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The G20: The New Ruling Aristocracy of the World?

Introduction

On the 17th and 18th of November 2007, the finance ministers and reserve bank governors of the G20 countries, along with leading International Monetary Fund (IMF) and World Bank officials, will be gathering in the seaside village of Kleinmond, South Africa.1  During this meeting — which will be hosted by the current Chair of the G20, our own Trevor Manual — the most powerful economic ministers and politicians will be surrounded by symbols of opulence — a golf course, five star accommodation, a beautiful conference centre, body guards, limousines, cavalcades, and sea views.  They will swop smiles and handshakes for the press — who like the court jesters of old will sing these global capitalist elites’ praises.  They will also tell us that these politicians have come to Kleinmond to create a better world for us.  The biggest joke of all is that they will expect us to believe this lie.  Of course, if you look past the superficial pomp, glitz and sheer propaganda that will be part of the Kleinmond gathering, you will find that a better world is not being created for us; a better world is being created for the global elite and their transnational companies to our detriment.  The G20 only cares about economic growth for the richest companies on earth; they really don’t care about us — we are inconsequential to them until we rise up in protest.  Indeed, at the meeting in Kleinmond, the G20 will be formulating plans to further exploit the workers and poor of the world to produce more wealth for transnational companies and their greedy capitalist owners.

The G20’s Composition and Agenda

The G20 comprises of the 20 biggest economies in the world, in the form of the US, the UK, Germany, France, Italy, Canada, Russia, Japan, South Africa, China, Brazil, Australia, Argentina, India, Indonesia, Mexico, Saudi Arabia, South Korea, and Turkey.  Together these countries account for 90% of the world gross product2 and over 80% of world trade.3  Added to this, with their combined voting power in the IMF and the World Bank, these countries completely dominate these institutions.4 Indeed, the President of the World Bank and Managing Director of the IMF are required to attend all the G20 meetings.

The G20 was established by the G8 in 1999 in the wake of the Asian economic crisis.5 At the time of the Asian financial crisis, some of the largest economies in the South came under speculative attack, for which neo-liberal policies such as financial liberalisation had created the space.  When the crisis initially broke, billions of dollars were wiped out in a matter of hours and it threatened to spread to the countries of the North.  Indeed, the Asian economic crisis shook the most powerful countries and economic institutions, such as the IMF and the World Bank, to their core.  It actually endangered the entire neo-liberal global project that had been formulated to supposedly overcome the crisis that capitalism had first began to experience in the 1970s, which was and is based on the problem of overaccumulation of capital.  To shore up the neo-liberal system, the giants of the G8, led by the United States, realised that they needed to further draw in the biggest countries of the South, such as South Africa, India, China, and Brazil into the global financial governance system.  The G20 was one attempt to do this and in effect rescue the global neo-liberal agenda, which had been — and still is — so favourable to the interests of transnational companies.

The G20’s self-stated purpose is to meet annually to discuss policies that will promote continuous high economic growth for transnational corporations across the world, whilst at the same time attempting to limit any possible financial crisis that may pose a threat to high economic growth.  To do this, the G20 has opted to promote neo-liberal globalisation even further.6

The most important document that has been produced by the G20 so far is the Accord for Sustained Growth.  It outlines the policies that the G20 countries aim to promote in order to create an environment in which the largest companies in the world can maintain high growth.  One of the most important pillars of the G20’s Accord for Sustained Growth is financial liberalisation.  As such, the G20 has called for countries across the world to further open up their economies to capital flows.  The goal of this is to increasingly allow companies to move money in and out of any economy in the world.  Thus, the G20 wants to entrench an environment where corporations can look for countries and areas of investment that offer the highest rates of return.7 This includes allowing companies to buy assets in any country and speculate on any stock market in the world.  Of course, financial liberalisation has already spawned speculation on currencies and stock markets on an unprecedented scale, which in turn has created financial volatility and increased the likelihood of another financial crisis.  Due to the fact that the G20 believes in financial liberalisation, their answer to this increased financial volatility is not for countries to impose financial controls to stop speculation but rather for countries to build up their currency reserves and strengthen their capital markets.8 The G20 countries, including South Africa, believe that countries could use these reserves to defend their currencies and stock markets when they are attacked by speculators.  Building up reserves means that countries have to divert money away from social spending. Thus, the G20 countries believe that speculation should be allowed to continue, and its negatives effects, such as currency and stock market crashes, should be borne by the poor, who will lose further social services so that vast reserves can be built up to defend currencies and stock markets when the corporate speculators descend on them.

