By Hazel Henderson and - -
LONDON, Jan 1 2003 (IPS)

The central component of what has been widely defined as \’\’globalisation\’\’ is the transformation of the global economy into one of unsustainable debts in which the finance sector plays a dominant role, writes Anne Pettifor, director of The Jubilee Research programme and former director of Jubilee 2000 Coalition UK. In this article for IPS, the author argues that this transformation was the intended result of government action. The US trade deficit had to be financed, and the US was determined to finance it without lowering living standards or ceding its policy autonomy to foreign creditors. Capital controls had to be lifted so the US could access foreign capital markets. The City of London, backed by the UK government, was only too happy to broker financing for the US deficit, first through the \’\’stateless\’\’ Eurodollar market based in London. We should be prepared for the economic, environmental, and social degradation associated with destruction of the \’\’credit bubble\’\’, in particular widespread depression and deflation. However, we cannot do so if our analysis of the forces at play in the global economy is wrong, or if we play into the hands of the finance sector by ignoring it. Above all we should be prepared to shape the alternative: a world in which the finance sector and markets in general are once again subordinated to environmental, social, and political priorities, determined locally and democratically.

The central component of what has been widely defined as ”globalisation” is the transformation of the global economy into one of unsustainable debts in which the finance sector plays a dominant role. This transformation, we contend, was the intended result of government action.

Today the world’s outstanding debts have reached USD 100 trillion, according to estimates by one economist, equal to three times global GDP and therefore unlikely to ever be repaid — an outcome that will wreak havoc on the lives of billions of people.

The success of the Jubilee 2000 campaign in placing the issue of sovereign debts on the political agendas of the G-8 countries is in this context particularly significant. Our work has led to the cancellation of USD 34 billion of debts and the promise of more cancellation.

But the urgency of the situation remains extreme. The coming inevitable ”correction” to the credit cycle presents, in our view, a grave and imminent threat to the stability of the global economy and to the livelihoods of billions of people.

This situation did not develop on its own. The explosion of credit that characterised the transformation of the global economy from the 1970s onwards was overseen by the IMF and World Bank and by respected central bankers like Alan Greenspan of the US and Sir Edward ”Steady Eddie” George of the UK.

Today, as a result of an effective license granted by governments, the finance sector acts as the French aristocracy did before the Revolution. Its members remain largely hidden and unaccountable behind the invisible walls of the ”capital markets” that protect privilege and wealth.

This ”invisibility” does not prevent the players in these markets from attempting, for example, to dictate the outcome of democratic elections in Brazil. Indeed, the election of President Lula must be interpreted as a major victory by the Brazilian people over the arrogant pretensions of invisible, reckless and unaccountable international bankers, creditors and investors — the same group that helped raise Brazil’s debt to 63 percent of GDP by 2002 from 29 percent in 1994 when President Cardoso took office.

Unfortunately, because the finance sector is on the whole invisible, it does not attract the opprobrium associated with the activities of a much smaller, and more productive sector of the global economy: the trans-national corporations (TNCs).

While big TNCs harm the environment, flout human rights, and intensify exploitation of the land and labour, they are a relatively small part of a global economy now dominated by a sector which, in our view, poses a much greater threat to humanity and the environment. Furthermore, while they may do harm, big corporations are at least producing goods and services. The finance sector, on the whole, is about the unproductive business of making money from money.

”Globalisation”, and the prosperity with which it is associated in the west, has been a useful term in masking the actions of governments over which civil society has –but failed to exercise– power and influence.

The CEO of Citigroup, Walter Wriston, defined globalisation in the following, and misleading, way: ”… a galloping new system of international finance [which] differs radically from its precursors in that it was not built by politicians, economists, central bankers, or finance ministers …[but rather] by technology, by men and women who interconnected the planet with telecommunications and computers.”

On the contrary, western governments, their elected leaders, and by implication civil society, have been and are still the real driving force behind financial liberalisation. As Canadian economist Eric Helleiner has cogently argued, Anglo-American leaders were motivated to embark on the ”globalisation” project because of the steady expansion of the US trade deficit in the 1960s and 70s. This led to deliberate decisions by the US and UK governments to remove controls over the movement of capital.

The US trade deficit had to be financed, and the US was determined to finance it without lowering living standards or ceding its policy autonomy to foreign creditors –that is, without implementing the necessary ”structural adjustment” that is routinely imposed on much poorer nations. For this to be possible, capital controls had to be lifted so the US could access foreign capital markets. The City of London, backed by the UK government, was only too happy to broker financing for the US deficit, first through the ”stateless” Eurodollar market based in London — a market carefully created by elected representatives of two of the world’s most powerful states.

Today the US’s accumulated external debt is equal to USD 2.2 trillion and can only be sustained by mobilising a staggering USB 4 billion of foreign savings each day of the year.

The US deficit is a powerful symbol of what is wrong with ”globalisation” and the imbalances caused by a credit binge, excessive consumption, and associated debts. These debts are already wreaking havoc on poor country governments, big corporations (like Enron and WorldCom), and millions of households and individuals. It is vital that western civil society grasp this reality and accept responsibility for the governmental decisions that have led to it.

We should be prepared for the economic, environmental, and social degradation associated with destruction of the ”credit bubble”, in particular the onset of a period of widespread depression and deflation. However, we cannot do so if our analysis of the forces at play in the global economy is wrong, or if we play into the hands of the finance sector by ignoring it.

Above all we should be prepared to shape the alternative: a world in which the finance sector and markets in general are once again subordinated to environmental, social, and political priorities, determined locally and democratically — a world in which governments, and their people, regain the right to policy autonomy and to sustainable self-determination. (END/COPYRIGHT IPS)

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