Delivering the insufficient?

September 11, 2009

G20 finance ministers issue another bland statement

Bretton Woods Project, 10 September 2009

Despite spin doctoring that called it a triumph for cracking down on banking bonuses, the G20 finance ministers’ statement in early September produced an accounting for how the G20 met or did not meet existing promises and little new agreement. Once again the UK government excluded critical civil society from the discussions.

The summit, held in London in order to prepare the ground for the G20 leaders meeting scheduled for 24-5 September in Pittsburgh USA, was billed as a battle over bank bonuses, but the final communiqué was mostly a bland repetition of existing statements with plenty of escape clauses and pushing issues to other forums. On the fiscal stimulus and loose monetary policy that have been the mainstay of rich country responses to the financial crisis, it committed countries to continue “necessary financial support measures” but also “agreed the need for a transparent and credible process for withdrawing our extraordinary … support.”

The communiqué was short, with only seven paragraphs. It final two points served to report on the commitments made to strengthen the IMF and World Bank. The G20 hailed the “significant progress in strengthening the IFIs” but also said “more needs to be done”. For the pedantic, the change in language on IMF governance may look like a positive step forward. In April the G20 said “emerging and developing economies, including the poorest, should have greater voice and representation”, whereas in September it read “the voice and representation of emerging and developing economies, including the poorest, must be significantly increased.” A searching look at the accompanying “progress report on the actions of the London and Washington G20 summits” highlights the areas left vague.

SDRs go ahead at the IMF

The report confirms that the $500 billion promised to the IMF has yet to be delivered as it references only the “commitments of more than $250 billion”. Actually delivery has only come from Japan, Norway, France, Canada, China and the United Kingdom, totalling about $195 billion. The US commitment of $100 billion has been agreed through the New Arrangements to Borrow, which requires additional measures to activate. The IMF has committed about $173 billion overall (including loans made before the crisis), but it had about $250 billion in available capital before the agreement to boost its resources. Thus, the boost in resources has not yet been used to support any developing countries.

And while the London Summit called for a “doubling of the IMF’s concessional lending capacity for low-income countries”, this has been reinterpreted to be a simple doubling of concessional lending year-on-year rather than the overall pot of resources available for such lending. The Fund announced in late July an increase in expected concessional lending to $4 billion a year in 2009 and 2010 from about $1.2 billion on 2008.

The commitments on issuing special drawing rights (SDRs, see Update 65), the IMF-created reserve asset, were the most tangible and successful, with full allocation of SDRs as per the G20 communiqué. This included the final ratification of the fourth amendment to the IMF Articles of Agreement, which provides for an extraordinary allocation of SDRs to countries that joined the IMF between 1981 and 2009. Still most of the new SDRs go to rich countries and no progress was made on a method of re-allocation.

Some World Bank changes left vague

While the Bank did raise lending from about $30 billion to $60 billion in the last fiscal year, there was no quantitative reporting on the take up of programmes oriented at social protection and low-income countries. The communiqué indicates that the Rapid Social Response Fund (see Update 65) was agreed, but fails to say how much was provided, likely due to very low take up of the facility.

A paper on increasing the financial capacity of the Bank through a capital increase is promised for the annual meetings, while the Bank is still “developing an approach” to let some low-income IDA-eligible countries borrow more money on IBRD terms usually reserved for middle-income countries. The progress report said that the IMF and World Bank boards were both reviewing the debt sustainability framework, though the IMF board had actually met on 31 August, prior to the G20 meeting. The IMF’s agreed changes were announced on 9 September.

On the promise of increasing trade finance by $250 billion, the G20 produces an unreferenced figure of $65 billion having been taken up, though the only actual programme cited is the one by the World Bank’s International Finance Corporation (IFC), which received commitments of just $7.75 billion (see Update 66).

The promised G20-chair review of the IFI’s role and responsibilities, which was supposed to be personally handled by British prime minister Gordon Brown, is reported to be in “consultation with the G20, external academics and LICs.” There was little to no discussion on the matter with civil society, despite repeated questioning of the prime minsters’ office by NGOs about how a consultation would be run. In the end the exercise was contracted out to London-based think-tank the Overseas Development Institute, which placed a limited discussion note on its website and failed to alert more than its database of researchers about the online discussion forum.

Financial and tax regulation still pending

Despite the hype on bonuses, the communiqué merely asked for “global standards on pay structure” and called on the Financial Stability Board (FSB) “to report to the Pittsburgh summit with detailed specific proposals for developing this framework.” FSB standards are not legally binding and there is no mention in the communiqué of the idea that there should be a cap on the total bonus pool. As the FSB in basically a forum for discussion among the G20 and other governments, countries that have opposed strong regulation on financial sector remuneration such as the UK, will work hard to water down any proposals.

On the fight against tax evasion, there was recognition of the need for “developing countries [to] benefit from the new tax transparency, possibly including through a multilateral instrument.” However the use of the word “multilateral” was left vague. The OECD which has been the lead analytical body on tax matters often uses ‘multilateral’ to mean merely a series of bilateral agreements.

The G20 had previously agreed that all systemically important financial institutions should be regulated, but had left the definition of systemically important to the IMF, Bank for International Settlements (BIS) and the FSB. They promised to do it “by the next meeting of finance ministers and central bank governors.” However they failed to produce the guidelines on the definition by this early September finance ministers’ meeting. They have now promised to do it by November when the G20 finance ministers meet again.

Civil society exclusion

UK-based NGOs, the Jubilee Debt Campaign and Bretton Woods Project, had their accreditation for the G20 finance ministers’ meeting revoked by the UK Treasury just days before the summit. Representatives of both organisations had received notification of accreditation on Friday, 28 August. Both received emails late on 2 September saying “Unfortunately your accreditation has been withdrawn by HM Treasury. Please be aware that you will not be permitted access to the meeting venue or any of the press facilities.” No further information or reason was given for the withdrawal of accreditation for the NGOs.

The UK government also barred NGOs War on Want and the World Development Movement from attending the G20 London Summit in April. Nick Dearden, director of Jubilee Debt Campaign, said “It is outrageous that NGOs such as ours have again been banned again from attending G20 summits. The UK seems to be setting a precedent that it is acceptable to silence voices of dissent and prevent debate from being aired.” Both Bretton Woods Project and Jubilee Debt Campaign had been involved in a 4 September London action calling on the G20 to stop letting money rule the world on the day the summit commenced. UK NGOs Oxfam and ONE, which had not been listed as organisers of the action, were accredited and allowed into the summit venue.