Through the Accord on Sustainable Growth, the G20 has also called for all countries to advance the privatisation of state-owned assets and public services.9 This creates further investment opportunities for transnational corporations, who can now swoop into the countries of the South and buy up the ex-state owned assets that offer the best possibilities for future profiteering.  In fact, under South Africa’s chairmanship, the G20 has been pushing countries to privatise state assets at an increasingly rapid rate in order to use the money received from this to service debts to the IMF, the World Bank, and private Northern banks.10 Since much of the debt owed by the South is illegitimate, this call for the countries of the South to sell their public assets to pay the IMF, the World Bank and Northern private banks is especially sickening.  It will translate into a situation where people across the globe will lose the few remaining social services that they still have so that the Northern private banks can grow richer.

The G20 countries have also sought to assist the largest transnational corporations to increase their profits in a variety of other ways.  The G20 has promoted policies to create a flexible labour market on a global scale.11 In other words, the G20 are promoting policies that strip workers of their few remaining rights so that corporations can pay them less and less and thereby drive up their profit rates.  Along with this, the G20 has implemented policies that are aimed at protecting the intellectual property rights (IRPs) of corporations, including patents on medicines.12 In doing so, the message being sent by the majority of the G20 countries is that the interests of transnational corporations are more important than people’s lives.

Through the Accord for Sustained Growth, the G20 countries have also committed themselves to implementing and furthering trade liberalisation.  Indeed, all of the G20 countries are firm believers in free trade because it is the transnational companies that are based within their territories that benefit from free trade regionally and globally.  For this reason, the G20 countries have used the G20 meetings as a forum to discuss how they could collectively kickstart the stalled WTO negotiations.13 In fact, the G20 countries are the driving force within the WTO: they are the ones that have driven the entire WTO process through the exclusive green room meetings in which they participate to the exclusion of smaller countries of the South.

At the Kleinmond meeting, the G20 will also be discussing the possibility of implementing a number of reforms within the World Bank and the IMF.  However, the reforms that have been suggested by the G20 countries are only superficial.  The largest countries of the South involved in the G20, such as South Africa, Brazil, China, and India, want to reform the World Bank and the IMF in order to receive greater voting rights for themselves within these institutions.  They have, however, not called for equal voting rights for all countries in IMF and the World Bank, which is significant.  In effect, this means that South Africa, Brazil, China, and India are still willing to deny larger voting rights for smaller nations within the IMF and the World Bank.  It, therefore, appears as if these G20 countries wish to use the G20 to push for greater voting rights for themselves in the IMF and the World Bank so that they can join the older imperial powers in using these institutions to promote the expansionary agendas of their own capitalist elite.14 Certainly the reforms that are proposed by the G20 countries regarding the IMF and the World Bank have not extended to questioning the neo-liberal policies these institutions have forced upon poorer nations of the South.  This is because all of the G20 countries are firm believers in neo-liberal economics.  In fact, the G20 countries have openly stated that as part of the proposed IMF and the World Bank “reform” process, the control that these institutions have over smaller countries’ economies should be strengthened.15 This would entail the further imposition of neo-liberal economic policies on smaller countries.  It is telling that the G20 countries, especially South Africa, India, and Brazil, wish to extend the powers and reach of the IMF and the World Bank at the very moment that these institutions have lost much of their power and credibility in the South.16 Indeed, the IMF and the World Bank, and the neo-liberal agenda that they push, are being openly challenged by countries such as Venezuela, Cuba, Bolivia, and Ecuador.  The defence that G20 countries, such as South Africa and Brazil, have mounted on behalf of the IMF and the World Bank clearly demonstrates that these countries are far more aligned with the older imperial powers than they are with progressive countries, such as Venezuela and Ecuador.

