IBON Features | 7 November 2011 | The slow recovery highlights the urgency for policies that are directed in strengthening domestic economies
IBON Features— Heads of states of largest and developing nations gathered last week for the Group of 20 (G20) Summit but failed to come up with concrete plans to manage what the International Monetary Fund (IMF) now calls a “protracted global crisis”.
Considered as today’s top forum of the world’s largest countries, the G20 concluded its summit on November 4 but without drawing any new solutions to the raging public debt crisis affecting the US and the European Union (EU).
The slow recovery highlights the urgency for policies that are directed in strengthening domestic economies. But instead, many governments of the Third World like the Philippines persist with the same discredited neoliberal policies that have intensified the global crisis.
Still no solution
The inability of the IMF and other international institutions to maintain its earlier optimism underscores the deep problems of the global economy. The world economy is still struggling to find sources of growth after the merely debt- and speculation-driven growth of the 1990s and 2000s. The unraveling public debt crisis in the US and several EU countries like Greece is now the urgent financial flashpoint for the world economy.
The G20 Summit held in Cannes, France approved an action plan that requires countries to make structural reforms to enhance growth and jobs—but these countries have made the same commitments for the past five years. In short, there were almost no new commitments made during the forum that countries were not already implementing.
Recovery seemed under way after the financial crisis erupted in 2008. But this semblance of stability was only a result of the massive fiscal stimulus by big capitalist economies. Counting all new financial support measures including bailouts, public loans and guarantees, public assumption of private sector debt and other liabilities, the total value of this fiscal stimulus reaches $10.8 trillion. This is equivalent to almost a fifth of global gross domestic product (GDP). For instance, two rounds of ‘quantitative easing’—a policy used to increase money supply and stimulate economic activity— cost the US $2.3 trillion.
The benefits of the fiscal stimulus are however clearly short-lived, with the global economy slowing again as of third quarter of 2011. The slowdown is also not just in the advanced capitalist economies but also in the supposed alternative growth centers like China, Brazil, Russia, which all projected decreases in their economic growth. These countries are still dependent of the major capitalist centers for a large part of their demand, exports, and investments—aside from also having their own internal economic troubles.
The short-lived benefits have created new fiscal and financial sector imbalances. The mounting public debt troubles in the US, Europe and Japan mean greater fiscal austerity which further dampens demand. The world’s largest countries are all facing slowing growth due to growing public debt burden, increasing austerity, high unemployment and lack of productive domestic investment opportunities. Every country is looking for sustainable solutions to the slowing economic growth.
PH oblivious to crisis?
While the world economy looks for new sources of growth, the Philippine government unfortunately affirms and continues past neoliberal policies that are no longer viable. The Aquino administration implements these outdated policies but with two additional stresses: first, more extensive privatization through public-private partnerships (PPP), and second, covering up the failures of neoliberal policies with its multi-billion conditional cash transfer (CCT) program.
The Philippine government intensifies privatization with even greater incentives for foreign investors through so-called regulatory risk guarantees. Its coverage is also greatly expanded into health, education, and housing—reducing these vital social services into opportunities for profit. It seems that every area of the economy will not be spared by PPPs, among them power, telecommunications, information technology, highways, railways, ports, airports, transport systems, irrigation, water supply, sewerage, markets, warehouses, government and land reclamation.
The Aquino administration is forced to acknowledge the unavoidable consequences of decades of neoliberal policies: low and volatile growth, record joblessness, falling incomes and growing poverty. But rather than deal with the roots of the problem, it instead seeks to merely cover up poverty with the multi-billion CCT program that is expensive, debt-driven and unsustainable. More than just relief without reform the CCT program actually seeks to use the relief precisely to cover up for the lack of reform.
The global economy faces deep problems and governments around the world, including the Philippines, should be looking for viable solutions for the intensifying crisis. This includes implementing radical and meaningful reforms in economic policies outside the neoliberal path. This means that there should be deliberate and coordinated measures to strengthen domestic economies, including greater assertions for economic sovereignty especially in poor countries like the Philippines. IBON Features