Michael Moore’s ‘Capitalism: A Love Story’

August 22, 2009

‘CAPITALISM: A LOVE STORY‘ – In Theaters October 2nd

“It’s a crime story. But it’s also a war story about class warfare. And a vampire movie, with the upper 1 percent feeding off the rest of us. And, of course, it’s also a love story. Only it’s about an abusive relationship.

“It’s not about an individual, like Roger Smith, or a corporation, or even an issue, like health care. This is the big enchilada. This is about the thing that dominates all our lives — the economy. I made this movie as if it was going to be the last movie I was allowed to make.

“It’s a comedy.” — Michael Moore

Civil society wants substance, not procedural delays at UN conf on crisis

May 25, 2009

A statement calling upon governments not to take procedural arguments as an excuse to further delaying the substantive negotiations on the urgently needed global policy responses to the current crisis is being circulated to negotiators at the UN. 

Statement on the negotiations about the outcome of the UN Conference on the World Financial and Economic Crisis and its Impact on Development May 15, 2009 

Download: Draft outcome document for the June UN Conference on the crisis

1. We are facing a global systemic crisis, which originated in the rich countries of the North, their unsustainable consumption and production patterns and the irresponsible economic behavior of their dominant social actors. The crisis affects billions of people all over the world, pushing many millions of them into unemployment and poverty, and violating their economic, social and cultural rights. 

2. The response of the G20 was not sufficient to address the root causes of these multiple crises of food, climate, financial markets and sustainable development. 

3. The global crisis needs a global response involving all societies that are affected by crisis. Therefore, the United Nations is the only legitimate forum through which the crisis can be resolved. This is the reason why we highly welcomed the decision of governments in Doha to hold a UN Conference on the world economic and financial crisis and its impact on development. 

4. Since the Doha Conference it has taken diplomats in New York more than 16 weeks to agree on the modalities of the “Crisis Conference“. They are responsible for the delay, they are responsible for the lack of time for the substantive negotiations on the outcome of the conference. 

5. Civil Society Organizations and Networks produced comprehensive statements listing their recommendations and demands on how to address the current crisis, starting with the “Civil Society Benchmark Paper” in the run-up to the Doha Conference 2008. 

6. Many of our demands are reflected in the recommendations presented by the “Stiglitz Commission” in March 2009. For this reason we regard these recommendations as a good basis on which to build a new global economic and financial system . 

7. Many of our positions are also reflected in the first draft outcome document presented by the President of the General Assembly (PGA) on 8 May 2009. We understand that the recommendations in this document contain short-term measures that have to be implemented immediately as a response to the current crisis, such as the sufficient funding for a global stimulus package, and long-term measures, such as the establishment of a new Global Reserve System or the proposal for a Global Tax Authority. We agree that the UN conference in June has to come up with immediate responses to the crisis and simultaneously decide on an intergovernmental time-bound process towards the long-term reforms. 

8. In contrast, the draft document by the Co-Facilitators, dated 6 May 2009 neither specifies the necessary short-term actions nor does it contain concrete commitments for longer-term structural reform measures. It mainly reconfirms – by recycling already agreed language – decisions taken at the Doha Conference and the G20 Summits. The policy recommendations in this document lack any sense of urgency. The recommendations on institutional reforms (para. 47) are interesting but, according to the Co-Facilitators, they only “might be considered”. Such a diplomatic phrase makes any recommendation completely useless. If governments agreed on such an outcome document, they would further weaken the UN as the global forum for economic policy coordination and decision making and would completely fail to find meaningful answers to the current crisis. 

9. We understand that under the current time pressure it will be difficult for governments to agree on a comprehensive set of radical reform measures as outlined in the draft of the PGA. But, a consensus on many concrete reform proposals that are on the table can still be reached. Among the decisions that are of high priority and could be taken at the UN Conference without any further delay are the following: 

– The initiative to establish a Global Panel on Systemic Risks in the World Economy, following the model of the Intergovernmental Panel on Climate Change, bringing together academics, civil society and policy makers. 

– The decision to upgrade the Committee of Experts on International Cooperation on Tax Matters to an intergovernmental Commission on Tax Matters as a functional commission of ECOSOC by the end of 2009. 

– The political commitment to introduce an internationally coordinated Financial Transaction Tax in order to mobilize additional resources for a short-term Global Stimulus Fund and the longer-term implementation of the Internationally Agreed Development Goals, including the MDGs. 

– The establishment of a Global Economic Coordination Council within the UN system. 

– The decision to review the Agreement between the UN and the Bretton-Woods-Institutions (BWIs) in order to enhance coordination and policy coherence by integrating the BWIs as specialized agencies completely into the UN system. 

10. We call upon governments not to take procedural arguments as an excuse to further delaying the substantive negotiations on the urgently needed global policy responses to the current crisis. 