The Consequences of the Policies Pushed by the G20

The consequences of the neo-liberal policies that have, and are, being pushed by the G20 countries are familiar: the rich are getting richer and the poor are getting poorer.  While most of the G20 countries are now richer than ever under neo-liberal globalisation; as many as 80 other countries are now poorer than they were in the 1970s.17 Although trade has increased under the global neo-liberal ‘free’ trade regime, it has only been an elite who have benefited.  The portion of exports from the poorest countries has declined markedly.  In fact, the poorest 48 countries now only account for 0.4% of global exports.  This is because the industries in these countries have been destroyed by imports flooding in under the banner of ‘free’ trade.  All of this translates into a world of growing inequality: a world where the richest 400 people, the new global capitalist aristocracy, now have more money than the poorest 3 billion people combined.18

While companies have made massive profits due to neo-liberal policies that are promoted by the G20 countries, the people of the world have suffered.  Due to privatisation, billions of people have lost all access to social services, such as education, water, sanitation, and healthcare.  This is because, in most countries, these services are now being sold by private companies as commodities: if you can’t afford to pay for such services, you don’t get them!  The macabre result: over 1 billion people have lost access to clean drinking water; 2.6 billion people lack basic sanitation; over 1 billion people are illiterate; 820 million people suffer from malnutrition; over 1 billion people lack access to any form of healthcare19; and 30 000 children die every day from poverty.20 This takes place in a world where the amount of money spent by American and European companies on entertainment each year could give every person in the world access to enough food, proper healthcare, basic education, and clean water.21

The Reasons Why the G20 Emerged

The event that led to the formation of the G20 was the Asian financial crisis.  However, the actual reasons why the G20 was formed are more systemic and relate to the steady decline of US imperial power and the growing breakdown of US hegemony — the Asian crisis was simply the catalyst for the formation of the G20, not the reason why it was formed.

Since the early 1970s, and the beginning of the global capitalist crisis, the US’s global economic dominance and hegemony has been on the decline.22 In 1950, the US supplied 50% of the world’s gross product; by 2003 this had dropped to 20%.  In 1950, 60% of all manufactured goods were produced in the US, today only 20% of manufactured goods derive from the US.  Non-US companies now dominate most of the industries in the world.  For example, 9 of the 10 largest electronics companies, 8 of the 10 largest car manufacturing companies, 7 of the 10 largest oil companies, and 19 out of the 25 largest banks in the world are non-American.23  Since 2002, the US has also been paying out more to foreign investors than it has received from its investments abroad.  This, along with declining exports, has seen its current account deficit balloon.24

As early as the mid-1970s, the global position of the US state and capital was declining and that they were losing market share and economic power to other imperial countries, such as France, Germany, the United Kingdom, and Japan.  Certain sections of US capital realised that the growing importance of countries such as Japan and Germany, along with decline of the US, could spark inter-imperial rivalry on a global scale, which would be detrimental to the capitalist system as a whole.  Some of the most important sections of the US capitalist class have been firm believers that the largest capitalists across the globe have a common interest in ensuring that there is a stable global environment that favours capital accumulation, even though they may compete with one another as individual capitalists.25 Thus, these influential US capitalists believe that the most powerful capitalist states should work together to create a global environment that favours the interests of the most powerful corporations in the world.  The influence that this section of US capital exerted over the US state led to the US forming the G726 in 1978.27 The formation of the G7 was aimed at persuading Western Europe and Japan that the US was willing to work with other capitalist powers to create a global environment that would favour the interests of all of the most powerful capitalists.  On this basis, and through the G7, a collective imperialism was formed, which was headed up by the US, but included lesser imperial powers like the United Kingdom, France, Germany, Italy, Canada, and Japan.28

By the 1990s a number of countries in the South had also begun to emerge as regional imperialists.  For example, since the 1990s, sections of Brazilian capital, with the assistance of the Brazilian state, have been rapidly expanding into other Latin American countries.  In East Asia, China has emerged as a major player and now looks set to rival the US globally.  Similarly, South Africa has emerged as a regional imperialist in Africa.  The South African state has been working hand in glove with South African corporations to assist them to expand into other African countries.  This has seen South Africa becoming the largest foreign direct investor in Africa.29 With countries such as South Africa, Brazil, India, Australia, and China emerging as regional powerhouses, the US was faced with a further devolution of its power in the regions where these countries were and are acting as imperialist powers.  Again the US indicated to these countries that it would be willing to cooperate with them.  In doing so, the US co-opted South Africa, Brazil, and India into the collective imperial system that it had created with lesser imperial powers like the UK, Germany, France, etc. It did this in a number of ways.  For example, South Africa, China, Brazil, and India were welcomed into the inner circles of the World Economic Forum.  The World Economic Forum has been one of the central institutions through which capitalists and leaders from the South have been inducted into the emerging global capitalist aristocracy.  Along with this, regional emerging imperialists, such as South Africa, were drawn into the centres of power in the WTO, the IMF, and the World Bank.  Similarly, the G20 was established to entice the emerging regional imperial powers into the global collective imperial system. The aim of this was to ensure global stability so that a climate which favours capital accumulation globally could be assured.  Of course, the new regional imperial powers like South Africa have not joined as equal partners; they are lesser partners in the global collective imperial system.  This can be seen by the fact that the G20 is not yet a highly formal structure like the G8.

