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From the opening plenary session, day 2 of the Now We The People conference, 24.8.03 University of Technology, Sydney Is
there a crisis in the global economy? Congratulations to the organisers of this timely and important conference. I hope that we can find the resources and commitment to make it an annual event. Three questions must be asked about the global economy: Firstly, are people better off under the neo-liberal policies pursued by major capitalist economies and imposed on poorer countries over the past 20 years? Secondly, is there anything that is new about the emergence of the US as the world's only super power? Thirdly, are there alternatives to the dominant neo-liberal policy agenda that could better serve Australia and our small planet's citizens. The global economy is facing economic, social and environmental crises but power and economic relationships are structured in such a way that inhibits us addressing the most basic elements of these crises. Around 3 billion of the world's citizens are surviving on less than A$3 per day. By 2030 the world's population is forecast to increase by 2 billion people, and by 2050 3 billion. Nearly all of this increase will be accommodated in the cities of poor countries. Much of sub-Saharan Africa is crippled by civil war, AIDS and impoverishment. Some states are collapsing. Around 20 million of the world's children slept in the streets last night and a further 22 million people are refugees fleeing war and persecution. The income gap between advanced capitalist economies and poor countries is growing. The average income of the 20 richest countries is now 37 times the poorest 20. This ratio has doubled in the past 20 years. Of the 100 largest economies 52 are in fact transnational corporations. The wealth of the world's three richest multi billionaires is equivalent to the wealth of the world's poorest 48 countries. Many poor countries are facing an environmental crisis associated with soil erosion and contamination, low quality water and deforestation. More than 1 billion people lack access to safe water for drinking, personal hygiene and domestic use. Almost one quarter of global land resources (cropland, pasture, forest and woodland) has been degraded and one fifth of all tropical forests cleared over the past 50 years. In fact the world confronts a long-term environmental crisis. The 1990s were the hottest decade on record and scientists are now saying that greenhouse gas emissions are resulting in even faster climate change characterised by drought, floods and other natural catastrophes. Yet the US and Australia, the major perpetrators on an absolute and per capita basis respectively, refuse to ratify the Kyoto protocols. Both countries favour their most energy-intensive industries. The rapid modernisation of the world's two most populous countries China and parts of India has major environmental implications. For these countries to attain a standard of material well-being equivalent to advanced capitalist countries would lead to a global environmental disaster. For example for China to have the same number of motor vehicles per head as Germany translates into 650 million vehicles, more than known reserves of metals in the world. Over the past 20 years we have witnessed a long period of income redistribution in advanced capitalist economies. From the late 1970s, advanced capitalist economies were confronted with a major crisis resulting from increasing demands by workers for higher wages, increasing social expenditures to support the welfare state and external shocks such as spiraling oil prices. This resulted in falling profitability for firms and rising inflation and unemployment that threatened the stability of the global economy. The dominant policy response has been termed "neo-liberalism" which entailed a winding back of social expenditures, privatisation, deregulation of financial and labour markets and emphasis on market solutions rather than government policy to address major social and economic problems. The political agenda associated with "neo-liberalism" sought to eulogise individualism and to undermine solidarity and cooperation between groups of society seeking greater equality and fairness. Globally, neo-liberalism resulted in cooperation and consensus between the major economies through institutions such as the "Group of 7", the World Trade Organisation, the World Bank and the International Monetary Fund. Countries that sought alternatives to the neo-liberal agenda were punished such as France in the 1980's which attempted to stimulate government expenditure to increase employment. On the other hand, the adoption of neo-liberal policies in a number of countries has had disastrous results including Russia and Argentina. The rise of neo-liberalism drove changes in the way economies were structured and economic forces in turn shaped the neo-liberal policy agenda. At the core of the neo-liberal agenda were not debates about the advantages of regulation versus deregulation or privatisation versus public ownership but the expansion of the economic surplus to benefit transnational corporations and wealthy individuals. The global economy faces a period of instability and crisis. The current development path is not sustainable. Over the past decade high rates of economic growth have been driven by high rates of consumption and a massive build up of debt. We have seen the dot.com boom come and go, the property market frenzy and the share market fluctuate widely. Low interest rates spurred a credit binge. Economic growth has been sustained by credit. Countries that adopted neo-liberal prescriptions have witnessed declining living standards for much of their population and growing income inequality. On the advice of western economic advisers, Russia went cold Turkey following the collapse of the Soviet Union and paid a heavy price in terms of living standards. The average life span of Russians actually declined over the 1990's. Argentina in the 1990's was considered a model country that adopted neo-liberal economic policies. It cut