Jens Martens and James Paul, Global Policy Forum 
Roberto Bissio, Social Watch 
Beverly Keene, Jubilee South 
Andrea Baranes and Antonio Tricarico, Campagna per la Reforma della Banca Mondiale 
Mirjana Dokmanovic, Women and Development Europe (WIDE) 
Gigi Francisco, Development Alternatives wirh Women for a New Era (DAWN) 
Patricia Blankson Akakpo, Network for Women’s Rights in Ghana (NETRIGHT) and ABANTU for Development (ROWA) 
Josep Xercavins i Valls 
Philo Morris, Medical Mission Sisters 
Aldo Caliari, Center of Concern 
Rudy De Meyer, 11.11.11 
Verena Winkler and Simon Stocker, Eurostep 
Eva Friedlander, IWAC, the International Women’s Anthropology Conference 
Luke Fletcher, Jubilee Australia 
Anne Jellema, Action Aid 
Mark Herkenrath, Alliance Sud, Switzerland 
Klaus Schilder, terre des hommes Germany 
Magaly Pineda, CIPAF, Rep.Dominicana 
Feminist Task Force of the Global Call to Action against Poverty 
Arjun Karki, LDC Watch 
Sarba Khadka, South Asia Alliance for Poverty Eradication-SAAPE 
Mana Dahal Rural Reconstruction Nepal-RRN 
Edward Oyugi, Social Development Network, Nairobi, Kenya 
Oksana Kisselyova, Liberal Society Institute, Ukraine 
Cartas A. Kapele, Children Education Society (CHESO), DAR ES SALAAM – TANZANIA 
Fernanda Carvalho, IBASE – Brazilian Institute for Social and Economic Analysis 
European Network on Debt and Development (EURODAD) 
ATTAC Hungary 
Milan Smrz, Czech section of Eurosolar 
Joseph M. Sammut, Social Watch, Malta 
Christine Andela – COSADER (Collectif des ONG pour la Sécurité Alimentaire et le Développement Rural) – Cameroun 
Marta Benavides – Instituto Internacional de Cooperación entre Pueblos (IICP) – El Salvador 
GCAP – Sudan 
Jubilee Debt Campaign (UK) 
Tom Kucharz, Ecologistas en Acción (Spain) 
Transnational Institute 
Institute for Policy Studies, Global Economy Project 
Dr. Hassan Abdel Ati – National Civic Forum – Sudan 
Malgorzata Tarasiewicz – Network of East-West Women, NEWW-Polska 
AWID (Association for Women¹s Rights in Development) 
Rede Brasil sobre Instituições Financeiras Multilaterais 
Marek Hrubec, Centre of Global Studies, Czech Republic 
Zelená Pro Planetu, Czech Republic 
Henri Valot, Policy Advisor CIVICUS: World Alliance for Citizen Participation 
Professor Aijaz Qureshi: Social Watch Pakistan- IDF 
Zulfiqar Halepoto- Sindh Democratic Forum (SDF) and Social Watch Pakistan 
Nazeer Memon- Sindh Agriculture Forum 
Abrar Kazi – SDF- water expert and technocrat 
Rural Reconstruction Nepal (RRN) 
Public Finance Monitoring Center 
Women’s Working Group on Financing for Development 
Egyptian Association For Community Participation Enhancement (EACPE) 
CARDET, Cyprus 
National Social Watch Coalition – India 
Action for Economic Reforms 
Philippine Rural Reconstruction Movement (PRRM) 
Arab NGO Network for Development (ANND) 
Ziad Abdel Samad 
Mariama Williams, Integrated Policy Research Institute (IPRI) 
Yves Conze, Integrated Policy Research Institute (IPRI) 
Carla Bakboord, MSc Cultural Anthropologist, Executive Director Equality & Equity for Gender&Social Development, Suriname 
El Amel Association For Social Development in Algeria 
Women for Change 
Genoveva Tisheva- Bulgarian Gender Research Foundation 
Development Network of Indigenous Voluntary Associations (DENIVA), J.B. Kwesiga 
Network of Ugandan Researchers and Research Users (NURRU), David Obot 
Tomas Tozicka – Jubilee Czech 
Hanaa Edwar, Iraqi AlAmal Association 
David Obot (NURRU), Kampala-Uganda 
J.B.Kwesiga (DENIVA), Uganda 
Hamarneh, Vanda, Syria 
Consumers Association of Penang 
Friends of the Earth, Malaysia 
KOPIN (Koperazzjoni Internazzjonali) Malta 
Instituto Latinoamericano de Servicios legales Alternativos (ILSA) – Colombia 
Klaus Heidel, Werkstatt Ökonomie e.V., spokesperson Social Watch Deutschland/Forum Weltsozialgipfel (Social Watch Germany) 
International Gender and Trade Network (IGTN). 
Rene Suša, Humanitas, Society for human rights and supportive action, Slovenia 
Africa Development Interchange Network (ADIN) 
Sanayee Development Organization (SDO). Kabul, Afghanistan 
UK Coalition Against Poverty. Eileen Devaney 
Baudouin Schombe, Coordonnateur National Reprontic 
Bretton Woods Project (UK) 
FOCO – Foro Ciudadano de Participación por la Justicia y los Derechos Humanos 
DECIDAMOS, Campaña por la Expresión Ciudadana, Paraguay 
Social watch Mocambique 
Jiri Silny, Ecumencial Academy Prague, Czech Republic 
Vagn Berthelsen, Secretary General of IBIS 
Sisters of Mercy (of the Americas) 
Marta Scarpato, Consultora sindical, Italia 
Mayalu Matos Silva, Brazil 
Carlos Martinez Garcia, Presidente de ATTAC España 
Martín Pascual, Fundación Cenda, Chile 
CIDEP, Asociación Intersectorial para el Desarrollo Económico y el Progreso Social (El Salvador)I 
Reseau Marocain pour le Droit a la Sante, Dr Aziz RHALI. Maroc 
Antonio J. González Plessmann, Activista venezolano de Derechos Humanos 
WEDO (Women’s Environment and Development Organization) 
Red de Control Ciudadano, Costa Rica 
Secours-Catholique/Caritas France 
Instituto de Estudos Sócioeconômicos – INESC, Brasil 
Lunaria, Italy 
War on Want 
Carlos Martinez Garcia, Presidente de ATTAC España 
Socio Economic Rights Initiaitive/Social Watch Nigeria 
Global Economy Program 
Coordinación de ONG y cooperativas – CONGCOOP 
Uganda Coalition for Sustainable Development 
SLUG – The Norwegian Coalition for Debt Cancellation 
African Women’s Development and Communication Network/FEMNET Africa 
K.U.L.U.-Women and Development, Denmark 
Plataforma 2015 y más, España 
Third World Network 
Red Latinoamericana sobre Deuda, Desarrollo y Derechos – LATINDADD 
Women Headed Households Empowerment (PEKKA)

Further Resources: 

UN Conference on the World Financial and Economic Crisis and its Impact on Development

Official Website of the Conference

Breaking News: UN postpones summit over crisis

UN General Assembly postponed the celebration of the UN Conference on the World Financial and Economic Crisis and its Impact on Development, to happen in late June, sources reported Friday. According to UN spokesperson Spanish Enrique Yeves, recently many delegations asked the President of the Assembly Miguel D Escoto to postpone the already scheduled date of the encounter, since it coincided with other several international events. He also stressed the delegations to participate are still involved in the negotiations on the project of the event, convened by D Escoto, so that the crisis can be intensively debated by the 192 UN member countries. The Summit, previously scheduled for Jun.1-3, will take place on June 24-26, as it stated a missive sent to UN countries member, from the Head of Cabinet of the President of General Assembly Norman Miranda

Capitalism’s Crisis and our Response

April 19, 2009

By Walden Bello*

Speech delivered at the Conference on the Global Crisis sponsored by Die Linke Party and Rosa Luxemburg Foundation, Berlin, March 20-21, 2009.

Week after week, we see the global economy contracting at a pace worse than predicted by the gloomiest analysts. We are now, it is clear, in no ordinary recession but are headed for a global depression that could last for many years.

