Global economy 'off the rails'

No one any longs thinks that piling on the pressure through austerity, grinding millions into the dust, can possibly make any difference to the debt crisis. But despite increasingly strident calls, “pushing for growth” is a non-starter.

The influential Brookings Institution has just updated its tracking “Indices for the Global Economic Recovery”. Professor Eswar Prasad, inventor of the index introduced the latest findings with a stark warning:

The engines of world growth are running out of steam while the trailing wagons are going off the rails. Emerging market economies are facing sharp slowdowns in growth while many advanced economies slip into recession. Political fragmentation and gridlock have hurt confidence and stunted the effectiveness of macroeconomic policies. Financial markets have shed their optimism and investors are clamouring to retreat to safe havens as confidence has tumbled.

Parallel meetings of the G20 richest countries in Mexico and of 300 hedge fund traders and investors in Monaco have been able to do little more than watch the train wreck from the platform’s edge. The G20 declaration warned of the impending addition to the global catastrophe arising from US attempts to follow the European example, reducing, or even slowing the growth of its towering wall of debt.

Whilst in the European bolthole for the extraordinarily rich, Jamil Baz, chief investment strategist at GLG Partners told the speculators taking a break from sunning themselves on the terraces: “The crisis has not even started. It will take 20 years for us to reach escape velocity,” he said, tossing back another glass of champagne. “It will be devastating.”

For the Greek people, however, turned into guinea pigs by the EU, IMF and European Central Bank, their plight can’t get much worse. Tens of thousands of Greeks made unemployed and homeless by attempts to solve the deepening crisis queue for food at soup kitchens. The Orthodox Church says it is currently feeding a quarter of a million people daily. 

The Athens Chamber of Commerce says that 68,000 Greek businesses closed over the last 17 months and it expects a further 36,000 to close in the next 12 months. The economy is at a standstill. Businesses have no credit so no-one is paying for anything. The government which controls much of the economy has stopped paying its bills. As of last month, it owed nearly €7bn to the private sector. 

In 30 days it will run out of money, unless a coalition government can show eurozone authorities that it has both the determination and the means to implement a further round of brutalising austerity and so earn the next tranche of bailout funds. They’ll be certain to be relying on the fascist gangs of Golden Dawn who enjoy strong support from the police.

The Greek people are in the front of the firing line but they are not alone. The Spanish and Italian governments are screaming for more help and the terms of any deals will be no less stringent. International lenders, unimpressed by last week’s €100bn loan to Spain, have driven the country’s borrowing costs to even higher, impossible rates.

The logic of all this crash is another Great Depression, much worse than that of the 1930s, and a breakdown of political co-operation. You saw as much this week when Manuel Barroso, president of the European Commission, lost his cool in a press conference and blamed investment banks in the US for causing the recession when asked about the eurozone crisis.

Another world is not only possible but absolutely necessary for there is no way out through the current political system which is in a mutual dance of death with economic and financial elites.

A global network of local People’s Assemblies can act as opposing poles of attraction for all those whose interests lie in replacing the failed, bankrupt capitalist system. Assemblies can build on the achievements and successes of worker’s co-operatives, credit unions, and a broad range of democratically-owned and operated enterprises as the foundations of a new start. Allowing things to carry on as they are is not an option.

Gerry Gold

Economics editor

Power to the G7 billion, not the G20

The General Assembly of Occupy LSX has called for a global debate about a very different future to the one leaders gathering for the G20 in Cannes are planning.

As the G20 big nations discuss how to impose the full weight of the economic crisis on the backs of first Greek, and then all other working class people across the globe, LSX unanimously agreed these four points:

1. Our global system is unsustainable. It is undemocratic and unjust, driven by profit in the interest of the few.

2. An economic system based on infinite growth, but which relies on finite resources, is leading humanity and the environment to destruction. As long as this system remains in place, people of the world continue to suffer from an increasingly unfair share of income and wealth.

3. We seek a global system that is democratic, just and sustainable. The world’s resources must not go to the military or corporate profit, but instead go towards caring for people’s needs: water, food, housing, education, health, community.

