‘A truly-global crisis!’
Utilizing the IMF’s terminology for the economic classification of countries worldwide, as a group the “emerging economies” have been clearly out-performing the “advanced economies” during this protracted period of global economic recession, financial crisis and credit squeeze. Because of this and other considerations, I have challenged elsewhere, the accuracy of, and thus the misplaced emphasis arising from, labelling the economic crisis as ‘truly-global,’ in a distinct, meaningful, and unprecedented sense. To be truly-global, the economic crisis would have had to herald the definite emergence of a global economy as an independent supranational entity, which is above and beyond 1) the national and regional economies that comprise it; and 2) the ‘inter’-national economic and financial relations, which have been developing among them.
Just as the United States is by far the largest and most important of the individual advanced economies, China is the largest and fastest growing nation among the group of emerging economies. As a matter of fact China has out-performed all economies worldwide in the rate of economic growth. Importantly also, there are as yet no signs that its unprecedented level of economic performance is likely to significantly falter for the foreseeable future.
Concerns remain
Having made this observation, there are several concerns that China will need to address urgently. One of these is that its staggering annual rate of economic growth will certainly taper off as the absolute size of its economy grows larger and larger. This is inherent to the mathematical logic of the relation of increments to size. Recent trends during the economic crisis have seen China’s pre-crisis double digit annual economic growth rates (10-12 per cent) dip to high single digit numbers (8-9 per cent). Overall, however, the rate remains incredibly larger than for other nations.
A second concern is that economic growth of this high rate places enormous pressures on the availability, at non-inflationary prices, of food supplies, energy, building and construction materials, as well as a wide array of raw materials used in industrial processing. All these products are essential to China’s continued rapid growth.
It should also be noted in this regard that, if the global crisis leads to a significant weakening of import demand for Chinese products in the United States and the European Union, it would then be reasonable to expect growth in China’s domestic demand will fill this void. Indeed, China’s stimulus spending and monetary expansion during the economic crisis has been directed at accommodating a switch from high export dependence to greater reliance on domestic demand to fuel growth.
A third concern is that China’s unique combination of intense demand pressures and explosive economic growth brings a risk of speculative bubbles developing as investors/speculators seek to cash in on what may be best described as the good times. One such potential bubble, which has been widely discussed in the international financial media, is a property market bubble. As readers would recall such a bubble has occurred in both the United States and the European Union causing enormous damage to their respective economies.
China and the G20
As readers know China is a key member of the G20. Reading between the lines there are signs of tensions between China (and the other emerging economies) and the United States (and other advanced economies), over 1) the assessment of the global economic crisis; 2) appropriate policy responses to address it; and 3) the distribution of the global burden/costs attached to resolving it. As we shall also see, when we come to deal with this topic later, similar tensions exist in regard to the international management and resolution of the problems of global warming and climate change.
It should be observed though that an exclusive emphasis on differences within the G20 would be misplaced, as there are also large areas of agreement. Indeed the combination of advanced economies and emerging economies in the G20 has been crucial, since the grouping has arrogated to itself the formal authority for policy initiation, coordination, and implementation in dealing with the global crisis.
However, because the leading emerging economies were not too long ago seen as representing the vanguard in the global fight against poverty, inequality, domination, and neo-liberal ideological assessments and prescriptions for developmental problems, it has come as a shock to many analysts, to see the ease with which the emerging economies have settled into the pattern and styles of rule, typical of the historic imperial states, and their neo-liberal perspectives.
Neo-liberal paradigm
One example of this flip-flop can be seen in the manner in which the G20 has, in the recent Seoul Summit and related events, described the measure of what it has been doing and achieving during the period of global crisis. Thus in June 2010, the G20 erroneously claimed: “The global economy continues to recover faster than anticipated although at an uneven pace across countries and regions.”
Recognising that this claim was being made at a time when there was an upsurge of uncertainty in the European Union (EU) and the USA, the statement went on to put in this caveat: “However, the recent volatility in financial markets reminds us that significant challenges remain and underscores the
importance of international cooperation.”
Remarkably, the G20 statement further went on to boast: “The G20’s strong policy response to the crisis has played a pivotal role in restoring growth and we stand ready to safeguard recovery and strengthen prospects for growth and jobs.”
Indeed, the statement further stated that building on this progress, the G20 “reaffirmed [its] commitment to intensify efforts and to accelerate financial repair and reform.”
At best these statements may be described as little more than neo-liberal platitudes or political spin; at worst they represent an effort to deceive the large majority of countries and their peoples, who may not be fully cognisant of how fragile global economic recovery remains and the grave risk of reversal. In reality therefore, G20 statements, like those of the G7 which preceded it, avoid directing attention to the underlying global problems of inequality, poverty, domination and exploitation.
Next week I shall indicate that the group of emerging economies, as represented by China, is fast emerging as one of the most cynical plunderers of the resources and rights of the poor and powerless nations, which lie outside the G20 grouping.
