Competitive devaluation and financial warfare

Last year in Kenya, when my African friends were discussing the depression and financial crisis, they asked why is it that people in the West, especially the US workers, are now only grasping the dangers of the power of the banks? African working peoples have faced the onslaught of the capitalist’s financial war against ordinary people for the past 30 years. The most obvious evidence has been high rates of unemployment and underemployment, massive hollowing out of industrial capacity, destruction of social services, and millions of deaths orchestrated by the IMF (International Monetary Fund)-imposed currency devaluation and liberalisation policies. These neoliberal strictures have been most evident in the areas of health care and education. In a continent where over 7,000 persons were dying everyday from preventable diseases, the IMF was also arguing that African economic recovery could only come from the complete opening of African markets and currency devaluations.

The experiences of Africans over the past 30 years are most pertinent within the context of the Group of Twenty (G20) meeting in South Korea. This meeting has four main items on the agenda, namely:
1) Building a framework for strong, sustainable and balanced growth
2) Strengthening the international financial regulatory system
3) Global financial safety nets
4) Modernising the international financial institutions.
If we look at the language and orientation of this agenda, we can see that the political leasers have not really learnt that the world is in a transition into a new international system. The other lesson that has not been learnt is that the West cannot keep exploiting the former colonised peoples forever. The structural adjustment policy measures that were initiated by the Bretton Woods Institutions against the oppressed nations and peoples are now being promoted in the West in the name of ‘austerity measures’ for global economic recovery. The escalation of the impact of the depression from Africa, Asia, and Latin America has now reached the working peoples of Western Europe and North America. When the managing director of the IMF referred to currencies as a weapon of war, many interpreted his statement as a volley against China. But could it be that he was addressing US leaders when he said, ‘Many do consider their currency as a weapon, and this is not for the good of the world economy.’ Robert Zoellick, the head of the World Bank followed in October by reminding the world that, ‘If one lets this [currency war] slide into conflict or forms of protectionism, we then risk repeating the mistakes of the 1930s.’

One of the challenges at this moment is for working peoples to begin to see that their interests converge so that they can develop a new sense of international solidarity. It is such sense of solidarity and internationalism that can ensure a formidable network for effective organisation and mobilisation against the toll of this capitalist depression and drum beats of war.

G20 SUMMIT

This international solidarity requires that we pay attention to local struggles and connect to international struggles, whether in New Orleans, Port-Harcourt, Guangdong, Quito, Madrid, or in Rouen, France. In these struggles, the workers and the youth, bit by bit, are regaining confidence in their own power and in their capacity to fight back. These forces are learning new lessons as the political leadership succumb to the power of the bankers who want to divert this growing solidarity to weaken the new alliances across borders.

We particularly need to closely watch the balance of forces arrayed as world leaders meet in South Korea. This is the meeting that is called the Group of Twenty (G20). It emerged as a response to the financial crisis of the 1990s, and the realisation that the former colonial masters who comprised the G7 could no longer dictate terms to the world. The summit in South Korea will be the 5th meeting of the G20 heads of governments to contemplate ways forward on the crisis arising from the failure of capitalism. Because the G20 has been conceived in a moment of crisis, it remains a holding operation until there is a process of deepening the democratisation of the international political system.

The G20 is a successor international formation to the G7 that was established in 1976 at another moment of international crisis when the USA foisted the system of flexible exchange rates on the countries that were defending Western capitalism. The G7 comprises Canada, France, Germany, Italy, Japan, UK, and the US. This gathering was convened one year after the US was defeated in Vietnam and five years after the Nixon administration had devalued the dollar. As an instrument of Cold War politics, economics, and diplomacy, the G7 bolstered the political authority of the US and the centrality of the dollar. In the face of the profligate spending and indiscipline of the US capitalist classes, the German and French leaders set about the creation of a competitive currency under the umbrella of the political formation that matured to become the European Union. The Euro became a competitor to the US dollar. This tenuous alliance of the G7 survived in the context of the Cold War. It was in this context that Reagan told the leaders of Germany and Japan that they had to support the US as long as they would want to be protected from the Soviet Union.

The G20 meeting is taking place twenty-five years after the Plaza Accords of 1985 when Ronald Reagan and James Baker bullied the Germans and the Japanese to subsidise the US military build-up. The yen appreciated and the Japanese economy never fully recovered from the economic consequences of the Reagan bullying in 1985. The end of the Cold War shattered the justification for the G7 and through the 1990s, the Russians were invited to the table, thus changing the G7 to G8.When Russia joined the G7 the neoliberal hawks descended on the society dismantling social programmes, with years of economic devastation for the peoples of Russia.

US unilateralism was hidden behind the G8. The limits of this unilateralism exploded on the world stage with the deepening of the capitalist crisis, following which there was a hurriedly-called G20 summit in November 2008. It was at this summit that President George W. Bush started to show some humility in relationship to the real position of the US and the rising power of states such as India, Brazil, and China.

G2 – CHINA AND THE US

Unilateralism and the language of the world’s only superpower had been premised on the ‘containment’ and encirclement of China and a national security doctrine that motivated some US security officials to see China as an enemy. This is despite the fact that there had been an alliance between sections of the Chinese capitalist class and the US financial barons. Top US multinationals (such as Walmart) saw China as a place where they could get around labour laws and safety standards. In January 2009, speaking in the capital of the People’s Republic of China, Zbigniew Brzezinski called on the Chinese to make a G2 alliance between the US and China. This invitation to the Chinese leaders to become co-imperialists with the USA was presented under the banner of ', published by Pluto Press.
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