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G8/20: The Issues Pt.2

Economics Measures Planned to Save Banks From Themselves

by Gwalgen Geordie Dent

PHOTO Billy Goat
PHOTO Billy Goat

Toronto - With a heavy focus on G8/20 security, protesters, weapons and summit costs, Mainstream Media have been accused of failing to cover another important aspect of the G8/20: the issues.  The Toronto Media Co-op takes aim at the Toronto G8/20 agenda and the grassroots response in this second part of a week-long series.

Economics issues have been at the forefront of the of the G8/G20 meetings in terms of press coverage, government releases and corporate pressure.

While the focus on bank taxes, austerity measures and capital balances has been high, the understanding of these issues and how they affect the average Torontonian hasn't always been clear.

"I’m in a space where these big concepts are happening but how do you make these issues affect people on the street?" says Sabrina Gopaul, Member of the Jane and Finch Action Against Poverty.  Jane and Finch is a major neighbourhood in Toronto with strong levels of poverty and community.

The G20 is tackling a number of major issues this year that focus on private market regulation, public sector regulation and economic foreign policy.

While the G20 has been heavily criticized, Liisa Scofield, an Organizer with the Ontario Coalition Against Poverty, feels the role of the G20 is clear. 

"I feel weird that we call it illegitimate, because so is the state.  It’s true to it’s own economic format," she said. 

Greg Albo, a Professor of Political Economy at York University says there are three issues being discussed: bank taxes, austerity and capital account balances.

Public Sector Regulation

Private sector regulation ideas from G20 government releases have mostly focused on bank taxes.  While countries such as France and Germany had been pushing for a "Robin Hood" tax or Tobin Tax, a tax on financial speculation, the G20 as a whole rejected it.

A compromise tax meant to tax banks a flat rate instead was met with strong resistance from Canada who sent Federal Ministers abroad to speak out against it.   It has since been abandoned in favor of a plan where governments would buy ownership shares of a bank during a crisis.

Canadian Finance Minister Jim Flaherty has suggested firm caps on bank leverage (debt) while resisting calls from other G20 nations on a cap on Executive pay.  According to a December article in The Globe and Mail, Executive pay at Canada's major six banks increased 18% from 2008 to 2009, even though the banks received a not-well-publicised $125 Billion bailout.

No consensus or clear plans on tax havens, accounting standards or an international financial regulator have been put forward.

For Albo, there has been small agreement on the "worst excess" of financialization, like short-selling but a "complete split" on transaction taxes. "Most of the proposals put forward at the original G20 in Washington have been abandoned.  What we are getting is a socialzation of the finaincial debt in the financial sector," he said.

Scofield feels the rules are mostly focusing on the rich and elities who are attending the meetings. "There is a move to give more breaks and benefits to financial powers while thing are being taken away from the poor.  It’s the prioritizing the banks while taking things away," she said.

Austerity Measures

Another key issue at the Toronto G20 meetings will be "austerity measures" or budget cuts, mostly for European nations.  Bank of Canada Head Mark Carney has recently stated governments are entering an "Age of Austerity".
 
Scofield believes this will mostly impact the poor.  "I think [the recent cuts in the Canadian Province of Ontario are] precedent setting.  They start with the lowest rungs of people, people on OW (welfare benefits) and disability, and public sector [wage freezes].  At a time when those benefits should be raised [during the recession], they cut it.  One of the first things they went to cut was the transit accessibility plan.  We see who gets the brunt first."

Austerity measures are being pushed hard by Canadian Finance Minister Jim Flaherty. Speaking in Reuters this month he stated,  “We are all agreed in the G20 that fiscal consolidation is mandatory. Our intent is to get a clear agreement on the principles needed to achieve real progress on reducing deficits and debt burdens. In Toronto we will push for clear, credible, concrete, timely fiscal consolidation plans.” 

In Canwest News Service the month before he was clear that European budgets will be the main focus: "It is clear they need fiscal discipline in some of those countries. …I know the European Commission is very anxious that [countries] consolidate fiscally. And to some extent the IMF will have something to say about this."

IMF loans to the European union as part of a package to bailout Greece, Spain, Portugal and Ireland have affected this heavily.  G8 countries hold over 47% of all votes on the IMF. 

For Albo, a fundamental change is currently happening in how the G20 operates.

"The EU is already moving towards austerity coordinated by the Germans.  East Asia is moving towards austerity cutbacks.  The US is cautious about moving to austerity and a block has formed [including Canada] within the G20 to help them," he said.

Trade Balances

For Albo, the need for austerity by G20 leaders is a push to address the unequal trade balances between the US (primarily an importer) and Germany, Japan and China (primarily exporters).

"The US wants emerging countries to be more expansionary in policies and less reliant on exporting to bring down the US accounts deficit," he said.   Currently the US is seen as the 'Consumer of Last Resort' and according to Albo, this is what they are trying to change.

U.S. Treasury secretary, Timothy Geithner confirmed as much in the New York Times and Globe and Mail, this month stating that Germany, Japan and China needed to increase their economic demand and China should allow its currency to appreciate to bolster domestic demand.

Why? 

"Austerity has been a essential component to decrease US consumption and lower unit of labour costs to improve their competitive position," according to Albo.

'A Very Scary Sign'

Gopau, says that the issues being dealt with by the G20 this weekend will not be affecting people in her community.  She says credit card debt and interest, child care costs, and tuition are of a greater importance to people.

For Scofield, the measures being discussed by the G20 now are "a very scary sign".

"They’re saying we’re coming out of the crisis on top while the poor are facing cuts.  They are taking advantage of the crisis to further the policies that got us here in the first place.  Ya, we’ve been here before, but this is a different form of neo-liberalism.  I think it's going to getting a lot meaner over the next 20 years.  The IMF, G20 are calling for 20 years of austerity," she said.

Geordie Gwalgen Dent is a contributing and sustaining member of the Toronto Media Co-op.  This is the second part of a week-long series.  The first part can be found here.

Curious as to why tens of thousands are protesting the G8/G20 summits?  Go to 2010.mediacoop.ca for up to the minute G20 and G8 Summit Protest Reporting, straight 'outta the Alternative Media Centre!


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Comments

Thank you

I want to thank you so much for these in-depth pages. 

Just as you say, the media has been showing only the clashes in the street and said nothing of why people are protesting in the first place.  Thank you for helping me be an informed individual.

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