at Bretton Woods.”
British Prime Minister Gordon Brown pointed out a deep contradiction of capitalist globalization: “We now have global financial markets, global corporations, global financial flows. But what we do not have is anything other than national and regional regulation and supervision.” We need “a global way of supervising our financial system.” He called for “very large and very radical changes,” including turning the IMF into a “global central bank.”
But the Bush administration soon put an end to such wild talk. “This meeting is not about discarding market principles or about moving to a single global market regulator,” a White House official said. “There is very little support for that.” [Read more →]
An initial response from individuals, social movements and non-governmental organisations in support of a transitional programme for radical economic transformation. > Read and sign!
