The recent G-20 meeting (main imperialist countries together with the so-called emerging countries), held in Seoul, South Korea, ended in a foreseeable failure. The polite diplomatic manners and the smiling photos could not conceal the impossibility of reaching agreements that would avoid the “currencies war” or “commercial war” initiated by the policy that Obama’s administration has begun to put into practice.
Making this failure absolutely clear, Chinese President, Hu Jintao, declared ironically, “We could not even agree about the time-tables when meetings were supposed to begin.”
The war of currencies began before the meeting, when the Federal Reserve announced that they would emit $600 billion dollars within 8 months to buy Treasury bonds of their own country and their policy to devaluate the international price for dollar in comparison with other currencies. This measure will affect other imperialist countries as well as those of the “emerging countries”, especially the exporters.
As to the dynamics of the price of dollar, let us highlight that it was enough for the Fed to announce the measures, for the dollar to be devaluated in 10% in the international market and its price will keep on sliding down as the Fed emits these $600 billion.
Export the crisis
To understand the meaning of this Obama’s policy and its deep impact on the world economy, it is also necessary to take into consideration what is happening in the USA, where two features are combined:
Firstly, the American economy, in spite of the gigantic packs of state aid for the banks and corporations, is far from recovering. There was a weak revival in the first quarter of 2010 (+3.7% of the GDP), but it soon began to slow down in the second and third quarters when the growth of the GDP got stuck at under 2%, a figure that is not even enough to avoid the increase of unemployment. Important bourgeois economists, such as Krugman and Roubini, talk about the perspective of a new recession or, in the best of the cases, “anaemic growth” till the end of 2011.
The second element is the defeat of Obama’s administration and the Democratic Party in the recent legislative election when they lost their majority in the House of Representatives. All the analysts agree that the central cause of the defeat was the generalised dissatisfaction of the toiling masses with the development of the country’s economy and the persisting unemployment. Weakened and forced to co-govern with an opposing parliament, as from next year, Obama government appealed to the Fed to apply policies of monetary injections and devaluation of exchange rate and so try to get out of the mire.
Obama will take advantage of the character of hegemonic imperialism emitting currency of international acceptation that USA still has and will seek to infuse some air into economy: devaluating the dollar will favour exports and diminish the imports. That is why the President of the US declared that his aim was to “double the exports in the nearest future.”
But by doing so, he also “exports the crisis to the rest of the world: American imperialism has launched a “commercial” offensive in order to solve its crisis at the cost of other imperialisms (European and Japanese) and other semicolonial countries as well as at the cost of their own workers.
That is why his policy of emitting dollars and devaluating their own currency will further turns unpredictable the international monetary system, which is already very fragile and unstable and may produce highly explosive economic and political effect against the background of an international economic crisis that is far from ending.
It is important to highlight that Obama’s policy does not aim at “defending the interests of American people” but only those of his bourgeoisie. His administration has already launched vigorous attacks against American working class and their standard of living, expressed in 10% unemployment, in the shrinking of payrolls of the corporations. In the fall of wages and benefits (many corporations such as GM, have demanded that their workers should accept that their wages and salaries should be sliced down to half) and poverty rates unseen in the past decades. Let us add that the devaluation of the dollar may also spawn inflationary process at home.
Furthermore, the current policy is of cuts in budgets of services such as public health and education. We can see this expressed in the following piece of news, “Leaders of the bipartisan presidential commission established by Barack Obama to reduce the fiscal deficit proposed a number of austerity measures that are so draconian that, if put into practice, they could lead to a social explosion similar to what we could recently see in Paris and London” (Clarin, 11/11/2010).
Some bad news for EU
The Fed measures represent bad news for European imperialist bourgeoisies, especially in the countries members of the “euro zone”. These bourgeoisies were already in serious trouble: with their economic growth even more anaemic than in the USA; the impossibility of having a flexible monetary policy due to the contradiction of using common currency (euro) but no united countries; tax crisis in several countries as an outcome of the help to prevent bankruptcy of the banks; the need to carry out violent attacks against the working class in order to get out of that crisis. At the same time facing tough struggles in response, which means significant erosion of all those government. This whole situation jeopardises the very existence of the euro, the outcome of 50 years of construction work by European bourgeoisies.
With this in the background, they bet that last year’s devaluation of the euro with respect to dollar would allow them to export more and so start getting out of the mire. This was the case of Germany, the strongest economy on the continent and the second world exporter. Early this year German industrial exports had some improvement, which allowed for a certain economic growth of the country and helped to push a little the weak growth of the rest of the EU. An important part of German exports goes to USA. Now, with the devaluation of the dollar and the increase of the price of the euro, the gate began to be closed and the consequences of that can already be felt: last September, German industrial production fell 0.8%.
The devaluation of dollar also means that European bourgeoisies will have to redouble the attacks against the workers because it is now much more necessary to reduce wages and to make the working conditions much more exacting and so reduce costs and maintain international “competitiveness” with respect to USA.
But these attacks will take place at a time when European workers are already fighting against the plans of adjustment and reduction of state budgets that governments are putting into practice. This increases the possibility that the struggle will become even tougher.
It is therefore logical that German minister of Economy, Rainer Brüderle, should express his concern about the measures of the Fed. Another member of the Angela Merkel’s administration declared, “This will create the effect of a tsunami on the world economy”. While the president of the Euro Group and Prime Minister of Luxemburg, Jean-Claude Juncker, insisted that a devaluation of the dollar “represents serious risks” and added that it was necessary to “shun national behaviours, more inspired in selfish reflections than in real needs of the international community.”
