Amid energetic protests, the G20 group of world  leaders – representatives from Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States, along with an extra seat for the European Union – met in east London over April 1-2, ostensibly to try and map a way out of the financial crisis.

Indications going into the summit were not positive – American officials came out as broadly pessimistic about the chances of reaching an agreement, and it became obvious that there was a serious division between countries with relatively large financial sectors (America and especially Britain) and those with smaller financial sectors (Germany and, most vocally, France).

Our own esteemed prime minister, Gordon Brown, was fairly unambiguous in the way he pinned his political fortunes into sealing some kind of agreement. He embarked on a world tour to lobby for a global fiscal stimulus package. His efforts were hindered by rebuffs and inconvenient leaks, but he bravely pressed on. French president Nicolas Sarkozy, meanwhile, made a great deal out of his firmness and tenacity, threatening to walk out if a “meaningful” deal was not reached.

And now, he would have us believe, he has been vindicated. It cannot be denied that, certainly, something has been agreed. $1.1 trillion, to be precise, divided into four separate funds: the largest ($500 billion) to aid struggling economies, two $250 billion initiatives to boost world trade and provide the IMF with an overdraft facility respectively, and a $100 billion package for lending to poor countries.

This appears to have been secured in exchange for some kind of verbal assurances to the Franco-German axis that financial services will face more regulation – a deal which looks to be a bargain for the Anglo-Saxon countries, contra Robert Hormats, the Goldman-Sachs vice-chairman, who considered the summit to have come out unfavourably for the States.¹

Indeed, the most ‘concrete’ measure the summit reached on financial regulation was a so-called black list of tax havens, to be enforced by the Organisation for Economic Cooperation and Development (OECD). ‘Black list’ calls to mind various more or less dubious historical precedents – the McCarthyite moves against alleged communists in America, for example – which have in common a concerted effort on the part of the state to repress or shut down their targets.

Whatever other accusations you may level at the OECD list, however, it is certainly not guilty of heavy-handedness. Its criteria do not consider the Channel Islands or the United Arab Emirates to be any more tax havens than Germany. Instead, it levels its most concentrated fire at such notorious centres of financial fiddling as … Uruguay.² Even poor old Uruguay has reasons to be cheerful, though, as the liberal Tax Justice Network reports that it is now completely in the clear …³

We can tentatively call the summit a victory for the US, then – but is this a knockout or a split decision? On the empirical level, it simply is not clear only a week after the various heads of state got back on the plane. For a number of reasons, however, it is unlikely that things will pan out so very much in America’s favour in the medium term, as they did on April 1-2.

The first reason is that the European leaders’ calls for tighter financial regulation were not abstract point-scoring, nor simply attempts to shift the brunt of the crisis away from their own fragile economies (the latter is, of course, a not insignificant element on all sides). They were grounded in the somewhat intractable reality that the crisis began with a deep and structural failure in the financial sector, and that it is this failure which has inevitably spread outwards to affect the economy as a whole.

Capitalism simply does not ‘go’ without credit – the favourable conditions that made it so widely available in the upswing of the business cycle have turned rotten, and to get the credit system moving, some kind of drastic shift in its functioning is necessary. If it is not imposed by the state, it will impose itself – through massive destruction of capital, and considerably deeper economic upheaval than we have yet seen.

In this context, the ‘choice’ made by Brown and Obama to shore up the financial system with cash injections and only cursory nods in the direction of tighter regulation is something of a devil’s bargain – the problems that pose the necessity of regulation even from the point of view of sections of the bourgeoisie cannot be wished away. I put the word ‘choice’ in scare quotes – it is, of course, not a free choice at all, but the bitter fruit of the overproduced capital in the last business cycle, as well as the development of the global division of labour over centuries.

Secondly, the $1.1 trillion figure sounds superficially impressive, but – leaving aside the fact that a proportion of it had already been allocated by individual governments – as we have seen, is internally divided, and earmarked for somewhat vague purposes. What exactly is the $250 billion trade stimulus package actually going to do, for example? What exactly constitutes a “struggling [national] economy”, eligible for parts of the $500 billion pot, at a time when the world economy is, to put it mildly, struggling? These things will not be decided easily – the US will have to fight again and again to get the funds to where it wants them. If it won the battle in east London, a long and exhausting war stretches out before it.

We must also view the summit as part of the long process of decline in US hegemony. Yes, it has forced a political settlement – such as it is. Yet the bureaucratic-military machine – in the last instance, the basis for America’s global supremacy – remains in trouble. Adventures in Iraq and Afghanistan, apart from their brutality, are simply more obviously unsuccessful every day. A major (not, as we know, total) withdrawal from Iraq is already in progress – and Obama now talks of an “exit strategy” even from Afghanistan, a war he previously claimed he would prosecute to victory.

As an indirect result, Washington (and its satellites in Westminster and the like) will find it increasingly difficult to resolve financial issues to its advantage. A more virile hegemon would be able to manipulate this global bail-out fund (a more accurate description than ‘stimulus package’, touted by the bourgeois media) in such a way that the core imperialist states could see the best of it, in practice offloading more of the worst effects of the crisis onto countries further down the pecking order – or rival blocs.

It is difficult to see how this could be done, or even identify a ‘rival bloc’ in the conventional sense. China, the most obvious candidate in many ways, remains deeply implicated in the US economy – should the dramatic contraction in Chinese industrial production become a freefall, the US would see its consumer markets and large parts of its own manufacturing base decimated. Similar links bind the US to the core European Union states – and the friction between the two sides visible over the last few weeks must be viewed in that context (one possible outcome here, of course, is a violent ‘decoupling’ – and violent it would most certainly be).

If it will take more than $1.1 trillion to save capitalism, and if US political-military power is no longer enough to enforce the flimsy global settlements it can manage to broker, the question is posed: exactly what will end this crisis? Capitalism, as every Marxist knows, will not destroy itself. It will recover, eventually, one way or another. Still, we are entitled to wonder exactly what form this recovery will take – and we ought not to be viewed as overly catastrophist to consider it very unlikely that the world will see a protracted period of growth, comparable to the post-war boom or the subsequent neoliberal era, any time soon. The context of the former was the devastation of continental Europe in World War II, and the latter the renewed global offensive against the Soviet bloc.

Short of such a conveniently catastrophic war, or a semi-autarkic rival to break down, capitalism is likely instead to enter a protracted period of stagnation. That means a long period of economic dislocation. It goes without saying that the bourgeoisie will attempt to load the worst burden onto the shoulders of the working class … but only as long as we allow it to do so.

Notes

1. www.bloomberg.com/apps/news?pid=20601087&sid=axEnb_LXw5yc&refer=home
2. www.oecd.org/dataoecd/38/14/42497950.pdf
3. taxjustice.blogspot.com/2009/04/oecd-blacklist-empty.html

From Weekly Worker