Over the last many months, TripleCrisis bloggers and readers have written about many dimensions of the crisis. I would like to raise here several issues that warrant attention by progressive observers of the crisis.
1) The credit rating agencies and Polanyi rise again in Mediterranean Europe
We are now seeing that the government in Spain is trying to get ahead of a Greek-like fate by imposing its own extremely severe austerity measures that involve myriad types of budget cuts and recasting of its (inflexible) labor laws. Certainly the situation in Greece (and the protracted negotiations over its bailout) gave these moves particular impetus. But so did the downgrade of Spain by the credit rating firms.
However, we are left to wonder why the credit rating firms, whose performance has been so discredited by the crisis in the USA and elsewhere, are able to rise from the dead and still play the role of “oracle” when it comes to a country’s economic and social policies? It is ironic that at this very moment, the failures of credit rating agencies are center stage at the hearings of the US’ Financial Crisis Inquiry Commission chaired by Phil Angelides. (The Commission is investigating the causes of the global financial crisis that led to the bailout of big banks in the USA.)
In addition, we cannot fail to note that the underlying politics of the austerity programs in Greece and now in Spain (and perhaps ultimately in the other Mediterranean European countries) seem to be part of a larger project to dismantle Europe’s generous welfare state and systems of labor protections. Granted, many of these programs have been in need of serious reconsideration for some time, especially in relation to their financing. What we see in the Mediterranean countries now is a project that resonates quite strongly with the market-making projects of economic and social reconstruction that Karl Polanyi described in his landmark 1944 book, The Great Transformation.
Many political economists rediscovered Polanyi’s work during the neo-liberal reconstruction of many developing countries over the last quarter century and during the creation of liberal, capitalist economies in so many post-Communist countries. In Mediterranean Europe now we have another “Polanyi moment” as the least liberal of the region’s economies are being restructured radically in the context of the current crisis. Polanyi wrote of the push back by social actors that accompanies such reconstruction projects, and we are certainly seeing that in the many protests across the European south by the elderly, students, public sector workers, and unions. It remains for us to watch whether this push back will ultimately frustrate or at least slow the austerity programs that are now in place.
2) We’re still waiting for something good to come of the G-20
The G-20 (a grouping of the usual G-8 countries, plus others such as Brazil, China, India, Saudi Arabia, and South Africa) is a product of the financial crisis. It has since become the central body for discussion about the crisis among rich and rapidly growing economies (while the IMF has become the “first responder” to crisis). In the early days of the crisis, many of us were hopeful that the G-20 would emerge as a more progressive and inclusive voice in discussions of global economic policy.
But so far the G-20 has been a rather tepid affair that seems to resemble not much more than a larger and somewhat more unruly G-8. Granted, the G-20 has taken on issues like increasing the voting power of the developing countries at the IMF and World Bank. However, it has done so in a manner that is disappointing to progressives that have for so long been pushing for significant changes in governance. Despite the real basis for progressive disappointment with the G-20 to this point, we must recognize that the institution is entirely new, and we cannot therefore discount its impact before it has even found its footing (and before new players in the grouping have found ways to operate within it).
The G-20 has two important meetings this month that may give us further insight into the nascent coalition building within it and the kinds of issues on which it ultimately takes a stand. Right now the G-20 finance ministers and central bank governors are meeting in Busan, South Korea, and then later this month the G-20 national leaders meet in Toronto, Canada. Among the most important issues on the agenda of these meetings are discussions of new restrictions on derivatives trading, the imposition of more stringent capital and liquidity requirements for banks, and the proposal for a global tax on the largest banks (see the IMF interim report that describes this latter proposal). It is noteworthy that the global tax on banks is being supported by the US and the EU governments and by the IMF, though predictably the US’ (and other countries’) financial lobbies are already trying to frustrate these proposals. The Canadian government has come out against the proposal, and so have some developing country members of the G-20, most forcefully Brazil. This fissure is perhaps understandable since banks in Canada and in developing countries did not engage in the kinds of activities that led to the crisis. It remains to be seen if consensus can be reached on any of the important measures on the G-20’s agenda. If the fissures on financial regulation continue to emerge, if financial interests (as expected) continue to frustrate bold steps that might reduce the likelihood of another major financial crisis, and/or if the meetings conclude only with fuzzy, feel good statements on the need to promote transparency in financial markets, it may give further credence to the disappointment that so many progressives have with the G-20 to this point.