Despite acting as a collective globally, through such institutions as the G20, each of the powers involved in the collective imperial system has its specific region of the world in which it operates as the prominent imperialist power to further its own capitalist entities interests.  For example, the US’s main strategic imperialist spheres are Latin America, the Middle East, parts of Africa, and parts of Asia; while Britain’s imperialist ambitions are mainly restricted to some of its ex-colonies.30 Similarly, South Africa’s imperialist sphere covers much of sub-Saharan Africa.  As a result, where two or more imperial powers’ interests clash in a certain region or country, they will compete in that region or country, even though globally they will remain aligned through institutions such as the G20 and the World Economic Forum.  Hence, although not in conflict globally, in certain areas in Africa, South African, British, and US interests do clash.  This, however, does not preclude South Africa, Britain, and the US from working together in other areas of Africa where they have common interests.

Within the collective imperial system, the various countries continuously jostle to increase their powerbases.  Specifically, under George Bush Jr, the US has acted unilaterally on a number of occasions to strengthen its leadership position within the global collective imperial system.  It has targeted strategically located countries such as Iraq, Iran, North Korea, and Zimbabwe through military actions and sanctions.  Such actions were not just directed at these countries — they were actually warnings to the regional and global imperial powers located close to these countries or with interests in these countries,31 such as the EU, Russia, China, and South Africa.  For example, the US invasion of Iraq was aimed at seizing oil interests in Iraq for US companies to the detriment of European oil companies.  Added to this, the military attack on Iraq was also meant as a veiled warning to the European powers not to openly challenge the US’s leadership role in the global imperial system.32 Such action by the US has even extended into a bid to gain global dominance as the sole imperial power.  However, because of its declining economic and political power, the US has failed dismally in these actions.  It has become bogged down in a war in Iraq, which it is losing.  It has also failed to intimidate North Korea into submission and thereby undermine China’s power.33 Similarly it has also failed to get rid of the ZANU-PF in Zimbabwe, which was aimed at curbing South Africa’s imperial influence and power in sub-Saharan Africa.  By undertaking these actions, and failing to reach its goals, the US has found itself in a serious crisis.  Due to these failures its leadership position in the global collective imperial system has been further eroded.34 As a result of the costly wars it is waging, the US is now borrowing at an unprecedented rate: its debt now stands at over $ 9 trillion.35 Most of this debt is owed to countries such as China, Russia, India, Brazil, and South Africa.  If the dollar continues to weaken, there is a real danger for the US that these countries will withdraw the money that they have invested in US bonds.  If this happens, the US economy will be in severe crisis and may even experience an economic meltdown, which will have knock-on effects globally.

At this point the US is at a crossroads.  It can try and maintain its leadership position through military might: abandon initiatives such as the G8, the G20, and the World Economic Forum, and attack the emerging regional and global imperial powers militarily and/or economically.  This is an unlikely option.  Iraq has proved that despite all of its high tech weapons the US is militarily over-stretched.  It could not fight wars on multiple fronts like the British Empire of old.  Added to this, a global imperial war — along with the trade barriers that would accompany it — are not in the interests of the biggest US transnational companies.  The largest transnational companies, and their global capitalist owners, want a global neo-liberal free trade regime.  They need such a global free trade regime to function as truly transnational companies and maximise their profits.  The other option that the US has — to deal with its declining power — is to further broaden and strengthen the global collective imperial system.  This would perhaps involve replacing the G8 with the G20 and granting the reforms in the IMF and the World Bank that have been demanded by China, South Africa, India, and Brazil.  This would also further undermine the US’s power, but it would further bind the global elite in the G20, and their project, together.  Such an option is actually favoured by some sections of the US capitalist elite, and seems the most likely path the US will follow.