4. An international, global collaboration has started, and is working on a statement that will unite the occupy movements across the world in their struggle for an alternative that is focused on and originates from people and their environment.

Ragnhild Dale, who was involved in drafting the statement, said: “We reject the G20 as a valid forum for decision making. It is unjust, unaccountable, lacks transparency and continues to promote a global economic system that is fundamentally unsustainable. We want to create real dialogue and debate, which isn’t happening at the G20. We invite everyone to join us in creating a global statement that reflects the combined voices of the 99 per cent who aren’t at the G20, so that we can realise real change.”

Jamie Arad, supporter of OccupyLSX, added: “We ask questions that the G20 will never ask, such as why are decisions that affect 7 billion people made by a powerful elite behind closed doors? Why do we rely on a global economic system based on infinite growth when we know that the world’s resources are finite? Why do we assume the G20 can be trusted to put people and sustainable living before profits and corporate interests?"

You might say, well so what? Just 500 people in a churchyard – more people work in just one of the arrogant skyscrapers that surround LSX's old tents and handmade banners. But they are 500 people showing leadership, pointing a way forward – not back to European war, mass unemployment and hunger as in the 1930s. They speak for the interests of millions.

And in the United States, similar messages are coming through. In Oakland, California, 15,000 people brought the entire city to a standstill yesterday. Demanding equality and an end to police brutality, the occupation movement not only took back space they were driven out of last week - they called for a General Strike and, broadly speaking, got it. Schools, businesses and even more important, Oakland's container port closed down. Workers coming on shift turned back, some parking up to join the occupation.

Oakland's police and politicians who unleashed terror on the citizens last week, were nowhere to be seen. Of course, that doesn't mean the fight is over - it is just beginning. But the decision of big unions to support the occupy movement gave them pause for thought.

Occupations run by Assemblies are test beds, showing what people can do when they are independent and liberated. A network of People’s Assemblies can widen this movement to the whole of society, giving it a concrete form that can appeal to all those under attack from capitalism.

Assemblies can facilitate a transition to a democratic society based on co-operation and self-determination instead of profit and corporate power. They will disprove in action the lie that there is no alternative to the capitalist system and the states/local government bodies that serve it. Go here to read more about People's Assemblies and how they can change the world.

Penny Cole
Contributing editor

Toronto is a turning point

The failure of the G20 summit in Toronto to find a common approach to tackling the global economic and financial crisis had an air of inevitability about it. After all, capitalism is not exactly a rational system where sensible men and women come together to sort out an international crisis.

If that were really the case, the 20th century would not have experienced two catastrophic world wars, for example. Nor would the inter-war years have been dominated by the calamity of the Great Depression in Europe and America, which only ended when the major powers took to the battlefields.

In reality, what the Toronto communiqué – which apparently took all of 54 hours to negotiate – heralds is another period of intense competition and rivalry. In an abandonment of the unity of the past three crisis-era Group of 20 summits, the leaders decided to adopt "differentiated and tailored" economic policies for each country. Earlier proposals for a unified approach to limiting the activities of major banks by imposing tighter capital requirements were also put on the back burner.

In other words, it’s every country for itself. Sound familiar?

President Obama’s plea not to start cutting budget deficits too soon because it might harm the “recovery” was simply ignored. All the major economies are cutting deficits – and America won’t be far behind. Obama, it was noted, praised Britain’s “courageous budget” of last week.

He is aware that his stimulation package has failed to revive the US economy. On the contrary, unemployment continues to grow despite an increase in state spending. The recession has wrecked the finances of many states too, which are dependent on local property and sales taxes.

The small southern California city of Maywood is disbanding its police force and firing all public sector employees. Every service is being contracted out. US states have an estimated $200bn budget shortfall, equivalent to 30% per cent of all state budgets. The federal government’s deficit is about $1.3 trillion and rising.

