What the G20 should really be debating
As the G20 kicks off, Rob Killick sets out a three-point agenda that it – and the rest of us – should be talking about.
As the G20 leaders begin their deliberations today, it is worth trying to assess the problems that face them, and us. Everybody has been competing to describe the current recession as the worst since the 1970s/1930s/Black Death, yet the full scale of the crisis has yet to be properly discussed.
I would argue that the world is facing three interlocking crises. Firstly, the recession is severe, but what makes it worse is that it is happening at a time when the coherence and the credibility of the political elites is at an historical low ebb. The coexistence of a political with an economic crisisis is what makes this recession so dangerous.
The entwining of the political and the economic crises has meant that the world’s response to the recession has been slow and lacking in vision. For example, we are nearly two years into the toxic debt crisis and still the bank bailouts appear to be having very little impact.
The weakness and isolation of the political elites has led them to scapegoat bankers, and by extension the whole financial system of capitalism, as the cause of the problem. This has in turn undermined the bailouts of the banks as investors have become wary of being seen to be making money out of the crisis and governments have become constrained about what they can do for fear of upsetting their voters.
The second element of the crisis is the changing balance of world power. The imbalance between productive economies like China and the less productive economies in the West lies at the heart of the recession. China and others built up huge financial surpluses which were recycled into consumer debt in the west. Now China is demanding that it be recognised as a new global power and wants to see its economic clout acknowledged by changes in global institutuions like the International Monetary Fund.
The very fact that it is now the G20, which includes China and other developing nations, that are meeting today is a recognition of the shift in the balance of power. But changing the way the world is run will be a tricky process, as there will be losers as well as winners.
The third element of the crisis is the absence of any alternative to the status quo. This may seem an odd thing to say. Why should an absence of any critique of capitalism be a problem for the system? The answer is that in the absence of contestation the global elites have lost their way. For most of the twentieth century, the West was driven on by its conflict with the Soviet Union. The technological and scientific breakthroughs that came with the Space Race, for example, came about because of the USA’s determination not to let the Soviet Union put a man on the moon first.
The absence of opposition of any kind to capitalism today – except the temper-tantrum variety that we saw on the streets of London yesterday, which is more about reining in capitalism than superseding it – has contributed to a sense of drift and general loss of impetus in society in general and has also affected the political elites. Our rulers have themselves begun to lose faith in the market system, so much so that the G20 looks to be dominated by arguments about how much global regulation the system needs.
There are other social and natural problems facing the world, of course. Huge numbers of people still live close to the breadline. We need to develop new, cheaper and cleaner energy sources. But the three interlocking crises mean that developments in these areas will be held back until politics and politicians themselves are given a new lease of life. This is what should be on the agenda at the G20 – and in debates amongst the rest of us, too.
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