Here comes the travail of crisis. The more they talk about coordination, the more it becomes necessary to concentrate on the conflicts revealed by the very talk of coordination. The G20 finance ministers’ meeting, held in South Korea on Friday, has already been mortgaged by the case opened by US Treasury Secretary Timothy Geithner regarding the global current account imbalance.
In a letter, Geithner proposed to limit each country’s current account surplus to 4% of its GDP by 2015. China’s surplus is 4.9% and Germany’s is above 5%. But, a few days before it, officials in Beijing had said that the responsibility for the conflict lies in the money flow originating in the easy money policy of Washington, which made possible an explosion of liquidity and, with it, debt-financed consumption, eventually causing a financial crisis. Very true, except that the other side of the same coin is the Chinese, Japanese, South Korean, and German surpluses, plus the surplus of some Italian export sectors. Russia, too, benefitted from it since the growth of China and India, sustained by the US financial bubble, inflated the prices of energy, the principal source of Moscow’s financial wealth.
The travail of crisis becomes visibly painful as every country clings to the side of the current account equation that is in its interest. Geithner is watching the US deficit — in principle, with good reason. The United Sates cannot rehabilitate its economy — totally wrecked due to outsourcing, three decades of falling real wages, and dependency on the military and financial sectors which has devastated economic infrastructure — without restoring domestic industrial production. Germany, Russia, and Japan have reacted to Geithner’s letter by hanging on to the other side of the current account equation, the side showing a positive net balance. From their point of view, Germany and Japan are doing what makes sense for them. Their production and employment depend on export, which is the only dynamic factor in their capitalism. Instead of regarding that as a problem, Berlin sees in export the only way out of the crisis. Tokyo fully shares the German vision, except that, not in possession of an area over which Japan can exercise mercantilist hegemony, unlike Germany which has the European Union, it is forced to reluctantly revive public spending, albeit unsuccessfully so far.
Nevertheless, Geithner’s proposal, though rooted objectively, is still deceptive. Limiting the surplus to 4% without creating additional spending mechanisms, in which global public spending becomes essential, only means threatening the surplus countries. Such threats as well as quarrels and conflicts constitute precisely business as usual in the travail of crisis.
Joseph Halevi is Senior Lecturer of Political Economy at the University of Sydney. A version of this article was published in the 23 October 2010 issue of Il Manifesto. Translation by Yoshie Furuhashi (@yoshiefuruhashi | yoshie.furuhashi [at] gmail.com). Cf. Don Lee and Christi Parsons, “G-20 Meeting Ends with U.S. Failing to Secure Key Support for Trade Plan” (Los Angeles Times, 23 October 2010).