What I would like to do here today is first, to briefly discuss the origins and dynamics of this crisis; and, second, to explore a strategy for the global left that would respond to the current crisis in the context of the challenges coming from the technocratic capitalist center and the populist capitalist right.

The fundamental crisis: overaccumulation
Orthodox economics has long ceased to be of any help in understanding the crisis. Non-orthodox economics, on the other hand, provides extraordinarily powerful insights into the causes and dynamics of the current crisis. From the progressive perspective, what we are seeing is the intensification of one of the central crises or “contradictions” of global capitalism: the crisis of overproduction, also known as overaccumulation or overcapacity.  This is the tendency for capitalism to build up, in the context of heightened inter-capitalist competition, tremendous productive capacity that outruns the population’s capacity to consume owing to income inequalities that limit popular purchasing power. The result is an erosion of profitability, leading to an economic downspin. 

To understand the current collapse, we must go back in time to the so-called Golden Age of Contemporary Capitalism, the period from 1945 to 1975. This was a period of rapid growth both in the center economies and in the underdeveloped economies — one that was partly triggered by the massive reconstruction of Europe and East Asia after the devastation of the Second World War, and partly by the new socioeconomic arrangements and instruments based on a historic class compromise between Capital and Labor that were institutionalized under the new Keynesian state

But this period of high growth came to an end in the mid-1970s, when the center economies were seized by stagflation, meaning the coexistence of low growth with high inflation, which was not supposed to happen under neoclassical economics.

Stagflation, however, was but a symptom of a deeper cause: the reconstruction of Germany and Japan and the rapid growth of industrializing economies like Brazil, Taiwan, and South Korea added tremendous new productive capacity and increased global competition, while income inequality within countries and between countries limited the growth of purchasing power and demand, thus eroding profitability. This was aggravated by the massive oil price rises of the seventies.

The most painful expression of the crisis of overproduction was global recession of the early 1980s, which was the most serious to overtake the international economy since the Great Depression, that is, before the current crisis.

Capitalism tried three escape routes from the conundrum of overproduction: neoliberal restructuring, globalization, and financialization

Escape Route # 1: Neoliberal Restructuring
Neoliberal restructuring took the form of Reaganism and Thatcherism in the North and Structural Adjustment in the South. The aim was to invigorate capital accumulation, and this was to be done by 1) removing state constraints on the growth, use, and flow of capital and wealth; and 2) redistributing income from the poor and middle classes to the rich on the theory that the rich would then be motivated to invest and reignite economic growth.

The problem with this formula was that in redistributing income to the rich, you were gutting the incomes of the poor and middle classes, thus restricting demand, while not necessarily inducing the rich to invest more in production. In fact, it could be more profitable to invest in speculation.  Moreover, this strategy, in the long run, aggravated the basic problem, in that investment in production would add to already installed productive capacity.

In fact, neoliberal restructuring, which was generalized in the North and south during the eighties and nineties, had a poor record in terms of growth: Global growth averaged 1.1 percent in the 1990s and 1.4 percent in the ‘80s, compared with 3.5 percent in the 1960s and 2.4 percent in the ‘70s, when state interventionist policies were dominant. Neoliberal restructuring could not shake off stagnation.

Escape Route # 2: Globalization
The second escape route global capital took to counter stagnation was “extensive accumulation” or globalization, or the rapid integration of semi-capitalist, non-capitalist, or pre-capitalist areas into the global market economy. Rosa Luxemburg, who was not only a great radical but a great economist, saw this long ago in her classic “The Accumulation of Capital” as necessary to shore up the rate of profit in the metropolitan economies.

How? By gaining access to cheap labor, by gaining new, albeit limited, markets, by gaining new sources of cheap agricultural and raw material products, and by bringing into being new areas for investment in infrastructure. Integration is accomplished via trade liberalization, removing barriers to the mobility of global capital, and abolishing barriers to foreign investment.

China is, of course, the most prominent case of a non-capitalist area to be integrated into the global capitalist economy over the last 25 years.By the middle of the first decade of the 21st century, roughly 40-50 percent of the profits of US corporations came from their operations and sales abroad, especially in China.

The problem with this escape route from stagnation is that it exacerbates the problem of overproduction because it adds to productive capacity. A tremendous amount of manufacturing capacity has been added in China over the last 25 years, and this has had a depressing effect on prices and profits. Not surprisingly, by around 1997, the profits of US corporations stopped growing. According to one calculation, the profit rate of the Fortune 500 went from 7.15 in 1960-69 to 5.30 in 1980-90 to 2.29 in 1990-99 to 1.32 in 2000-2002. By the end of the 1990s, with excess capacity in almost every industry, the gap between productive capacity and sales was the largest since the Great Depression.  From this perspective, that of overproduction, globalization was not, contrary to the interpretations of many of those who celebrated it and those who criticized it, a higher stage of capitalism but as a desperate effort by capital to escape the conundrum of overproduction.  There was nothing progressive about globalization.

Escape Route # 3: Financialization
Given the limited gains in countering the depressive impact of overproduction via neoliberal restructuring and globalization, the third escape route — financialization — became very critical for maintaining and raising profitability.

With investment in industry and agriculture yielding low profits owing to overcapacity, large amounts of surplus funds were circulating in or were being invested and reinvested in the financial sector — that is, the financial sector was turning on itself.

The result was an increased bifurcation between a hyperactive financial economy and a stagnant real economy. As one financial executive noted in the pages of the Financial Times, “there has been an increasing disconnect between the real and financial economies in the last few years. The real economy has grown … but nothing like that of the financial economy — until it imploded.” What this observer did not tell us was that the disconnect between the real and the financial economy is not accidental — that the financial economy exploded precisely to make up for the stagnation owing to overproduction of the real economy

One indicator of the super-profitability of the financial sector is that while profits in the US manufacturing sector came to one percent of US gross domestic product (GDP), profits in the financial sector came to two percent. Another was the fact that 40 percent of the total profits of US financial and non-financial corporations was accounted for by the financial sector although it was responsible for only five percent of US gross domestic product (and even that was likely to be an overestimate.

The problem with investing in financial sector operations is that it is tantamount to squeezing value out of already created value. It may create profit, yes, but it does not create new value — only industry, agricultural, trade, and services create new value. Because profit is not based on value that is created, investment operations become very volatile and prices of stocks, bonds, and other forms of investment can depart very radically from their real value — for instance, the stock of Internet startups may keep rising to heights unknown, driven mainly by upwardly spiraling financial valuations.

