The G20 summit this week is a good test of the mood among the ruling classes of the world. It brings together leaders and central bankers from 20 major economies that collectively account for 85 percent of global production and 80 percent of world trade.
Their meeting in China was dominated by recognition of continuing economic stagnation—or worse—and fear of rising resistance to political and economic elites.
Those who might be seen as the rulers of the world know their system isn’t working, and they can feel the ground shifting beneath their feet.
On the eve of the G20, Christine Lagarde, the International Monetary Fund (IMF) managing director, said, “Without forceful policy actions, the world could suffer from disappointing growth for a long time”.
Angel Gurria, secretary-general of the Organisation of Economic Co-operation and Development said, “Cylinders of growth are chugging their way but they are moving half-speed at best. In some cases we look like we’re walking backwards”.
The Chinese economy is growing at its slowest rate in a quarter century while Brazil and Russia are both in their second year of recession. The eurozone and the US are producing only very low growth rates.
It has been nine years since the financial crisis broke. The authorities are still funnelling vast sums to banks and corporations in the vain hope that they will begin lending or start investing. Instead much of the money is going into share buying and buying bonds.
Bosses are reluctant to invest. This is shown by the fact that nearly £10 trillion across the world is now invested in bonds and other financial holdings that pay negative interest rates. These negative interest rates means they get less money out after a period of time than you paid in.
They are bought because they are safe. And they may be able to be sold on at a higher price in the future when there is even more competition for secure investments.
The lack of investment by big business, because they can’t guarantee enough profit, has led some financial analysts to propose a novel solution—colonising Mars.
“It is not as crazy as it sounds,” wrote Viktor Shvets and Chetan Seth from the Macquarie global equities team recently. They hope that a Mars programme would help to boost the rate of profit on investment.
The IMF’s solution to all this is not (yet) interplanetary exploration. It is to boost infrastructure spending—roads, bridges, railways and so on.
But this shift from prioritising deficit reduction above all else is coupled with calls for “structural reforms”. This comes down to attacks on labour rights, cuts in pensions and fewer restrictions on bosses’ ability to hire and fire.
This is a carefully worded programme of continuing class war. But it’s one where politicians and financiers know there is plenty of opposition.
The Financial Times newspaper’s Martin Wolf worried last week that inequality and slowing productivity growth are a “poisonous brew” that “makes democracy intolerant and capitalism illegitimate”.
China’s president Xi Jinping told the G20 that the global Gini coefficient—the standard measure of inequality—had raced past its “alarm level” of 0.6 and now stood at 0.7. “We need to build a more inclusive world economy,” Xi said.
But none of the G20 attendees had a real solution. They all want to boost profits, they all want some other country to pay to boost demand so “their” firms can benefit from it.
There was much froth about “global cooperation” when China and the US formally committed to the Paris climate deal at the G20. But the deal is non-binding and crucial parts involve only aspirations.
Even if they were enforced, the targets for limiting global warming are far too low to halt continuing climate chaos.
The G20 leaders maintain a dysfunctional system that is producing fragmented and contradictory revolts across the world. Sometimes they are pulled leftwards, sometimes to the right.
The G20 shows capitalist failure. It also underlines the need for socialist politics.