By - - and Roberto Savio
ROME, Nov 23 2010 (IPS)

The last G20 meeting showed us that we are far from global governance. It’s clear that national interests, although interdependent, do not coincide, and that the era when the West could impose its will on developing countries is over.

We would do well to reflect on an emerging paradox: globalisation might reduce the weight of the West more than we had anticipated.

While governments have a degree of control over the real economy, no one controls finance, at either the local or global level. The symbol of this situation could very well be the president of the United States, Barack Obama.

Obama had a hard time in Seoul. Knowing that he cannot make concessions which the new Congress would view as less than a triumph for the US, he didn’t succeed in concluding a free-trade agreement with South Korea.

The G20 ignored his request for a global trade balance agreement. Furthermore, he was subjected to widespread criticism following the Federal Reserve’s announcement of its plan for a 600 billion dollar financial expansion.

The revolt is unprecedented. The world had grown accustomed to the US printing new currency every time it faced a crisis. As a result, there are 22 dollars around the world for each dollar in the US. Yet with the “red threat” and the Cold War no more, the leader of the world now finds itself increasingly disoriented. The US cannot solve its daunting economic problems by exporting them.

Voters today want lower taxes, which is one of the reasons for the rise of the Tea Party, which has united a disparate grouping of white citizens from all over the US eager to keep the American Dream alive.

Yet left out of the debate is the crucial fact that the US, like certain European countries, cannot continue living beyond its means. The federal debt, which was 41 percent of GDP two years ago, will reach 90 percent in 2020, according to the Congressional Budget Office. Interest on the debt alone will be 900 billion dollars per year.

Western countries have been living beyond their means without anyone growing concerned. What’s new is that the regulations imposed by Franklin Delano Roosevelt after the Wall Street crash of 1929 have been gradually dismantled in a process begun by Ronald Reagan and continued by Bill Clinton. As a consequence, the world is flooded by massive waves of speculative capital that escape any real form of control.

It’s enough to point out that total stock market transactions exceed by a factor of ten the total value of the goods and services produced in the real economy, the goal of which is to produce and sell. In contrast, the goal of finance is to maximise profits in the minimum amount of time.

The financial world is convinced that the euro is fragile because of Europe’s paralysed governance and its lack of a common vision. Greece, which for several years presented false budgets in order to be eligible for EU subsidies, was the first target of speculation. Only a massive European intervention saved it from bankruptcy. But speculation continues its advance and has its eye on every country, particularly Spain, Portugal, and Ireland.

The main catchphrase heard these days is “cutting fiscal deficits”. Nobody worries about the social deficit, which is generating in the US scenarios out of Central America. The top one percent of the US population receives 24 percent of the national income, up from 9 percent in 1976. In 1980, a manager of a large American company earned 43 times more than a mid-level employee; the figure was 531 in 2001 and is near 800 today.

Why do a significant proportion of the victims of the social deficit defend the privileges of this one percent? For the same reason they want to eliminate health care reform: they believe that the federal government shouldn’t intrude in citizens’ lives in this country built by the labour of individuals and without government assistance. The US is not Europe, which is ‘socialist’. Pure capitalism will restore the last century’s glory.

In this escape from reality the voices of reason go unheard. Thomas Friedman, writing for The New York Times, argued that the US will not be able to maintain its place in the world unless it returns to its traditional levels of robust investment in education and research.

In Europe, this escape from reality took the form of xenophobia and immigrant bashing. According to the UN, Europe needs at least 20 million immigrants to maintain the level of international competitiveness and to be able to finance pensions for its citizens.

Yet xenophobic parties now shape policy-making in certain Nordic countries, once bulwarks of tolerance and civic practice, while they are in power in countries as diverse as Italy and The Netherlands

Jean-Claude Juncker, Luxembourg’s prime minister and minister of finance, made a very revealing statement: ‘We know exactly what we have to do, but if we do it, we will lose the next elections.’

What must be done is eliminate speculation so that countries can gradually integrate their citizens into a fairer economy, reducing consumption and modifying their way of life. Yet not a single voice has called for this.

Indira Gandhi said that an optimist is a pessimist without all the facts. With these facts, the time has come to start a discussion about how to reduce the social deficit and create a more just society with balanced consumption, and to stop playing into the discontent of citizens and instead tell them the truth: we cannot keep going the way we were.

The West can’t pay its deficits by exploiting other regions of the world. This has worked for five centuries. It won’t work any longer. (END/COPYRIGHT IPS)

(*) Roberto Savio is founder and president emeritus of the Inter Press Service (IPS) news agency.

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