Profits then depend on taking advantage of upward price departures from the value of commodities, then selling before reality enforces a “correction,” that is a crash back to real values. The radical rise of prices of an asset far beyond real values is what is called the formation of a bubble.

Profitability being dependent on speculative coups, it is not surprising that the finance sector lurches from one bubble to another, or from one speculative mania to another.

Because it is driven by speculative mania, finance driven capitalism has experienced about 100 financial crises since capital markets were deregulated and liberalized in the 1980s, the most serious before the current crisis being the Asian Financial Crisis of 1997.

Dynamics of the Subprime Implosion
I will not go in detail into the dynamics of the current crisis, which stemmed from the collapse of the US housing market, also known as the Subprime Implosion.  Some key dimensions of it, like Alan Greenspan’s encouraging the housing bubble by cutting the prime rate to a 45-year-low of 1 per cent in June 2003 and keeping it there for over a year to counter the recessionary effects of the bursting of the technology bubble of the earlu 1990’s, were already mentioned yesterday.  Let me just highlight a few other points.

The subprime mortgage crisis was not a case of supply outrunning real demand. The “demand” was largely fabricated by speculative mania on the part of developers and financiers that wanted to make great profits from their access to foreign money — most of it Asian and Chinese in origin — that flooded the US in the last decade. Big ticket mortgages were aggressively sold to millions who could not normally afford them by offering low “teaser” interest rates that would later be readjusted to jack up payments from the new homeowners.

How did problematic mortgages become such a massive problem? The reason is that these assets were then “securitized” — that is converted into spectral commodities called “collateralized debt obligations” (CDOs) that enabled speculation on the odds that the mortgage would not be paid. These assets were then bundled with other assets and traded by the mortgage originators working with different layers of middlemen who understated risk so as to offload them as quickly as possible to other banks and institutional investors. These institutions in turn offloaded these securities onto other banks and foreign financial institutions.

The idea was to make a sale quickly, get your money upfront and make a tidy profit, while foisting the risk on the suckers down the line — the hundreds of thousands of institutions and individual investors that bought the mortgage-tied securities. This was called “spreading the risk,” and it was actually seen as a good thing because it lightened the balance sheet of financial institutions, enabling them to engage in other lending activities.

When the interest rates were raised on the subprime loans, adjustable mortgage, and other housing loans, the game was up. There are about four million subprime mortgages which will likely go into default in the next two years, and five million more defaults from adjustable rate mortgages and other “flexible loans” that were geared to snag the most reluctant potential homebuyer will occur over the next several years. But securities whose value run into as much as $2 trillion had already been injected, like virus, into the global financial system. Global capitalism’s gigantic circulatory system was fatally infected. And, as with a plague, we don’t know who and how many are fatally infected until they keel over because the whole financial system has become so non-transparent owing to lack of regulation.

Collapse of the Real Economy
We are now at that juncture where instead of performing their primordial task of lending to facilitate productive activity, the banks are holding on to their cash or buying up rivals to strengthen their financial base. Not surprisingly, with global capitalism’s circulatory system seizing up, it was only a matter of time before the real economy would contract, as it has with frightening speed in the last few weeks. Woolworth, a retail icon, has folded in Britain, the US auto industry is on emergency care, BMW’s profits went down by nearly 90 per cent, and even mighty Toyota has suffered an unprecedented decline in its profits. With American consumer demand plummeting, China and East Asia have seen their goods rotting on the docks, bringing about a sharp contraction of their economies and massive layoffs.

Globalization has ensured that economies that went up together in the boom would also go down together, with unparalleled speed, in the bust, the end of which is nowhere to be discerned.  

Let me just pause here to say that the reason I have gone into some detail about the causes and dynamics of the crisis is to underline the fact that what we have unfolding before us is not a crisis of the neoliberal variant of capitalism but the crisis of capitalism.  

Global Social Democracy: the Capitalist Response
With the collapse of globalization and the deregulated market going haywire, the neoliberal metaphysics that propped up contemporary capitalism has been thoroughly discredited, though it will undoubtedly engage in some rearguard action.  

I think that there is a real panic out there among the establishment and real disarray and a sinking feeling that things will get worse before they get better and that the old neoliberal institutions, like the IMF, WTO, and G 20 have become irrelevant, even as Keynesian methods of deficit spending and monetary easing might have very limited effects.  Increasingly the more intelligent intellectuals of the establishment  are realizing that we are just at the beginning of the global freefall and don’t really know when we are going to hit rock bottom and once we reach it, how long the global economy will lie there.  Indeed, the best image I can conjure of the global economy is that of a German World War II U-Boat that has been depthcharged in the mid-Atlantic by British destroyers, and it’s descending rapidly to the ocean bottom, and once it reaches the bottom, you don’t know how the crew is going to get the submarine back up.  Will the crew’s tortuous maneuvers to get some compressed air into the damaged ballast tanks get it back to the surface, as in Wolfgang Petersen’s classic film Das Boot, or will the U-boat just stay at the bottom?  Will Keynesian methods of reflation work today?  The more critical thinkers of capital like Martin Wolf and Paul Krugman are not taking bets on it. 

The two things we can be certain of is that one, neoliberal approaches are thoroughly discredited, and two, the facts on the ground will dictate what those who wish to save the system will do, not any predetermined ideological limits.  So let us disabuse ourselves of the notion that neoliberal principles will constitute red lines beyond which they will not go.

Let me be more specific.  I think that the actions of the new Obama administration in Washington clearly constitute a break with neoliberalism.  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.

At this point, massive stimulus spending at record-breaking levels—something anathema to neoliberals—has become practice, the only difference among Northern elites being how much stimulus spending it will take to refloat the submarine..  On this, Obama has become the super-Keynesian.  Nationalization of the banks—another practice condemned by neoliberalism—is also well in progress, and the questions that divide the elites is how aggressively the government will exercise its control of the majority shares of the stocks and whether it will return the banks to private management once the crisis is over.  

Reprivatization is not, contrary to some of the comments here yesterday, is not a predetermined fact.  The facts on the ground will determine the answer to these questions, for the task at hand for the state managers of capitalism is not whether or not the solutions are in line with a discredited doctrine but what it will take to save capitalism.

Beyond deficit spending and nationalization, I think that there will increasingly be a debate within the establishment on whether to go on the path of what I call “Global Social Democracy”, or GSD, in order to respond to capitalism’s desperate dual needs for stabilization and legitimacy.