The impotence of the political elites who gathered in Toronto reflects a stark reality of the problematic and contradictory relationship between capitalist nation-state systems and the globalised economy. Masked while the world economy expanded, this conflict has worsened since the 2008 meltdown of the banks.

Modern globalisation has created immense economic and financial forces that are greater in their impact and power than the sum of their parts. They are way beyond the control of even the most powerful states. Take, for example, the financing of government borrowing through what is known as the bond market. This isn’t some single marketplace, with a sign outside the door but is a series of inter-linked buyers and sellers in Europe, Asia and America, trading electronically around the clock.

Participants include commercial and investment banks, hedge funds, insurance companies, pension funds and – of course – the governments that guarantee interest on fixed-term bonds. Identifying all the various buyers and sellers globally is a task in itself; “bucking” this market is virtually impossible because states never know when they might come under attack. Just ask the Greek government.

Toronto, with its insistence on halving budget deficits by 2013, makes the transition from recession to depression much more certain. The political classes in every country are locked in a deadly embrace with economic and financial forces too powerful and inaccessible to cope with. So they take it out on ordinary workers, cutting their wages, pensions, jobs and services.

Remedial, curative action is not an option, just as it wasn’t in the 1930s. Telling the bond markets to take a running jump off a short pier, that they can whistle for their interest payments, for example, requires something quite different and quite revolutionary. The G20's failure at Toronto is a turning point. Now it’s our opportunity to seize the initiative.

Paul Feldman
Communications editor

Vuvuzela politics won't beat the banks

On the eve of the G20 meeting in Toronto this weekend, which will see further attempts to bring about a recovery from global economic and financial crisis differences have emerged between the US and Europe. Representatives of the world's 20 richest nations will be arguing over how to "manage their divergence".

US president Barack Obama has criticised the European imposition of austerity programmes of spending cuts and tax increases. At this point, the US is much more concerned with increasing spending to stimulate demand than reducing sovereign debt. This international tension is the political reflection of the battle between opposing teams in the Capitalist Rescue cup.

When the debt-fuelled global financial system went into meltdown in 2008, there was a sudden rush of enthusiasm for a new age of regulation that would, it was said, prevent a recurrence of the conditions that resulted in the worst credit crisis since the 1930s. The ghost of economist John Maynard Keynes was raised from the grave.

In the panic-stricken meantime central banks and governments around the world turned to the injection of ‘liquidity’ in the form of trillions of every currency to prop up the previously hugely profitable but now bankrupt commercial and investment banks and non-bank financial institutions. The marvellous rediscovery of the fool's gold of ‘quantitative easing’, the modern, electronic equivalent of printing money, allowed balance sheets and credit to be further expanded – miraculously treating like with like.

Controversy raged around the world about the actions to be taken over institutions judged ‘too big too fail’. Some were indeed ‘taken over’ by the state. Others were allowed to go to the wall.

Many of the best brains in banking and finance were set to work, tasked with designing a package of measures that would restore a degree of sanity to the madness that had drowned the world in a tsunami of unserviceable credit and debt. The team in favour of regulation, led by the Basel Committee on Banking Supervision, have been on the pitch, slugging it out with their opponents, amongst them the Institute of International Finance. The IIF are worried about the damaging effects of regulation. Basel’s captain Nout Wellink says ‘Raising capital and liquidity standards will reduce the probability of the event of a crisis. We will get greater stability of economic output and associated increases in welfare.” The IIF fought back with a warning that ‘global growth in the eurozone, the US and Japan would be cut by three percentage points between now and 2015 and as a result, 9.7m fewer jobs would be created over the period.’

Amongst the most important of the reforms put forward was to be a return to a more prudent relationship between a bank’s easily available capital assets and the amount of money it lent out.

Despite the chorus of calls for regulation, the pressure for a return to growth continues unabated, and the banks have lost little, if any, of their power. As a result synchronised bubbles and speculative excesses will re-emerge to undermine those who seek to regulate the financial markets.

