'I would like to locate the question of poverty and the G8 in the context of the crisis of global capitalism.' Those are not my words. They are the words of US billionaire George Soros. When Soros starts talking about the crisis of world capitalism, we should also call a spade a spade.
The high levels of debt in the developing world are one manifestation of the failure of the policies of corporate globalisation and neo-liberalism. During the 1990s, which were supposed to be the era of globalisation, we saw the number of poor people around the world increase by 28 million.
In 54 of the developing and former Communist economies the average per capita income actually fell. The number of poor people increased in Latin America and the Caribbean, central and eastern Europe, the Arab states and sub-Saharan Africa. In the second half of the 1990s, and in the new millennium, stagnation and rising unemployment have become the rule in the US, Europe and Japan. In the US the nine-year boom ended in 2001-rising unemployment and poverty have become central features of the world's most globalised economy.
It is very hard to deny this general picture of failure. There are still economists manipulating the figures, who try to prove that globalisation is a success from the point of view of living standards, but their ranks are thinning out.
The Nobel Prize winning economist Joseph Stiglitz, who used to be head of the World Bank, is one of the intellectuals who has defected. He says that the problem was the model of capitalist development that was imposed both in the developed north of the world and the developing south.
The G8 is an alliance of the governments of the world's richest countries. This group tries to coordinate economic policies to help stabilise the north, even as the south has been subjected to the ravages of instability and neo-liberalism. That has become more and more difficult. Indeed, competition among the G8 countries has intensified as global stagnation has deepened.
One indication of this competition is the way the Bush administration has used the policy of the cheaper dollar, making US exports more competitive, to get the economy to recover at the expense of other countries. The whole idea is to get the US to export more to other heavily industrialised countries in Europe and Japan and prevent relatively expensive imports from Europe and Japan entering the US.
Exchange rates-and the US doesn't deny this-have become a form of economic warfare among the industrial capitalist countries. The current situation is bleak from the point of view of a real recovery. The global economy is suffering from a crisis of what is called over-accumulation, overproduction and overcapacity.
Only 2.5 percent of the telecommunications infrastructure set up in the 1990s is being used. There was so much investment in telecommunications that a lot of the bankruptcies in the US-WorldCom and others-are related to this overinvestment. If you look at the car industry, only about 74 percent of the 70 million cars that are built each year have a market. The former director of General Electric, Jack Welch, has claimed that there is excess capacity in almost every industry. And, according to the Economist magazine, the gap between capacity and sales is the greatest since the great depression of the 1930s.
This great gap exists because of the neo-liberal policies that are gutting people's incomes in both the north and the south. We have a process where instead of adding people with purchasing power to the market, their purchasing power is being reduced. So there is an increasing contradiction between capacity and demand. This situation is being made worse by a number of factors. One is the significant new role of China in the world economy.
You often hear in the global press that China is a source of demand and a stimulus for the world economy. It seems like China is heroically propping up the world economy. I would disagree with this. China is adding to the problem of global overcapacity. So much investment, so many jobs are moving to China.
This is not with the intention of exploiting the Chinese market, but with the intention of using the Chinese market as a springboard to export elsewhere, especially the US, Europe and Japan. In China the economy is not based on the involvement of more and more people with purchasing power. Half of its people, despite the so called Chinese economic miracle, live in the countryside earning an average of £160 a year.
The big issue that is now faced by global capitalism is that, once overcapacity in China is added to global overcapacity, it will add to the crisis which the north has been unable to move out of. We are continuing to face a crisis of global economic stagnation from which, despite all the rosy predications, there is no stable recovery. The G8 is increasingly becoming a forum for competitive governments trying to recover at each other's expense.
We are going to see, especially in the US, more and more economic unilateralism, more and more protectionism, which is mirrored by the European countries and Japan.
We will see the US tie its recovery more and more to military mechanisms. This period of crisis will provide opportunities for global movements – such as the movement against corporate globalisation and the anti-war movement – to take advantage of these contradictions in order to advance the people's interests.
Walden Bello is the executive director of Focus on the Global South in Bangkok. He is speaking at Marxism 2004. He recently spoke at the Globalise Resistance anti-capitalist network conference in Britain about the G8, the meeting of the world's eight most powerful governments.