The problems they won’t face

LEADERS OF the group of 20 wealthy and industrializing nations will meet in Pittsburgh September 24-25 to coordinate their response to the world economic crisis, and in the run-up to the summit, President Barack Obama wanted to make his views clear.

Bankers should continue to receive bonuses in unlimited amounts. And activists shouldn't waste their time protesting.

"I was always a big believer--when I was doing organizing before I went to law school--that focusing on concrete, local, immediate issues that have an impact on people's lives is what really makes a difference, and that having protests about abstractions [such] as global capitalism or something, generally, is not really going to make much of a difference," Obama said.

That's a bit rich coming from the man who followed George W. Bush in putting U.S. taxpayers on the hook for an estimated $12.5 trillion to bail out banks and other financial institutions.

With the world staggering out of its worst economic crisis since the 1930s, "protesting global capitalism" and its deleterious effects couldn't be more timely.

Certainly, Obama's own plans for the G20 summit "won't make much of a difference" either--at least, not in a positive direction.

Despite Wall Street's central role in the financial meltdown, the White House has been content to put only slight restrictions on executive pay at banks that rely on government investment. And the Obama administration has apparently turned back an attempt, led by conservative French President Nicholas Sarkozy, to limit bankers' bonuses.

All 27 members of the European Union, under pressure from voters angered over bank bailouts, called for new international rules for banks "backed up by the threat of sanctions at a national level." EU leaders want bankers' bonus payments to be spread out over time, so that they "could be canceled in case of a negative development in the bank's performance."

Hardly a radical idea--that bosses who crash their companies and wreck the economy should have to give back some of the millions of dollars they get each year, in addition to their outrageous levels of pay.

But even that's too much for Wall Street CEOs and their water-carriers in the White House. Obama's economic team is steadfastly opposed to any limits on bonuses--and Sarkozy is threatening to walk out if there's no agreement on the issue.

This is cheap political theater on Sarkozy's part, aimed at shoring up support among a population increasingly frustrated by the crisis. But Sarkozy won't be the only leader putting on an act.

The heads of the other member countries of the old Group of Seven industrialized nations--the U.S., Britain, Canada, Italy, Japan and Germany--have had to take account of the rise of Russia, China, India, Brazil and other industrializing countries. Hence the new status accorded to the G20.

Nevertheless, imperial powers like the U.S. and the big countries of Western Europe will continue to drive their agenda at the expense of weaker countries. And without the immediate threat of catastrophic financial collapse that dominated the agenda at recent G20 meetings, world leaders will increasingly go their own ways while offering only the appearance of coordinated efforts between nations.

THE BIGGEST debate in the G20 is whether to continue stimulus spending to boost the emerging global recovery or begin pulling money out of the system to avoid inflation. Because the financial system has stabilized from its plunge at the beginning of the year, politicians are more inclined to postpone any decisive action and hope that they'll be rescued by an improving economy. As the Financial Times' Chris Giles noted:

Though the recession has ended, few forecasters yet think growth will be sufficiently fast in the quarters ahead to reduce unemployment. Global growth so far has also been dependent on fiscal stimulus and companies replenishing depleted stocks of goods, rather than on buoyant private consumption or investment. Neither can continue indefinitely, however--the emergency fiscal boosts are time-limited, and inventory adjustment too will naturally end.

In plain English, the argument is that the world economy is still plagued by a crisis of overproduction. The recovery is weak and dependent on big government spending that can't be sustained without enormous budget deficits. If the U.S. keeps going down that road, for example, it could devalue the dollar and jeopardize the dollar's status as the world's reserve currency.

What's needed, in the view of mainstream economists, is a "rebalancing" of the global economy to make it less dependent on U.S. imports. But that will be a wrenching change for China and other countries that rely on U.S. markets--not to mention the U.S. itself, where working class living standards continue to decline.

That contradiction is bound to lead to sharper international economic tensions between the big economic players--for example, the trade war over tires between the U.S. and China, and the never-ending dispute between Boeing and Europe's Airbus at the World Trade Organization.

But the wealthy countries can all agree on one thing: Make the poorest countries bear the brunt of the crisis. The World Bank estimates that 90 million more people worldwide will be pushed into extreme poverty, defined as living on less than $1.25 a day.

Under guise of aiding countries hit hard by the crisis, the U.S. is pushing the International Monetary Fund (IMF) to use its $1 trillion in reserves to make loans. Unlike the past, when such lending required countries to accept "structural adjustments" that cut social spending, today's IMF claims that it will take a more hands-off approach.

But the IMF was poised to give a $163 million loan to the coup regime in Honduras until international pressure forced it to back off. A supercharged IMF is prepared to lend money not to help the world's poor, but to funnel the money to indebted nations, like several in Eastern Europe, which will use the funds not to create jobs and boost workers' incomes, but repay Western European and U.S. banks.

"In Central and Eastern Europe, it looks increasingly like a big chunk of the IMF's new money will be a transfer from taxpayers to bail out western European banks that made imprudent loans in the East," said Mark Weisbrot, co-director of the Center for Economic and Policy Research in Washington, D.C.

WORLD LEADERS won't have Pittsburgh to themselves, however. Thousands of activists from that city and beyond will put forward their own alternatives to the global slump in meetings, teach-ins and protests.

Despite the best efforts of a frenzied media and local politicians, the demonstrators will have at least some right to protest, thanks to a judge's ruling that will allow such actions, though within strict limits.

Nor will the protests be "too abstract," as Barack Obama condescendingly put it. Organizers will be marching to demand debt relief to Third World countries, jobs programs and other pressing economic issues.

Not long ago, politicians and the mainstream media dismissed left-wing activists as ill-informed and backwards-looking people who couldn't face the facts about the positive benefits of corporate globalization.

Today, amid the wreckage of the Panic of 2008, far greater numbers of people are ready to listen to those who criticize the system and organize opposition. Now is the time to rebuild a left that can challenge capitalism itself--and present an alternative geared toward meeting human needs rather than corporate profits and bankers' bonus checks.