Even before the full unfolding of the financial crisis, partisans of GSD had already been positioning it as alternative to neoliberal globalization in response to the stresses and strains being provoked by the latter. One personality associated with it is British Prime Minister Gordon Brown, who led the initial European response to the financial meltdown via the partial nationalization of the banks. Widely regarded as the godfather of the “Make Poverty History” campaign in the United Kingdom, Brown, while he was still the British chancellor, proposed what he called an “alliance capitalism” between market and state institutions that would reproduce at the global stage what he said Franklin Roosevelt did for the national economy: “securing the benefits of the market while taming its excesses.” This must be a system, continued Brown, that “captures the full benefits of global markets and capital flows, minimizes the risk of disruption, maximizes opportunity for all, and lifts up the most vulnerable – in short, the restoration in the international economy of public purpose and high ideals.”

Joining Brown in articulating the Global Social Democratic discourse has been a diverse group consisting of, among others, the economist Jeffrey Sachs, George Soros, former UN Secretary General Kofi Annan, the sociologist David Held, Nobel laureate Joseph Stiglitz, and even Bill Gates. There are, of course, differences of nuance in the positions of these people, but the thrust of their perspectives is the same: to bring about a reformed social order and a reinvigorated ideological consensus for global capitalism.

Among the key propositions advanced by partisans of GSD are the following:
•    Globalization is essentially beneficial for the world; the neoliberals have simply botched the job of managing it and selling it to the public; 
•    It is urgent to save globalization from the neoliberals because globalization is reversible and may, in fact, already be in the process of being reversed; 
•    Growth must not be accompanied by increasing inequality;
•    Trade must be promoted but subjected to social and environmental conditions; 
•    Unilateralism must be avoided while at the same time preserving while fundamentally reforming he multilateral institutions and agreements; 
•    Global social integration, or reducing inequalities both within and across countries, must accompany global market integration; 
•    The global debt of developing countries must be cancelled or radically reduced, so the resulting savings can be used to stimulate the local economy, thus contributing to global reflation; 
•    Poverty and environmental degradation are so severe that a massive aid program or “Marshall Plan” from the North to the South must be mounted within the framework of the “Millennium Development Goals”; 
•    A “Second Green Revolution” must be put into motion, especially in Africa, through the widespread adoption of genetically engineered seeds. 
•    Huge investments must be devoted to push the global economy along more environmentally sustainable paths, with government taking a leading role (“Green Keynesianism” or “Green Capitalism”); 

The Limits of Global Social Democracy
Global Social Democracy has not received much critical attention, perhaps because, like the French generals at the start of the Second World War, many progressives are still fighting the last war, that is, against neoliberalism. A critique is urgent, and not only because GSD is neoliberalism’s most likely successor. More important, although GSD has some positive elements, it has, like the old Social Democratic Keynesian paradigm, a number of problematic features.

A critique might begin by highlighting problems with four central elements in the GSD perspective.

First, GSD shares neoliberalism’s bias for globalization, differentiating itself mainly by promising to promote globalization better than the neoliberals. Globalization, that is the rapid integration of production and markets but with effective regulation as EU Director General for Finance Jan Koopman, who describes himself as a Keynesian, puts it.  This amounts to saying, however, that simply by adding the dimension of regulation, along with that of “global social integration,” an inherently socially and ecologically destructive and disruptive process can be made palatable and acceptable. GSD assumes that people really want to be part of a functionally integrated global economy where the barriers between the national and the international have disappeared. But would they not in fact prefer to be part of economies that are subject to local control and are buffered from the vagaries of the international economy? Indeed, today’s swift downward trajectory of interconnected economies underscores the validity of one of anti-globalization movement’s key criticisms of the globalization process..

Second, GSD shares neoliberalism’s preference for the market as the principal mechanism for production, distribution, and consumption, differentiating itself mainly by advocating state action to address market failures. The kind of globalization the world needs, according to Jeffrey Sachs in The End of Poverty, would entail “harnessing…the remarkable power of trade and investment while acknowledging and addressing limitations through compensatory collective action.” This is very different from saying that the citizenry and civil society must make the key economic decisions and the market, like the state bureaucracy, is only one mechanism of implementation of democratic decision-making.

Third, GSD is a technocratic project, with experts hatching and pushing reforms on society from above, instead of being a participatory project where initiatives percolate from the ground up.

Fourth, GSD, while critical of neoliberalism, accepts the framework of monopoly capitalism, which rests fundamentally the concentrated private control of the means of production, deriving profit from the exploitative extraction of surplus value from labor, is driven from crisis to crisis by inherent tendencies toward overproduction, and tends to push the environment to its limits in its search for profitability. Like traditional Keynesianism in the national arena, GSD seeks in the global arena a new class compromise that is accompanied by new methods to contain or minimize capitalism’s tendency toward crisis. Just as the old Social Democracy and the New Deal stabilized national capitalism, the historical function of Global Social Democracy is to iron out the contradictions of contemporary global capitalism and to relegitimize it after the crisis and chaos left by neoliberalism. 

GSD is, at root, about social management.  What the left is about is about social liberation.  GSD is about technocratic management, the left is about participatory democracy down to the level of economic enterprises.  GSD is about making reconfiguring monopoly capitalism like the old Keynesianism did, though at a global level this time around.  The left is about creating a post-capitalist system when it comes to property relations.  GSD is about perfecting globalization.   The left is about deglobalizing.  GSD sees the future in Green Capitalism.  The left sees decapitalization as a precondition for a truly ecologically benign social organization of the planet.

Like President Lula of Brazil, President Obama has a talent for rhetorically bridging different political discourses. He is also a “blank slate” when it comes to economics. Like FDR, he is not bound to the formulas of the ancien regime. Like Lula and FDR, he is a pragmatist whose key criterion is success at social management. As such, he is uniquely positioned to lead this ambitious reformist enterprise.  Our task will not merely be how to support the positive aspects of the GSD program that promote the  people’s welfare while opposing those that lead to a restabilization of capitalism, but more important how, in the process, we differentiate our enterprise from the GSD enterprise and win people over to our strategic vision and program.

The Challenge from the Right
However, the choice in the coming period is not going to boil down between the Left and global social democracy.  Would that it were that simple!  In fact, there could be a response that would be anti-neoliberal in its economics, at least rhetorically, populist in its social policy, but exclusionist in its politics, evoking tribal as opposed to people’s solidarity.   We can already see some of this in the approach of President Nicolas Sarkozy in France.  . Declaring that “laissez-faire capitalism is dead,” he has created a strategic investment fund of 20 billion euros to promote technological innovation, keep advanced industries in French hands, and save jobs. “The day we don’t build trains, airplanes, automobiles, and ships, what will be left of the French economy?” he recently asked rhetorically. “Memories. I will not make France a simple tourist reserve.” This kind of aggressive industrial policy aimed at shoring up key sectors of the French capitalist class and winning over the country’s traditional white working class can go hand-in-hand with the exclusionary anti-immigrant policies with which the French president has been associated.

