Behind closed doors
Economic elite talk doom and gloom
By Milt Neidenberg
Red is the color of the day. Not an upsurge of
workers carrying the red banner of communism. Not yet. But a
trail of red ink representing trillions of dollars in global
debt.
This was the dominant issue discussed at the World Economic
Forum in mid-January. Amid plush scenic surroundings in the
mountain town of Davos, Switzerland, the blame game focused on
whether a global debt-fueled recovery driven by the United
States is sustainable, and how long it can run.
Since the forum was set up in 1970, it has grown to a
member-based institution of 1,000 of the foremost corporations
worldwide. Its main concern has always been to develop a
strategy for European financial and corporate interests.
Rarely did they criticize U.S. policies. In 2002 they went
so far as to change the venue of their annual meeting to New
York to show solidarity with Wall Street and Washington after
the Sept. 11, 2001, attacks on the World Trade Center.
U.S. Attorney General John Ashcroft, patron of the Patriot
Act, and Vice President Dick Cheney attended this year's WEF,
hoping to capitalize on these sentiments. In a major address
before prime ministers, CEOs and central bankers among others,
Cheney--the architect of empire building and pre-emptive wars
of conquest--tried to sell the so-called war on terrorism.
In an out-of-character conciliatory tone, he tried to cajole
his fellow predators into joining with the United States. "We
must meet the dangers together ... working cooperatively," said
Cheney. (New York Times, Jan. 25)
The strategy failed.
Many were suspicious of his motives. George Soros, a
multi-billionaire opponent of the Bush global strategy who
profits immensely by speculating in buying and selling
companies in the global market, commented on the speech, "There
is a big gap between the words of the Bush administration and
its actions."
Sir Howard Stringer, chairperson of the Sony Corp. of
America, summed up the attitude of many of the European robber
barons: "The combination of the Internet and globalization has
led to an era of hyper-competition. ... Nobody has time to
worry about international terrorism." (New York Times, Jan.
25)
When Stringer says hyper-competition, he's making a call to
the European bourgeoisie to resist U.S. hegemony.
The debate at the WEF was focused on the damage U.S.
policies have done to the global economy. Since the dollar has
plummeted 20 to 30 percent to an all-time low against the euro,
the central bankers have worried over how much lower the dollar
could go before it enters a crash mode.
Laura Tyson, chairperson of the Council of Economic Advisors
under President Bill Clinton and now dean of the London
Business School, heated up the bickering: "We can bash the U.S.
government for its unsustainable economic policies ... But it's
the [U.S.] economy that is pulling the world economy along, and
I don't see where else this would come from." (Wall Street
Journal, Jan. 22)
The government and high-finance tycoons at the WEF heard
more questions than answers.
Will ballooning deficits prevent foreign banks and
institutions from buying U.S. debt, which is now approaching
the fantastic sum of $8 trillion?
Will these huge deficits and imbalances, due partly to the
falling dollar, unwind uncontrollably, ending in the crash of
the dollar? How will this affect the U.S. balance of trade with
the European predators? Will hyper-competition lead to
recriminations and breaks in the imperialist camp?
"What concerns me is this excess liquidity," warns William
Rhodes, a senior vice president at Citigroup and first
vice-chairperson of the Institute of International Finance,
which represents more than 300 of the world's biggest banks and
financial institutions. (Wall Street Journal, Jan. 23) Rhodes
and others are afraid that too many dollars are flooding the
global markets, destabilizing the emerging markets of Asia and
Latin America.
U.S. banks and other financial institutions have begun to
shift billions of dollars into stocks and bonds of emerging
markets in search of higher returns than those in the United
States. The fear is that there is an "emerging market bubble"
that could lead to another 1997 Asian collapse or a default of
the Argentine type.
This type of lending leads to voracious, out-of-control
speculation. When this occurs during a growing crisis, dollars
invested in stocks and bonds and other forms of promissory
notes can depreciate at a catastrophic rate. No one can predict
when the process might lead to a crash that could have a
far-reaching effect on the global economy, because this capital
is linked by thousands of threads to the web of the banking and
monetary systems and the production and circulation of
commodities.
IMF criticizes its master
Recently an International Monetary Fund report warned that
rising U.S. budget deficits and ballooning trade imbalances are
running up a foreign debt of such proportions that it threatens
the financial stability of the global economy.
The report concluded that U.S. "net financial obligations to
the rest of the world could be equal to 40 percent of its total
economy within a few years," report ed the Jan. 8 New York
Times. 8. The newspaper called this "an unprecedented level of
external debt for a large industrial country that could play
havoc with the value of the dollar and international exchange
rates."
The IMF has rightly been accused of being an agency for the
U.S. government, its largest shareholder. For it to attack U.S.
policies is unprecedented, although it has often leveled
similar criticisms at underdeveloped countries when it ordered
them to stop spending and borrowing. It is an embarrassment to
the Bush administration and to the chair of the Federal Reserve
Bank, Alan Greenspan, who is the master manipulator of U.S.
monetary policies.
The IMF wouldn't be pushing the panic button unless it
perceived a growing opposition and division within the U.S.
ruling class.
Criticism is coming from both Demo crats and Republicans
associated with Wall Street power houses and corporate America.
They include Robert Rubin, former secretary of the treasury and
a partner in the global Wall Street dynasty Goldman Sachs;
Allan Sinai, formerly with Lehman Brothers; and Paul O'Neill,
Bush's former secretary of the treasury and once chairperson of
ALCOA, the giant aluminum corporation.
In a paper presented to a large group of bourgeois
academicians and Wall Street economists and analysts at a
recent meeting of the American Economic Assoc iation, Rubin and
Sinai called the Bush administration's fiscal and financial
disarray a potential for catastrophe. (New York Times, Jan.
6)
One of their conclusions was that the federal budget is on
an unsustainable path and that the "scale of the nation's
projected budgetary imbalance is now so large that the risks of
severe adverse consequences must be taken seriously, although
it is impossible to predict when such consequences may occur."
(New York Times, Jan. 8)
The factional debate is heating up. The Bush administration
is in an attack mode against these forces, calling them alarm
ists. Some on the extreme right within the Bush faction have
accused the opposition of being traitors during a wartime
crisis and have called for a patriotic front against them.
How deep these divisions go remains to be seen. At the
present time, they have yet to emerge in the electoral arena,
where the Democratic candidates are vying for the presidential
nomination.
A retreat from Iraq without securing the spoils of an
imperialist war, a currency crash that could drive interest
rates sky high leading to another recession, or a nationwide
upsurge of the working class and the oppressed nationalities
against the scourge of unemployment and poverty--anyone would
bring the factional divisions within the ruling class into the
open. Such unpredictable, unforeseen catastrophic events are
all within the realm of the possible.
The potential for an upsurge of the working class and
oppressed nationalities is rising. The consequences would be
global. It could set a course for a revolutionary process to
challenge the whole archaic, destructive capitalist system.
Reprinted from the Feb. 5, 2004, issue of
Workers World newspaper
This article is copyright under a Creative
Commons License.
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