Even if the G20’s power is increased, and the global collective imperial system is strengthened, there are no guarantees that capitalism will not experience a massive crisis in the future.  Neo-liberalism has created a form of capitalism that is volatile, highly unstable, and susceptible to crises.  Added to this, capitalism has created an unprecedented environmental crisis.

Conclusion

The meeting of the G20 in Kleinmond is a meeting of the global elite.  Despite the rivalries between the countries involved, they have proven and continue to prove a willingness to work together to force neo-liberal economic policies on the people of the planet.  The aim of such policies is to maximise the profits of the largest transnational corporations in the world.  Like the US, the people of the world also face a choice.  We can sit by and watch the G20 — along with the other forums that the collective imperial powers use — push through neo-liberal policies, or we can join together and resist.  We can join hands with the movements that have emerged across the world, like the Zapatistas, to struggle against neo-liberal capitalism and the collective global imperial system.  We can also join with the countries — like Venezuela and Ecuador — that have used the decline of the US to embark upon a path away from capitalism.  The choice is ours: we can choose to struggle to make another world possible or we can sit in silence and let the likes of Trevor Manuel and his allies in the G20 do what they want. 

 

1  Shaun Benton, “SA, Australia Discuss G20,” BuaNews, 13 September 2006.

2  Rodney Vlais, “G20 Mobilisation in Melbourne,” 29 January 2006.

3  Jonathan Katzenellenbogen, “Sout Africa’s Finance Eyes Price Stability in the G20,” Business Day22 November 2006. 

4  Australian Centre for Democracy and Justice, <democracyandjustice.org/>.

5  Injoo Sohn, “Asian Financial Cooperation: The Problem of Legitimacy in Global Financial Governance,” Global Governance 11 (2005):487-504. 

6  Omar Hamed, “What’s Wrong with the G20’s Neo-liberal Agenda?” Just Focus, 8 November 2006. 

7  G20 Accord for Sustained Growth: Stability, Competition and Empowerment — Mobilisng Forces for Satisfactory Long-Term Growth, China: The G20, 2005. 

8  Australian Centre for Democracy and Justice, op. cit.

9  G20 Accord for Sustainable Growth, op. cit.

10  South African National Treasury, G20 Work Programme for 2007, South Africa: National Treasury, 2007.

11  Tony Itis, “What Would It Take to Make Poverty History?” Share the Wrold’s Resources, 13 November 2006. 

12  Hamed, op. cit.

13  Australian Centre for Democracy and Justice, op. cit.

14  Vlais, op. cit.

15  G20 Accord for Sustainable Growth, op. cit.

16  Itis, op. cit.

17  “From Third World to One World?” World Socialist Movement.

18  Anup Shah, “Poverty Facts and Stats,” Global Issues, 24 November 2006. 

19  Shah, op. cit.

20  UNICEF, “The Power of Immunization,” The Progress of Nations 2002

21  Shah, op. cit.

22  Immanuel Wallerstein, “US Weakness and the Struggle for Hegemony,” Monthly Review 55.3, July-August 2003.

23  Richard B. Du Boff, “U.S. Hegemony: Continuing Decline, Enduring Danger,” Monthly Review 55.7, December 2003. 

24  Du Boff, op. cit.

25  Wallerstein, op. cit.

26  The G7 became the G8 when Russia was invited into the exclusive club on the collapse of the Soviet Union.

27  Colin I. Bradford, Jr. and Johannes F. Linn, “Global Economic Governance at a Crossroads: Replacing the G7 with the G20,” Washington, DC: Brookings Institution, 2004. 

28  Samir Amin, Beyond US Hegemony? Assessing the Prospects for a Multipolar World, London: Zed Books. 2006. 

29  Shawn Hattingh, South Africa in Africa: Another Scramble for Africa, South Africa: ILRIG, 2006.

30  Amin, op. cit.

31  Wallerstein, op. cit.

32  Michael Hardt and Antonio Negri, Multitude, London: Penguin Book, 2006. 

33  Wallerstein, op. cit.

34  Hardt and Negri, op. cit.

35  Martin Crutsinger, “U.S. National Debt Hits US$9 Trillion for the First Time,” Associated Press, 7 November 2007. 


Shawn Hattingh works for the International Labour Research and Information Group (ILRIG) in Cape Town.



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