Sarkozy’s conservative populism is relatively mild.  There are more radical ones waiting in the wings, like the anti-Muslim movement of Gerd Wilders in the Netherlands, which is said to be poised to win 28 per cent of the seats in the coming parliamentary elections, again with the same mix of communal solidarity, populist economics, and authoritarian leadership.  We know of such movements everywhere in the developed and developing world, and my worry is that it maybe be in the developing crisis that they might make their breakthrough to becoming a critical mass.

The point is that things will become worse, much worse, before they become better, and the global crisis is not something that can be managed technocratically to a soft landing like the US Airways flight that was eased into a soft landing on the Hudson River in New York a few weeks ago.  If Global Social Democracy fails in its effort to reinvigorate capitalism and the Left is unable to come out with a vision and program built on equality, justice, participatory democracy that appeals to people in a period of severe and prolonged crisis, then other forces will step in to fill the vacuum, as they did in the 1930’s.  If there is anything that Rosa Luxemburg and Gramsci and Lenin can teach us today, it is that, good will, values, and vision are not enough, that in the end, politics in the sense of a powerful vision, an effective strategy of coalition building, and wise supple tactics of building up a critical mass for winning power, with parliamentary and extra-parliamentary dimensions, is decisive.  Nature abhors a vacuum, and we must be ready to fill that vacuum or we lose, decisively, and this we cannot afford to this time around.

Reveille for Progressives
Let me sum up.  While progressives were engaged in full-scale war against neoliberalism, reformist thinking was percolating in critical establishment circles. This thinking is now becoming policy, and progressives must work double time to engage it. It is not just a matter of moving from criticism to prescription. The challenge is to overcome the limits to the progressive political imagination imposed by the aggressiveness of the neoliberal challenge in the 1980s combined with the collapse of the bureaucratic socialist regimes in the early 1990s. Progressives should boldly aspire once again to paradigms of social organization that unabashedly aim for equality and participatory democratic control of both the national economy and the global economy as prerequisites for collective and individual liberation and, one must add, ecological stabilization.

That is a perspective that we must might fight for not simply in a battle for people’s minds but for their hearts and souls, and here the struggle is, on the one hand, against the technocratic capitalist restabilization schemes of Global Social Democracy and, on the other, the mass-based heated capitalist restabilization schemes of nationalist and fundamentalist populism.  Ideas are not enough, and what will be decisive is how one translates our ideas and our values and our vision into a winning strategy and tactics that can triumph democratically.  We must move away from the economism to which the global left was reduced in the neoliberal era.  Politics, in short, must once more be in command.

*Walden Bello is president of the Freedom from Debt Coalition, senior analyst at Focus on the Global South, and professor of sociology at the University of the Philippines.  He is also an honorary member of Die Linke.

Too Big to Save: The End of Financial Capitalism

April 3, 2009

The financial logic of neo-liberal capitalism has devoured the world and exhausted itself in the process. A new model beyond “financialization” is needed, says Saskia Sassen.

By Saskia Sassen*, OpenDemocracy, April 2, 2009

The misnamed “Group of Twenty” (G20) meets in London on 2 April 2009 to discuss how to save the global financial system. It is too late. The evidence is in: we don’t have the resources to save this system – even if we wanted to. It has become too big to save: the value of global financial assets is several times the size of global gross national product (GDP). The real challenge is not to save this system but to definancialize our economies, as a prelude to move beyond the current model of capitalism. Why should the value of financial assets stay at almost four times the overall GDP of the European Union, and even more of the United States. What do everyday citizens – or the planet – gain from such excess?

The question answers itself. To explore further the inner workings of the financial system that has brought the world to this predicament is also to glimpse a future beyond financialization. The task the G20 should actually address is not to save this financial system but to begin to definancialize the major economies to a significant degree, so that the world can begin to move towards the creation of a “real” economy that delivers security, stability, and sustainability. There is much work to do.

The logic

A defining feature of the period that begins in the 1980s is the use of extremely complex instruments to engage in new forms of primitive accumulation, with taxpayers’ money the last frontier for extraction.  

Global firms that outsource hundreds of thousands of jobs to low-wage countries have had to develop complex organizational formats, using enormously expensive and talented experts. For what purpose? To extract more labor at the cheapest possible price, including unskilled labor that would be fairly low in the developed countries as well. The insidious element is that millions of saved cents translates into shareholders’ gains.  

Finance has created some of the most complicated financial instruments in order to extract the meager savings of modest households: by offering credit for goods they may not need and (even more seriously) promising the possibility of owning a house. The aim has been to secure as many credit-card holders and as many mortgage-holders as possible, so that they can be bundled into investment instruments. Whether people pay the mortgage or the credit-card matters less than securing a certain number of loans that can be bundled up into “investment products”. Once thus bundled, the investor is no longer dependent on the individual’s capacity to repay the loan or the mortgage. The use of these complex sequences of “products” has allowed investors to reap trillion-dollar profits on the backs of modest-income people. This is the logic of financialization, which has become so dominant since the neo-liberal era began in the 1980s. 

Thus in the United States – ground zero for these forms of primitive accumulation – an average of 10,000 homeowners have been losing their home to foreclosures every day. An estimated 10-to-12 million households in the US will not be able to pay their mortgages over the next four years; under current conditions they would lose their home. This is a brutal form of primitive accumulation: presented with the possibility (which is mostly a fantasy, a lie) of owning a house, many people of modest income will put whatever few savings or future earnings they have into a down-payment.  

This type of complexity is aimed at extracting additional value from wherever it can – the small and modest and the big and rich. This too explains why the global financial system is in permanent crisis. Indeed, the term “crisis” is in some respects a misnomer: for what is happening is more nearly business as usual, the way financialized capitalism in the neo-liberal era works.

The financializing of more and more economic sectors since the 1980s has become both a sign of the power of this financial logic and the sign of its auto-exhaustion. When everything has become financialized, finance can no longer extract value. It needs non-financialized sectors to build on. The last frontier is taxpayers’ money – which is real, old-fashioned, not (yet) financialized money. Krzysztof Rybinski’s “zombies” are also parasites.