As the G20 opens, the Financial Times reports that ‘Plans by global regulators to compel banks to set aside billions of dollars in extra capital to cope with future crises are to be pared back after intense lobbying by the industry. The committee is likely to shelve the idea that banks should be forced to maintain a longer term “net stable funding ratio” that aligns the maturity of their assets and liabilities.’

And then comes the bottom line ‘Analysts had also calculated that the Basel III reforms, were they implemented in conjunction with new taxes around the world – such as the liability tax announced by the UK government this week – could have cut a typical bank’s return on equity from 20 per cent to 5 per cent.’ For the capitalists and the masters of finance that would be an entirely unacceptable attack on profitability.

The rest of us need a way of ending the rule of the banks. Protests, resistance, shaking fists or even blasts from the vuvuzela won’t be enough. We need to build the forces which can take the economic and financial systems into social ownership and recast them on a not-profit basis.

Gerry Gold
Economics editor

Dollar 'time bomb' adds to turmoil

The reaction to the global meltdown has so far consisted of so many variations on a common theme: governments deepening their debt to provide backing for too-big-to-fail stricken banks and central banks inventing new money. The single lyric on the hymn sheet is “save the system, return to growth!”

But it hasn’t been enough to do the trick and everyone knows it. The universal collapse in demand, trade and credit is forcing a new round of consolidation on struggling global corporations. The world economy is hanging on a hardly-functioning financial system while the boom on stock markets is a purely speculative bubble.

Every country is affected, and no government is able to act on its own. The only result of any significance from the G20 in Pittsburgh was the recognition that the unfolding global crisis has outpaced, outgrown and outstripped the 30-year-old political arrangements for managing international economic affairs.

There is a time bomb waiting to go off amidst this turmoil. This is the plan to replace the not-so-mighty dollar as the currency used to trade in oil. The dollar would be replaced by a basket of currencies in addition to gold, according to reports. This move would signal the demise of the United States as the world’s leading capitalist economy, which has used the pre-eminence of the dollar to borrow vast amounts to fund the country’s huge trade and government deficits

The October editions of the International Monetary Fund’s World Economic Outlook and the Global Financial Stability Report make for sobering reading. They tell us much about the contradictory forces at work in the economy.

* Reducing excess productive capacity means much higher levels of unemployment are inevitable but this will reduce demand further.
* More intense rates of productivity are needed to reduce costs and restore profitability, but falling prices mean already over-indebted consumers defer purchases awaiting even lower prices.
* More regulation is needed, but the “ability of lenders to diversify funding sources” – like the unregulated derivatives markets at the heart of the crisis – “need to be retained”.
* The financial system must be restored to health, but the reported losses from banks have reached only half the expected levels so far.
* A much greater degree of coordinated government intervention is likely to be needed to support a recovery of production to just a fraction of pre-crisis levels, but can’t continue without rising interest rates strangling that very same recovery.

The global gurus are also pretty sure about one other thing: they’ve no idea if their prescription for “unwinding” the current level of intervention will work, or lead to a new crash. They’re giving no guarantees. This is how they put it: “Given that this is uncharted territory for policymakers, some experimentation may be appropriate to test market conditions. If warranted, reinstatement of some facilities should not be viewed as a setback.”

In other words, they haven’t a clue. You wouldn’t buy a used car from them.

In Britain, Tories and New Labour are vying to carry out the IMF's instructions to slash public spending to pay for bailing out the bankers. Neither party is really letting on about their real intentions, however. Commenting on yesterday’s speech by shadow chancellor George Osborne, the Financial Times noted:

“The effects of these measures – grim though they are – are dwarfed by the scale of the budget deficit. Mr Osborne has announced plans to save £7bn ($11bn) per year by the end of the next parliament, with changes to the pension age – beginning in 2016 – eventually contributing up to £13bn. The budget deficit this year? £175bn.”

Balancing the books will, therefore, require cuts so immense that they will destabilise society and create social upheaval. The state is undoubtedly preparing for such an eventuality and we would be well advised to do the same.


