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Will the G20 bailout work?

This article is over 15 years, 1 months old
Gordon Brown’s G20 plan to "save the world" has been hailed a truimph by the media.
Issue 2146

Gordon Brown’s G20 plan to “save the world” has been hailed a truimph by the media.

“Brown’s new world order” declared the Guardian – the Daily Mail added an exclamation mark to the same headline.

According to the bosses’ Financial Times paper, the G20 meeting on Thursday was the day that world leaders “fought back against the recession”.

At the summit Brown trumpeted “an additional $1.1 trillion programme of support to restore credit, growth and jobs in the world economy”.

But then came the reality.Beyond the money agreed by the G20 there are specific pledges to reform the global banking system, impose extra controls and better accounting standards on hedge funds, tighter rules for credit rating agencies, and a commitment to “name and shame” tax havens that fail to share information with regulators.

What this will achieve is debatable. The OECD, a club for the rich nations, and the World Bank already name and shame tax havens.

In any case, it is unclear how pointing at the Cayman Islands and noting that it is an uncooperative tax haven will stop the recession.

Along the way, world leaders dropped an already vague commitment to encourage “low carbon” and “greener” investment, which they made at the last G20 meeting.


The latest G20 agreement allegedly represents a common approach to dealing with the billions of pounds worth of toxic debts. But the reality is different.

While Labour has bought up much of this debt using public money, other world leaders are less keen to follow in their path.

These divisions lie behind the claims of a $1 trillion package. Once the previously announced funds and the promises are removed it is a about a tenth of the size of that.

Despite Brown’s claims to the contrary, it is not a stimulus package. World leaders do not agree on the use of stimulus packages.

Rather it is an agreement to lend money to the International Monetary Fund (IMF) at some unspecified point in the future to bail out countries facing bankruptcy.

As countries such as Hungary and Ukraine have recently learned, these bailouts come with a price.

The IMF insists on governments implementing severe “austerity measures” as part of the conditions for its loans – something that must be dreadfully familiar to people in the world’s poorest countries.

The conditions include cutting wages and slashing public services. So, Hungary has a target of cutting wages by over 7 percent this year as part of its IMF deal.

The presumption behind the G20 deal is that economies will collapse, the IMF will come in and lend money. Then it will use its power to push through neoliberal measures.

This isn’t a deal to save the world. It is a continuing plan to try to make workers pay for the bosses’ crisis.

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