social expenditures, privatised industries, cut tariffs and deflated its currency. Rather than stimulating economic growth, these measures resulted in an economic meltdown. The economy virtually collapsed, with 52% of the population now beneath the poverty line and close to 25% of the population unemployed and another quarter under-employed. A number of features stand out about the global economy: Firstly, the current period can be defined as the age of turbulence. Euphoria about rallying stock markets one day or more currently, the Baghdad boost, is followed by gloom the next day as companies in the real economy announce falling profitability. Secondly, most of the wealth and income growth is concentrated in a small club of western countries. Trade between advanced capitalist economies and poor countries doesn't take place on an equal basis. Transnational corporations based in advanced capitalist economies seek investment in countries with low wages and poor working conditions. The relationship is based on exploitation and not equality. Thirdly, the global economy is highly integrated with production, trade and finance linking different countries. The new global production system has resulted in production shifting to low cost countries where workers receive very low wages. Fourthly, the growing aggressiveness of the US administration has significant implications for the global economy. The primary focus of US policy in the global economy is to look after its domestic political interests and corporate elites whether it is energy corporations, heavily subsidised farmers or global corporates seeking to open up new markets. The dominant groups in the current US administration - the military-industrial complex, fundamentalism religious groups and neo-conservative ideologues - have embarked on a course of unilateralism that has major implications for the global economy. For much of the 1990's a debate raged about the impact of globalisation, the massive transformation of the global economy brought about by economic, technological and cultural drivers. The dominant group in this debate identified globalisation with a weakening of nation states and the emergence of a "borderless world". In fact the opposite is happening with growing nationalism and the increasing influence of unilateral intervention by the US. What is new about the current situation? Is there something new about current situation? Throughout the 1990s economic debates were concerned with how to enhance globalisation - the growing integration of capital, trade and production - as well as the rapid diffusion of information and western culture. Along the political terrain there were of course different interpretations of what this meant, with the left focussing on the dangers of corporate globalisation whilst the right concentrated on removing impediments to globalisation such as environmental laws and labour market "rigidities", as well as trade liberalisation and deregulation. With a handful of exceptions, most analysts equated globalisation with a decline in the importance of nation states and the capacity of government's to influence outcomes in the economy. After the collapse of the Soviet Union, the US administrations of George Bush senior and Clinton continued to act within a framework that emphasised an important role for the United Nations and other multilateral institutions, and to seek consensus with other major capitalist countries. The first Gulf war, led by the US under the umbrella of the UN, stopped short of an invasion of Iraq because of opposition from European, Middle East and Russian allies in particular. Global opinion mattered. The Clinton administration continued to champion the globalisation project, with US interests enhanced by a prosperous global economy. Up until the George W Bush Administration and September 11 US dominance of the global economy was contrained; firstly by the cold war, secondly by pressure from European and Japanese allies, thirdly by domestic opposition and finally by multilateral organisations such as the United Nations and, to a lesser extent, the "Washington consensus" institutions such as the World Bank and the International Monetary Fund. The "War on Terrorism", by building on the understandable sense of outrage and vulnerability at the attacks on the World Trade Centre and the Pentagon provided a pre-text for the US administration to become much more interventionist. The "War on Terrorism" set the pretext for the invasions of Afghanistan and Iraq, the identification of the "axis of evil", and sent out signals to the international community regarding US intent if any country stepped out of line. The strategy is articulated by the Project for a New American Century, a group dominated by the hawks in the US Administration, and increasingly, by the US President. The strategy demonstrates the close interrelationships between US military, political and economic interests. The toppling of regimes in Iraq and Afghanistan and their replacement by US supported regimes not only resulted in significant political outcomes in these countries but must also be seen as an attempt to reorganise the geography of the Middle East. The invasions also send out signals to all countries that the US is prepared to act against any state that does not coincide with their interests. Is it a sign of weakness or strength that the US Administration has embarked on a unilateralist path? It is certainly a high risky strategy, both for the US and the global recipients of this hegemonic strategy. Increasingly unilateralism by the US in economic policy involves passing the costs of the economic crisis onto other nations. For example, the US dollar has deflated by a massive 20% against major currencies in 2003 hampering export competition and economic recovery in Europe, Japan and third world countries. Within the US Administration, there are clearly major differences on the way forward and there is growing opposition from other countries normally considered to be close allies of the US. Political economist Walden Bello has suggested that the US is in fact overextending