Gerry Gold
Economics editor

Being anti-capitalist is only a start

As the leaders of the world’s richest countries start gathering in London for Thursday’s G20 summit, a picture can convey more than words about what confront Obama, Brown et al. The latest cover of Time magazine just about sums up the desperate nature of the global economic crisis. It depicts a small boat with six people desperately rowing to prevent it falling off the edge of a massive waterfall. The headline is: “All together now (please?)”

Whatever efforts are made at the G20, it’s apparent that even if the participants agree on stricter regulation of the global financial system, the proverbial cat is out of the bag. In fact, those taking part have already said as much. The German chancellor Angela Merkel spoiled the party on Saturday when she said that no deal would reached and that the summit “will naturally not solve the economic crisis either”.

Gordon Brown hopes that “this crisis can be dealt with by us acting internationally” and by the assertion of “sounder principles”. Only in his dreams. The notion that those overseeing the global economy can and will redress “global imbalances” is clearly cloud-cuckoo land. In reality, the world economy is on a knife-edge. Financier George Soros, the sage and self-appointed Cassandra of financial capital has warned that if the G20 does not insulate developing countries “against a calamity that is not of their making” the world will slide into slump. Soros does not appear over-confident about the outcome.

The most significant question is not “imbalances” between the richer and the developing countries, but the nature of capitalist production and ownership itself. The relentless drive for profit through unsustainable growth is at the root of the current crisis. Obviously, the G20 capitalist club is not in a position to address this issue! As A World to Win said in the flyer we distributed at Saturday’s “Put People First” march in London:

“Those who created the crisis are part of the problem, not the solution. The global crisis is a great opportunity to make a dramatic change and create for the first time a society where the majority actually come first over the narrow interests of profit. Ordinary people should plan for a future based on co-operation not competition, co-ownership and not private ownership, and for meeting social need not the demands of bankers and shareholders.”

The mass support for the protest march, organised by the Trades Union Congress and supported by a host of other organisations, which was joined by workers from across Europe, was significant despite the futile appeals to the G20 leaders put forward by march organisers. The response – estimated at around 35,000 even by the police which means it was far higher – shows that people are willing to take to the streets to defend their living standards

In Germany tens of thousands marched in Frankfurt and Berlin. It was, as comedian Mark Thomas also noted, the first time that people have had a chance to come out on the streets in a big way. Thomas called for it to be “the start of a grassroots movement”.

The key issue is where that movement should go? This is the question that must be raised at the camps and actions organised by ecological and direct action groups in the City and at alternative summits organised by students this week. Brown is right about one thing – the crisis is forcing change. That change has to be on terms that benefit society and the planet as a whole, however. Our Charter for Democratic Rights suggests how we can achieve the revolutionary transformation required. Sign it, spread the word, and join A World to Win in its aim of going beyond anti-capitalist propaganda to creating a practical alternative.

Corinna Lotz
AWTW secretary

Capitalism can't and won't 'put people first'

While most of the world’s media yesterday focused on the US plan for tighter regulations for the disintegrating financial sector and Gordon Brown’s grand tour aimed at talking up next week’s G20 summit, the real, productive economy was going to hell in a handcart.

Here, the exercise of people’s ability to work generates real value, including profit – at least it did when things were going well for the capitalist class. Not any longer. Now it’s shutdown time, and the actual destruction of productive capacity – including the jobs and prospects of many millions of workers.

The world's second-largest economy, Japan, suffered an almost 50% collapse in exports in February, compared with one year ago. The accelerating global slump drove exports to the rest of Asia down by 46% and to EU countries by 55%. This was the fourth successive month of record export declines, and the sharpest decline in at least 30 years.

Just as in the US and the UK, over-production of cars has intersected with a near-collapse in demand and the industry is grinding to a complete halt. Shipments of motor vehicles were down 64% , with those to the US tumbling 71%. Total exports to America fell by 58%.

The slump has meant that Japan's total industrial production fell by a record 10% in January. Japanese car manufacturers, in the UK and elsewhere, have reacted rapidly to the downturn, attempting to slash their overstocks by cutting output using short-time and no-time working. Union leaders have negotiated wage cuts in a futile bid to save jobs.