The limit

The difference of the current crisis is precisely that financialized capitalism has reached the limits of its own logic. It has been extremely successful at extracting value from all economic sectors through their financializing. It has penetrated such a large part of each national economy (in the highly developed world especially) that the parts of the economy where it can go to extract non-financial capital for its own rescue have become too small to provide the amount of capital needed to rescue the financial system as a whole.

By way of illustration: the global value of financial assets (which means: debt) in the whole world by September 2008 – as the crisis was exploding with the collapse of Lehman Brothers – was $160 trillion: three-and-a-half times larger than the value of global GDP. The financial system cannot be rescued by pumping in the money available.   

This in turn explains the abuses of entire economies made possible through extreme forms of financializing. Before the current “crisis” erupted, the value of financial assets in the United States had reached 450% of GDP that is to say 4.5 times total GDP (see “Mapping global capital markets“, McKinsey Report, October 2008). In the European Union, it stood at 356% of GDP. More generally, the number of countries where financial assets exceed the value of their gross national product more than doubled from thirty-three in 1990 to seventy-two in 2006.

Moreover, the financial sector in Europe has grown faster than in the United States over the last decade, mostly because it started from a lower level: its compound annual growth rate in 1996-2006 was 4.4%, compared with the US rate of 2.8%.     

Even capitalist economies – leaving aside assessments of whether this is the most desirable economic system – do not need an amount of financial assets that is four times the value of GDP. Thus even within a capitalist logic, giving more funds to the financial sector in order to solve the financial “crisis” is not going to work – for it would just deepen the vortex of financializing economies.

The scale

Another way to portray the current situation is via the different orders of magnitude involved in (respectively) banking and finance. In September 2008, the value of bank assets amounted to several trillion dollars; but the total value of credit-default swaps (CDS) – the straw that broke the system – stood at almost $60 trillion. That is a sum larger than global GDP. The debts fell due, and the money was not there. 

More generally – and again, to give a sense of the orders of magnitude that the financial system has created since the 1980s – the total value of derivatives (a form of debt, and the most common financial instrument) was over $600 trillion. Such financial assets have grown far more rapidly than has any other economic sector (see Gillian Tett, “Lost through destructive creation“,Financial Times, 9 March 2009).

The level of debt in the United States today is higher than in the depression of the early 1930s. In 1929, the debt-to-GDP ratio was about 150%; by 1932, it had grown to 215%. In September 2008, the outstanding debt due on credit-default swaps – a Made-in-America product (and, it should be recalled, only one type of debt – was over 400% of GDP. In global terms, the value of debt in September 2008 was $160 trillion (three times global GDP), while the value of outstanding derivatives is an almost inconceivable $640 trillion (fourteen times the GDP of all countries in the world).   

These numbers illustrate that this is indeed an “extreme” moment – but, again, it is not anomalous nor is it created by exogenous factors (as the notion of “crisis” suggests). Rather, it is the normal mode of operation of this particular type of financial system. Moreover, every time governments (that is, citizens and taxpayers) have bailed out the financial system since the first crisis of this phase – the New York stock-market crash of 1987 – they have given finance the instruments to continue its leveraging stampede. There have been five bailouts since the 1980s; on each occasion, taxpayers’ money was used to pump liquidity into the financial system, and each time, finance used it to leverage. This time, the end of the cornucopia is near – we have run out of money to meet the enormous needs of the financial system.  

The bridge 

The implication of the foregoing is that two major challenges need to be faced:

  • the need to definancialize the major economies
  • the need to move out of the current model of capitalism.

Both will be difficult, but it will help to focus on some very basic facts. The current estimate of official global unemployment is 50 million; the International Labor Organization (ILO) calculates that 50 million more could lose their jobs as the recession deepens. These figures are tragic for those affected. They are also relatively modest (without minimizing the human reality in any way) when set against the 2 billion people in the world who are desperately poor. But this raises the question: how many “jobs” would be created if there were a system that aimed at housing and feeding those 2 billion? The world would then need those 50 million currently unemployed to go to work – and another billion more workers into the bargain.    

If seen in this light, the financial “crisis” could serve as one of the bridges into a new type of social order. It could help all involved – citizens and activists, NGOs and researchers, local communities and networks, democratic governments – to refocus on the work that needs to be done to house all people, clean our water, green our buildings and cities, develop sustainable agriculture (including urban agriculture), and provide healthcare for all. This innovative order would employ all those interested in working. When all the work that needs to be done is listed, the notion of mass unemployment makes little sense.  

The technology to underpin this work – in helping to eliminate diseases that affect millions, and to produce enough to feed all – has existed for several decades. Yet millions still die from preventable diseases and even more go hungry. Poverty has become more radical: no longer about having only a plot of land that did not produce more, today it means having only your body. Inequality too has intensified and taken on new dimensions, including a new global class of super-rich and the impoverishment of the traditional middle classes.

The history of the last generation confirms that the neo-liberal form of market economy cannot deliver answers to these problems of disease, hunger, poverty and inequality – indeed it reinforces them. Some mixing of clean markets and a strong welfare state has (as in Scandinavia) produced the best outcomes yet; but for most capitalist economies even to come near to this model would entail sweeping internal change (see Amartya Sen, “Capitalism Beyond the Crisis“, New York Review of Books, 26 March 2009).

In any event, the increase in the financializing of market economies over the last generation has further sharpened the negative effects of profit-maximization logics. To move even a little in the direction of addressing the problems financialization has created means entering an economic space that is radically different from that of high finance. The challenge is there for those attending the G20 summit in London – and for those outside the gates.

*Saskia Sassen is professor of sociology and member  of the Committee on Global Thought,  Columbia University. Her books include Losing Control? Sovereignty in the Age of Globalization (Columbia University Press, 1996); The Global City: New York, London, Tokyo (Princeton University Press, 2001); Territory, Authority, and Rights: From Medieval to Global Assemblages (Princeton University Press, 2006); and A Sociology of Globalization (WW Norton, 2007)

US is shifting the crisis into the rest of the world

March 22, 2009

The Real News, March 16, 2009

Pepe Escobar: And how the US is shifting the crisis into the rest of the world.

Their crisis, our challenge

March 21, 2009

In a far reaching interview with Red Pepper David Harvey argues that the current financial crisis could lead to a streamlined private banking system – helped by government bail-outs – carrying out business as usual, unless there is sustained revolt and pressure for a dramatic redistribution and socialisation of wealth. He sees struggles for democratic control over the life of our cities – housing, health, education, transport and the environment – as central to such a change and urges new alliances beyond the workplace to achieve it.

Download the interview (PDF)