The Fed measures will also affect Japan, whose economy, after years of stagnation first and then the fall into the worst of the current crisis, enjoyed a brief recovery in late 2009 and early 2010, based on exports to USA. It is necessary to say that Japanese government was the first, before USA, who launched protectionist measures through the devaluation of the yen.
To put it all in a different way, the main imperialist bourgeoisies split on the issue of how to control the crisis and the “every man for himself”, while European and Japanese bourgeoisies will have the dirty part of the stick.
Pressure on China
An important aspect of the USA policy is the pressure on China to get her to split with the system of fixed parity between the dollar and the yuan, firmly controlled by the Chinese government, and switch on to a floating price of the yuan, subject of the ups and downs of the market.
Currently, with the system of fixed parity, if dollar devaluates, the Chinese government will devaluate the yuan in the same proportion so the effect on the trade between these two countries will be void. To the contrary, if the yuan had free price, the great accumulation of currency that China obtains every year due to the favourable trade balance sheet would push the yuan up with respect to the dollar. This would make the international price of industrial products go up and this would be added to the increase of internal costs as a result of increase of wages that are being achieved with strikes of workers of important factories in the country. As a whole, the process would be harmful for the exports that are already marked with a negative dynamics as an effect of the international economic crisis. That is why, so far, the Chinese government has refused to break the fixed exchange rate.
It is within this context that we must see Obama’s trip to India. The main objective of the trip was to see if there was a possibility of a privileged geopolitical role for this country in detriment of Pakistan, increasingly submerged in the extension of the Afghanistan war. But at the same time, he ventured several economic agreements that represent a concealed threat of transferring American investments towards India if China did not modify her exchange posture.
Another Bretton Woods?
Faced with the perspective of an exchange war, the grievous consequences at a fragile and unstable international monetary system, several bourgeois sectors have started talking about the need for a new Bretton Woods.
This international agreement, signed in 1943, gave room, for the first time in history, to an international financial system based on the dollar as a world currency. This worked until 1971, when it was unilaterally broken by the Richard Nixon’s administration and was one of the bases for the so-called “post war boom”.
For example, in an article published by Financial Times, Robert Zoellick, chairman of the World Bank, proposed to create a new monetary system based on a basket of currencies (dollar, euro, yen, pound and the Chinese Yuan) that would take the gold standard for the parities between these currencies. However, this seemingly rational proposal as against the current international monetary “anarchy” is absolutely inapplicable today. The Bretton Woods agreement was boosted in 1943 by American imperialist bourgeoisie, who took advantage of their unchallenged economic-political-military hegemony in the world to put this system under the service of their own interests. But now, that very same bourgeoisie is against reconstructing agreements of this type, so they can take advantage of the gaps of a “freer” monetary system. With USA and the entire American bourgeoisie against, there is not the slightest chance of building another Bretton Woods or any other similar agreement.
False anti-imperialism
For all the above reasons, the Chinese government went to the G-20 meeting ready to defend their exchange system and to criticise the devaluation of dollar. They received support from other developing countries such as Brazil and Argentina, whose exports and economies as a whole would also suffer from the devaluation of dollar. The EU governments, on the other hand, criticized the emission of dollars and their devaluation, but joined the pressures on China to liberate the price of the yuan.
In some Brazilian and Latin American media, the position of Lula has been presented as “anti-imperialist”. This is absolutely false. What the “emerging countries” pretend is to keep the crumbs of the international economy that allow them to play their current role in the uneven international division of labour, that of strong exporters of commodities.
That is why, faced with the new and brutal offensive of imperialism, they restrain themselves to beg “coordination” and “consensus” without any real and through confrontation with imperialism. It is small wonder that Lula declared that, after all, the decision of the government of the USA would have to be “respected” (Folha de São Paulo, 12/11/2010).
In semicolonial countries, such as Brazil, a really anti-imperialist policy would have to start from simple measures such as strong control over the in-flow of speculative capitals and the suspension of payments of the foreign and home debts and total breach with all the international financial organisms.
Later on such measures should be followed by the establishment of the state monopoly over banks and foreign trade so as to put an end to the leakage of currency and financial speculation; the expropriation of the great monopolies so as to end with the looting of national resources that imperialism is now practising. None of these measures can be found in the programme of Lula or any of his partners.
For a proletarian solution to the crisis
The G20 summit ended in an inevitable breakdown: no agreement of “goodwill” can exist because USA, the hegemonic imperialism, is against it. The policy boosted by the Obama’s administration will add more fuel to the international fire of political and economic instability while seeking solutions to American economy.
But regardless what policies the governments will adopt, the bourgeoisies of the different countries will keep on trying to unload the entire burden onto the backs of the working class resorting to unemployment, reduction of wages and salaries, impoverishing the working conditions, causing inflation and more poverty.
The economic crisis and the policies of the bourgeoisies and its governments in quest of a solution exacerbate the fact that in capitalism we can expect nothing but instability, crisis and anarchy as well as constant deterioration of the living standard for the toiling masses, so for their survival they jeopardise the entire mankind. That is why relentless struggle of workers and oppressed nations is a must. Firstly the struggle must be against the concrete consequences of the economic crisis and the policies adopted by the bourgeois governments – such as the shrinking of wages and salaries, cuts in the budget affecting public health and education, attacks against immigrants, etc.
But these immediate and absolutely necessary struggles must take place within the framework of the struggle against a much deeper struggle: the proletarian and socialist revolution that will tear down capitalism, a system that is increasingly irrational and inhuman. This is the upcoming view: the struggle of workers and students of France and other countries are showing us the way.