itself demonstrated by: ›› Its inability to create a new political order in Iraq ›› The failure to consolidate a pro-US regime in Afghanistan outside of Kabul ›› Inability of the US's main ally in the Middle East Israel to defeat Palestinian resistance and struggle for their homeland. ›› Growth of Islamic fundamentalism in opposition to US foreign policy, the most significant objective of Osama bin Laden. ›› The collapse of the Atlantic alliance and the emergence of a new counterveiling alliance based around Germany and France ›› Growing opposition of civil society to US unilateralism, militarism and economic hegemony, expressed most recently through the 10 million global citizens who marched against the invasion of Iraq. ›› New governments in Latin American opposed to neo-liberal policies and US hegemony including Brazil, Venezuela and Ecuador. ›› Increasing negative economic impacts of US military spending. ›› Inflaming of Arab and Muslim sentiment in the Middle East Adding to this list of challenges is the instability of the global economy itself. The biggest threat is deflation, brought about by over-capacity in major global industries. The US economy is moving in fits and starts. Since the Bush Administration was elected 3 million jobs have been lost in the US economy. Corporate profitability remains low. Another risk is terrorism and global instability. Major industries such as tourism and airlines are battling as a result of the fear of terrorism. At the centre of the global economy is the US economy, which has generated massive debts with the rest of the world. The US current account deficit with the rest of the world stands at US$450 billion, which is the total size of the Australian economy. The US federal budget deficit is forecast to reach US$455 billion this year, the highest on record. At some stage these debts must be repaid. Unilateralism is driving the US administration to adopt policies that are in fact the antithesis of neo-liberalism in an attempt to accelerate growth including tax cuts for the rich and increased military expenditure. Much of the growth of the past decade has been fuelled by short-term speculative activities including the share market, property and currency movements. Credit is getting continually pumped into advanced capitalist economies but there are fewer profitable opportunities to invest in. We may reach the point where the global economy stagnates no matter how much credit is pumped in or however low interest rates are. This was what happened during the Great Depression of the 1930's. Modern Japan is a case in point. Once considered the world's most successful economy the Japanese economy stagnated a decade ago when the bubble economy burst and all attempts to re-start it again have failed. An over-valued yen makes it difficult for Japan to compete with other Asian economies. We have over-production of hotels, office complexes, cars, household and electronic goods. Globalisation has intensified competition with workers wages constrained with the shifting of production from advanced capitalist countries to poor countries where living standards are repressed. At the same time long term public investment in social and economic infrastructure in advanced capitalist economies including energy, health, education and public transport have declined in real terms. This is because the neo-liberal agenda is concerned with a reduction of the role of the state, keeping taxes low and reducing social expenditure. Governments are reluctant to increase taxes or to borrow to put together resources to provide for society's future needs. Instead they are seeking to create a market for the private sector through what are called public private partnerships. Traditional infrastructure and services are being opened up to the private sector and community's are paying a high price whether through job losses, poorer services or higher prices. A distinctive feature of the new period is the growing intervention of the state to look after the economic and political elites and to repress opponents. This is in fact the opposite of the neo-liberal view of the state. The neo-liberal view of the economy is that markets should be able to function without governments or trade unions getting in the way. According to the neo-liberal view, when governments get involved they reduce economic dynamism. The "War on Terrorism" provided the pretext of US "Patriot Act" and the new ASIO legislation, bills which severely curtail civil liberties of citizens. In Australia, attacks on the unemployed and other social security beneficiaries have intensified. If you are unemployed and don't attend the appropriate number of job interviews you have your payments reduced. The industrial relations system aims to undermine the capacity of working people to organise themselves and support others. The state is becoming increasingly interventionist to promote opportunities for the private sector through privatisation, contracting out and public private partnerships. There are alternatives: Addressing the global economic, social and environmental crises of this magnitude can be overwhelming. But many things can be done. The most important starting point is recognition that we can make a difference. The wonderful slogan of the Greens "think globally act locally" is as relevant as ever. Evidence is growing that a new global project is emerging, based on the principles of sustainable development, solidarity, cooperation, social justice and ecological sustainability. This ranges in scope from small acts of generosity from households in the advanced capitalist countries, strengthening links between labour, community and environmental movements across countries, community economic development strategies, through to increasingly organised challenges to capitalism from movements such as the World Social Forum. It is easy to fall into anti US rhetoric but important to emphasise that much of the opposition to US administration's unilateral and increasingly militaristic strategies comes from within the US itself. The number of Australians involved in community-based action