Free Market’s FREE FALL!

Published: May 5, 2009 - 14:46 Updated: July 1, 2015 - 15:33

Although G20 leaders reached a consensus on the global stimulus package, it has received a mixed response. Many believe that it has refused to address the abject failure of neo-liberal capitalism
Sophia Furber London

It was "the day the world came together to fight back against the global recession", in the words of British Prime Minister Gordon Brown. While the leaders of the world's most influential 20 economies gathered in London to discuss solutions to the global meltdown, tens of thousands of protestors descended on the capital to vent their anger at the failures of free-market capitalism. London saw some of the largest protests in a generation in the run-up to the summit, culminating in 'Financial Fool's Day' on April 1, when demonstrators brought the financial district to a standstill. After a turbulent week in London, the leaders of the G20 unveiled a $1 trillion package, dubbed "the largest macroeconomic stimulus that the world has ever seen".

The G20 communiqué promised dramatic and sweeping reforms, ranging from the closure of tax havens to the creation of a 'global stability board' to monitor international finance. The IMF has been assured an extra $1 trillion to enable it to bail out struggling economies and to provide $250 billion worth of short-term loans in a bid to stimulate trade. Although G20 leaders managed to reach a consensus on the global stimulus package, the deal has received a mixed response among academics and economists, many of whom believe that it has failed to address the underlying causes of financial crisis. And while G20 leaders have promised that the summit marks a radical shift in the way the world economy is regulated, many of the demands and questions raised by the protestors remain unanswered.

The G20 summit united demonstrators from across the political spectrum, who came together to demand an alternative to unregulated free-market capitalism. The 'Put People First' march held the weekend before the summit was supported by a coalition of over 160 NGOs, religious groups and unions and was joined by over 35,000 demonstrators. Supporters of Oxfam and Action Aid joined forces with smaller organisations such as the Bihar Development Foundation UK, and the Dalit Solidarity Network, while environmental groups such as Climate Change Campaign and Greenpeace were well represented.

Demands were as diverse as the protest groups; some called for 'Jobs not Bombs', others for 'Action on Climate Change' and for 'Money for Need, Not Greed'. Some protestors simply berated the British government and the city financiers that they held responsible for the recession, bearing banners with slogans such as 'Scumbag Millionaires' and 'Hang a Banker'.

Britain, with its high dependency on the financial services industry, has been hit hard by the crisis, and unemployment has reached its highest levels since records began in the 1970s. British comedian and activist Mark Thomas received loud applause during his speech at the rally in Hyde Park, in which he criticised the British government's bailout of banks such as RBS, crippled by exposure to toxic loans. "It's us who have paid for the banks. The government says that they've nationalised them. But we've subsidised them," he told the crowd. Protestors at the 'Put People First' march were broadly united by the demand that the G20 leaders address the issues of 'jobs, justice and climate change' at the summit.

However, the march was just a taste of what was to follow in the days leading up to the summit. April 1 saw a mass anti-war rally, anarchist protests in the heart of the financial district and a 'Climate Camp' where 500 demonstrators set up tents in front of the European Climate Exchange, re-creating the atmosphere of a music festival or village fair. Police maintained a heavy presence in the capital in the run-up to the protests, removing the climate campers during the night and restricting the movements of crowds within a small area around the Bank of England for several hours using a technique called 'kettling'. One of the biggest controversies to emerge from the summit in Britain has been over the death of bystander, Ian Tomlinson, who died of a suspected heart attack after being kicked and pushed by policemen.

"The media have built today's protests up as 'threatening', but these demonstrations are reflecting the opinions of over 150 organisations about the war in Iraq, Palestine, jobs, and climate change,"  Tony Benn, prominent socialist and former MP Tony Benn, told Hardnews. Benn, leader of the Stop the War Coalition, was about to enter the US embassy to present a petition calling for an end to the wars in Iraq and Afghanistan.

While noisy protests against war, the mismanagement of the financial sector and the lack of action on climate change overtook London, the G20 leaders gathered for a programme of photo calls and macroeconomic negotiations.

The result of the summit was a triumph for Keynesian economics, as G20 leaders reached a consensus on Barack Obama and Gordon Brown's policy of massive fiscal stimulus. This was despite bitter opposition by a number of European leaders, including Nicolas Sarkozy and Angela Merkel, who argued for tougher financial regulation rather than more spending. The world will receive a $5 trillion injection of cash from G20 countries by the middle of 2010, and the resources available to the IMF are to triple, according to the communiqué.

Reactions from emerging economies have been mixed. Chinese economists have praised the G20 summit for its commitment to tighter international financial supervision. "The consensus in the statement reflected that leaders from different countries have noticed that the development of financial markets should be under strict control and every country should make efforts," said Cao Fengqui, director of the Research Centre for Finance and Securities at Peking University, Beijing. However, others believe that the G20 will offer the emerging world little more than modest loans to lubricate trade.

Jeffrey Sachs, professor of economics at Columbia University and director of the Earth Institute, praised the G20 commitment to increased financial regulation and increased liquidity for the IMF, but felt that not enough had been done to protect the poorest countries from the effects of recession.

Some of the harshest criticism of the stimulus plan came from Czech Prime Minister, Mirek Topolanek, who currently holds the presidency of the EU. He called the Obama administration's plans for the $1 trillion global stimulus a "road to hell". Topolanek claimed that leaders of the EU countries were extremely worried about the large fiscal deficit that the US, and other countries committed to spending their way out of the crisis, would run up.

Stock markets across the world rallied after the stimulus package was announced, on hopes of a faster economic recovery, while domestic economic scene in the UK and US gave some cause for celebration. The US received an unexpected increase in factory orders, while UK house prices showed marginal increases for the first time since the recession began. However, this has yet to raise the mood of Londoners, who have little sense of how the G20 promises will improve their own economic circumstances.

"This recession has completely changed the way that I view my future," Dave, 25, unemployed after losing a graduate job in management consultancy told Hardnews. "I'm sceptical about the stimulus package but I think we're all happy to see a bit more regulation in the banking sector. The party is over and it's time for the financial world to sober up."

Although the G20 yielded the largest co-ordinated rescue package that the modern world has ever seen, many of the demonstrators felt that their concerns had not been addressed at the summit. No reference was made in the communiqué to the expensive wars in Iraq and Afghanistan, and 'green investment' was only mentioned in passing, to the disappointment of climate change activists.

Commitments to closing tax havens, imposing tighter restrictions on the financial sector and providing more funds to the IMF have been almost universally welcomed, but for protestors and politicians alike, the G20 summit has raised more questions than it has answered.

Although G20 leaders reached a consensus on the global stimulus package, it has received a mixed response. Many believe that it has refused to address the abject failure of neo-liberal capitalism Sophia Furber London

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