The production shutdown isn’t restricted to the oil-burning, climate-wrecking past-its sell-by-date car industry. In the US, electronics giant Agilent Technologies is sacking 2,700 workers – 14% of its staff. The company expects revenue from its electronic measurement and semiconductor businesses to fall between 30% and 50% from 2008 to the lowest in its 10-year history and sees "no prospects for a meaningful recovery in the foreseeable future."

The rate of growth - now decline - of industrial production is the key measure of the health of capitalist production. Without growth, profits decline, investment falls off and jobs are shed. While Timothy Geithner, the US secretary, was talking tough about regulation yesterday, figures released showed that US corporate profits fell at the sharpest pace for 55 years. Meanwhile the number of people continuing to claim unemployment benefits rose by 122,000 to 5.56m, the highest total since tracking began in 1967.

The impact of the global capitalist crisis is being felt everywhere. French president Sarkozy has been in the Democratic Republic of Congo with a raiding party of business leaders. The country’s only industry is copper mining. Exports, especially to the companies producing for the global corporations in China, soared during the explosion of commodity production. Now that it’s all over, tens of millions of Chinese workers have been sent home, whole towns shut down. In the Congo, mining production has been cut in half and 300,000 are without work, or income.

The descent into global slump is fast and furious and suggestions that it will bottom out this year and growth resume in 2010 are clearly off the wall. People without jobs don’t buy things and banks without capital don’t lend, sending demand ever lower. Governments that have over-borrowed (i.e. Britain’s) can’t launch the very “fiscal stimulus” that Brown is urging all other countries to adopt.

Solutions won’t come from telling the G20 to “put people first”, the official slogan of tomorrow's TUC-sponsored demonstration in London. Capitalism can’t change course. The financial and productive sectors are locked in a deadly embrace where the victims are ordinary working people in every country. We must plan for an ecologically-sustainable future, based on co-operation not competition, co-ownership not private ownership, and for meeting social need not the demands of bankers and shareholders. Ending the rule of capital is long overdue.

Gerry Gold
Economics editor

G20 reduced to spectators

There they were on a warm spring weekend in Horsham, West Sussex, with a simple agenda: agree a plan to prevent the global economy from slipping from recession to deep slump, or at least suggest an outline of a strategy that their bosses could sign up to at the G20 summit in London next month. 

In the end, the communiqué issued by finance ministers and central bank governors was blandness itself. They pledged to “take whatever action is necessary until growth is restored” and ensure that “all systemically important financial institutions, markets and instruments are subject to an appropriate degree of regulation and oversight”. 

Meanwhile, the United States is going its own sweet way with more plans to try and rescue American banks together with implementing its  “stimulus” package while berating the Europeans for not doing the same. No commitments were offered in Horsham about keeping trade and markets open to prevent the spread of protectionist measures. 

Should we have expected anything more from this gathering? I think not. It’s important to restate that the capitalist economic system, at national and global levels, is not some logical, controllable process which finance ministers and central bank governors can manipulate as and when they please. 

Setting aside for a moment the anarchic nature of a market, profit-driven system, economic and financial structures have historically developed according to their own inner logic. The state and the economy are relatively independent. One cannot substitute for the other, even though they are interdependent and bound together historically. The state has responded to different circumstances, falling in line to either catch up with what’s happened or to facilitate new forms of activity. 

To blame Thatcher and Reagan, for example, for today’s financial crisis because they promoted deregulation during the 1980s is to confuse cause with effect. Deregulation proved necessary to summon up the finance for a new expansion of capital that corporations embarked on following the break-down of the old economic order in the early 1970s which had been based on fixed exchange rates and capital controls. Further deregulation in the 21^st century, which saw bank repackaging and selling off assets and loans, created space for them to lend to consumers as the only way they could buy goods (and houses) in order to sustain "growth".