to support third world countries is inspiring. This includes sponsoring village projects, individuals and projects. Acts of human kindness are necessary but not sufficient. In searching for practical alternatives we need a strategy that rebuilds from the ground up. In addition to oppositional strategies against war and the destructive impacts of corporate globalisation, which are essential, we also need positive initiatives to empower people to become involved in collective action that leads to positive results. Rebuilding communities ravaged by market fundamentalism is an important starting point. We need to put forward an achievable program and practical initiatives designed to create jobs, rebuild our communities and protect and restore our natural environment based around the principles of: ›› Caring and protection of the natural environment ›› The central role of human values of cooperation and compassion, rather than individualism. ›› Redistribution of wealth and incomes from high-income areas to low-income regions. ›› Empowerment of communities in decision making about economic directions and projects. ›› Acknowledging our responsibilities for future generations to inherit a peaceful and healthy planet. Some small examples may help. Communities could become more active in supporting unemployed people establish small businesses and cooperatives. The cooperative movement in Australia should be flourishing but it lacks support. The Australian environmental movement has been successful in establishing many cooperative projects but generally they are not translated into lasting structures that could sustain jobs. At a time when cooperatives are growing in the US and Europe they have been declining in Australia over the past 20-30 years. We need to foster the spirit of cooperative enterprise amongst young people backed up by practical management skills and funds to grow cooperative enterprises. Although local governments lack resources they have a capacity to work with their communities. Council assets such as libraries and childcare centres are important assets that can be used to nurture learning and employment opportunities for all sections of the community. Communities can establish incubators for artists and cultural workers and set up small Community and Environment Enhancements funds that lead to direct job opportunities. Of critical importance communities can set up broader community forums to engage and empower people in the process of local transformation. It is becoming clear that a low tax, small state is creating long-term problems for Australia. Public resources available for public education, health, transport and energy infrastructure will need to be substantially increased. Privatisation and their successor Public Private Partnerships are not capable of providing universal services that are affordable to all Australians. They are designed to assist the private sector "cherry pick" the most profitable elements of public infrastructure and services. Despite an outstanding reputation for research, inventiveness and skills in areas such as medicine, agriculture and solar energy, we have not been able, with one or two exceptions, to develop world class enterprises in these fields that could create jobs for thousands of Australians. This is because we lack the strong industry policy framework that characterises successful medium sized capitalist economies. In a wealthy society that has squandered much of its resources on shares and property speculation, we need to think creatively about how we can tap into our enormous savings in superannuation and channel funds into socially useful social and economic infrastructure. This includes public transport, renewable energy systems, health and age care facilities and affordable housing. Governments could establish savings bonds, underwrite community infrastructure projects, and establish investment opportunities for projects directly with super funds rather than providing private trusts with these opportunities. In the global community we need a stronger voice to speak out against global poverty, exploitation, repression and ecological degradation. Only a strong United Nations system can achieve this. We can do this by more actively supporting groups active in poor countries implementing projects based on sustainable development. We need to strengthen our linkages with the millions of people worldwide that are embarking with us on a new global agenda - one based on ESD principles, equality, justice and international solidarity. At the national level we need to build on important work that queries the benefits of free trade agreements and the ideological thrusts of the multilateral organisations such as the World Bank, International Monetary Fund and the World Trade organisation, all of whom are dependent on the US. We should campaign for the abolition of these "Washington Consensus" institutions and their replacement by global organisations concerned with addressing global poverty, development and social justice. A wealthy country like Australia should be tripling its aid budget to a mere 1% of GDP with emphasis on small-scale sustainable projects rather than large mega projects. Although options are limited for nation states when it comes to global finance markets, much needs to be done to re-establish our nation in the global community. It almost goes without saying that we need a stronger moral framework and values in relation to our own citizens and our relationships with the global community. Certainly a good friend of the American people should inform them of the folly of unilateralism and military adventurism. Our inability to deliver justice and say sorry to indigenous Australians solidarity remains an outrage, as is our continuing harsh treatment of refugees who come looking for our support. We
live in uncertain and dangerous times. We must make our voice heard. Now
We the People and our progressive political, labour and social movements
offer us an opportunity to work together and take action. Graham Larcombe,
National Institute for Economic & Industry Research: www.nieir.com.au |