Governments and central banks were happy to join in this new “golden age”, as Gordon Brown so wonderfully described it in June 2007 in a speech to the City when he was still chancellor of the exchequer. In fact they cheered the whole process on. That’s ended in calamity and the same politicians are struggling to understand let alone control the forces at work. No one, for example, knows the real scale (and certainly not the value) of “toxic” debt in the system. 

Meanwhile, the impact of the crisis in Britain is mounting. Ten people are chasing each job centre vacancy and the dole queue is expected to reach over three million next year. Unemployment among 16-to-24-year-olds is already running at more than 15%. 

Today, the Bank of England warns of a 1930s-style depression, saying that households are displaying early symptoms of being caught in a  “debt deflation trap” where debts become harder to repay as prices and wages fall. The amount owed on mortgages, loans and credit cards has risen by 165% since 1997. 

Some, of course, are trying to talk capitalism back to health. US federal reserve chairman Ben Bernanke, claims to have seen the “green shoots of recovery”. How should we estimate this prognosis? Perhaps he’s recently watched Being There, where Peter Sellers, a humble gardener, metamorphoses into Chauncey Gardiner and is mistaken for a financial expert. Chauncey’s remarks about how the garden changes with the seasons are interpreted by the president as sound economic and political advice. Say no more.

Paul Feldman
AWTW communications editor 

 

 

Can we do it? Yes we must!

As the political leaders of 20 of the biggest economies gather in Washington to work out how to fix the global capitalist economy as, like a runaway train, it heads straight for the buffers, the range of “solutions” is piling up. None of them have a hope of taking off.

For outgoing US President George Bush, the oh-so-obvious answer is “sustained economic growth”. He told a New York audience that "the answer is not to try to reinvent that system” but to “make the reforms we need, and move forward with the free-market principles that have delivered prosperity and hope to people around the world".

Others are into reinvention. Gordon Brown, who until recently thought globalised capitalism could not possibly be improved upon, is now for “creating a new global financial architecture” to replace the Bretton Woods monetary system (which actually collapsed 40 years ago!). The Germans want a “new balance between market and state” while the Canadian suggestion is that "dynamic new economic players ... must be full participants at the global table".

There’s another proposal aired by Bob Geldof. He is back banging the drum for Africa, which has been left out of the discussions. Bob wants to ensure that “900 million potential producers and consumers” are drawn into “the next round of globalisation”. With the whole world diving into slump, Bob sees salvation for capitalism in Africa.

And on that he’s at one with Bush, who just yesterday received a major humanitarian award from Africare for his work in Africa. No really, it’s true. According to Voice of America White House correspondent Paula Wolfson, Bush was honoured for his efforts throughout his administration to combat disease across the continent. Bush says America has an obligation to help the people of Africa. "It is in our national security interest that we defeat hopelessness. It is in our economic interest that we help economies grow.”

The brutal truth is all these plans, pleas and proposals are non-starters. Why? Because they all look beyond the current disastrous disintegration of the global economy to a bright, newly refurbished, much more regulated, fairer, capitalist world. This is not how capitalist slumps work themselves out.

Fixing the real problem - an overhang of capacity as global production turns from recession to depression and slump - has only one solution as far as capitalism is concerned. In 1942 in the midst of the Second World War, economist Joseph Schumpeter, a critic of Keynes, but a big fan of credit-led investment, published his most famous work Capitalism, Socialism and Democracy. It was then, with the world at war, that he chose to develop his version of the concept of “creative destruction”. That is already under way, with 10 million Americans already out of work and General Motors on the edge of bankruptcy.

Bush bemoaned the fact that critics were "equating the free enterprise system with greed, exploitation and failure" and objected to it. He is right to warn against the coming assault on the citadels of capitalism. There’ll be many demonstrations and protests against the G20 over the weekend and the election of Obama last week was itself a product of the anger millions of Americans who want action against bankers and corporations.

What is urgently needed is a concept of a society beyond the private ownership and control of capital, together with the leadership and organisation to make it a reality. Can we do it? Yes we must!

Gerry Gold
Economics editor