This weekend Brisbane hosted the G20 summit largely seen as an economic forum. The gathering appeared to be rather helpless in countering the global economic threat. Having failed to come up with valid economic solutions, the US and its allies moved on to talk Ukraine…
Says Marcel Salikhov, Head of Economic Department at the Institute for Energy, Economy and Finance, Moscow:
The G20 summit was constructive, but there were no real breakthrough decisions made. So, mainly the summit agenda was focused on the economic matters and the main point of the summit was the decision of the leaders to boost the economic growth by 2% by 2017. And different specific decisions were made in order to achieve such a target. But if we look at it in a practical manner, there were no game-changers or things that were not discussed earlier.
So, they haven’t lived up to expectations?
Marcel Salikhov: I think that there were no specific expectations on the subject. But overall, everyone understands that right now the global economic growth is slowing down. For example, today the economic growth figure for the first quarter was released and we can confirm that right now Japan is in the economic recession. So, I think, in general there is an expectation that the global leaders need to take more political decisions to boost and coordinate the economic policies.
These are kind of more practical things, as it was in during the financial crisis of 2008-2009. I want to remind you that the global leaders then decided to boost the public spending and to make the fiscal policy a major tool against the economic crisis.
Talking about the economic issues, this weekend Mr. Poroshenko announced his decision to introduce an economic blockade of Donbas.
Marcel Salikhov: The Ukrainian situation was not in the overall agenda of the G20 summit, but, of course, it was the major topic for the internal discussions between the leaders of different countries, and especially with President Putin. As for the decision of Mr. Poroshenko to introduce an economic blockade of the Donbas region, I don’t think that it will work, because obviously Donbas has the border with Russia.
And I think it will do more harm, rather than benefit the Ukrainian officials, because of the coal production. Right now Ukraine depends on the coal shipments from Donbas. So, I think it is would be beneficial for both parties of the conflict not to make too much economic damage to their economies.
But Mr. Poroshenko is obviously not an independent decision maker. So, what do you think is the rationale behind this kind of move?
Marcel Salikhov: Probably the main rationale is to introduce more economic harm and to depress the economic potential of Donbas and Lugansk republics. But I don’t think that it will work. And it is better for both parties to negotiate the economic matters.
The overall economic situation in the EU is fragile and the economy stagnating. And one of the causes is more economic confrontation with Russia.
Boris Kagarlitsky, Director of the Institute for Globalization and Social Movements:
Actually, there is very little one can expect of these meetings, because, though the very idea of these meetings initially was to change the format of the international decision making, shifting from G8 kind of elite club to a broader G20 club, basically it didn’t change much. The key idea of all these meetings is to discuss how to keep everything unchanged and how to keep everything going as usual, without even reacting to the actual challenges of these times and of the current crisis.
Of course, this is quite understandable, because keeping things as they are is increasingly difficult and that kind of work needs a specific effort. But it is not the place where you can expect anything to happen, that can seriously or substantially change something in the world.
Basically, all the major players kept insisting on having more of the same free market policies, more of the neoliberal agenda with all these stability rules, privatization, government noninterference in the economy, deregulation, supporting the private businesses instead of the social issues and so on. So, I don’t think there was anything new there.
And speaking about politics, of course, from the Russian perspective, the really important things were happening around Putin. And it was very clear that there was a very serious division between Putin and the Western leaders, though, by the way, interestingly enough, it was not on the economic issues which they discussed. It was mainly kind of a personal attack on Putin, rather than any expression of the serious disagreements on the issues which were at the center of their meeting.
The Russian Government and the Russian elite, they definitely wanted a compromise. And ironically, the public and a humiliating capitulation is exactly the only thing the West wants from Russia at this stage. I mean, it is more of a symbolic issue, than an issue of substance at this point, because given the way the Ukrainian crisis was treated before the Western public, it is now becoming very clear that any compromise on anything would actually mean accepting the very fact that the Western policies on Ukraine were not exactly correct and that these policies could be criticized, and could be put in doubt.
When you are saying that no major breakthrough was achieved at this G20 summit, and you’ve mentioned that all the discussions have been like locked into the discussion within the existing system of neoliberal values, does that imply that you, as an expert, believe that another system should be introduced or another systemic approach should be worked out?
Boris Kagarlitsky: Of course, there can be a discussion how radical the changes should be. And this is also partly a political issue. But one thing which is getting increasingly clear is that the period of neoliberal globalization is over, and what we need is to relegitimise protectionism and relegitimise the policies which are orienting the economies towards developing their domestic markets.
And that also means relegitimising a government intervention in the economic development, government investment, public sector involvement in creating the economic growth and so on. Which also means, by the way, a lot of international cooperation, because what is you need in the globalized world is something which can be called coordinated protectionism, in the sense that every country should get its right to be protectionist, to defend its own domestic market, and to prioritize its domestic market. But at the same time, there should be new rules of cooperation and interaction on this basis developed between the major nations.
That’s what we used to have in the 1950’es with the original Bretton Woods system, but that was broken in the late 1970’es. And since then, by the way, the global economy is in many ways destabilized.
But now many economists are complaining that the state budgets with their huge deficits don’t have the necessary resources to support the social programs. Is this a valid argument?
Boris Kagarlitsky: No, it is an absurd argument, because the deficits of their public budgets emerge exactly from the lack of the public sector development and the lack of public involvement in the economy. For example, the governments are not allowed to run businesses, they are not allowed to have enterprises which are making profits, they are not allowed to do production investment which will generate income for the budget and so on.
So, you first limit the budget to the taxation as the only tool of actually getting funds into it, then you also cut the taxes as much as possible and then you say – we have no money for development and we have to cut the social spending – and while you cut the social spending you also destroy the domestic market, you decrease the demand there and, as the result, you will get less money in taxes. And so, it is vicious circle.
Sergei Markov, Director of the Institute for Political Studies:
At this summit the countries didn’t reach an agreement about the reconstruction of the global economic infrastructure. On the other hand, the main informal issue of this G20 summit appeared to be Russia and the Russian leader. We could see well-organized and calculated attacks of the US and its allies against personally Vladimir Putin. And this reflects the fact that the Western coalition didn’t want to come to a compromise on Ukraine and a peaceful solution of the Ukrainian crisis.
The conditions for a peaceful resolution of the Ukrainian crisis suggested by Russia are very easy. First of all, to stop the military attacks organized by the Kiev Government against the civilians in Donetsk and Lugansk. Second, to stop the fire and have a negotiation between all the political groups inside Ukraine. Third, constitutional reforms and federalization of Ukraine, which is a very democratic principle. And also, the equal status for the two major languages – the Ukrainian and Russian – as a guarantee against russophobia and violent derussification of Ukraine. And the neutrality of Ukraine, as a guarantee that Ukraine will not be involved in the big European war and wouldn’t be a trigger for such a big European war.
This peaceful solution by Russia wasn’t accepted by the Western coalition. In Brisbane they showed that they have a political will for organizing the Russian Maidan and overthrowing the democratically elected President of Russia, exactly as they organized the overthrowing of the democratically elected President of Ukraine. This has led Vladimir Putin to a very difficult decision which he will have to take in some period.
It is clear that Vladimir Putin, in August this year suggested some kind of a compromise that Novorossiya will control only a small territory of Donetsk and Lugansk regions, and Russia wouldn’t give its support to Novorossiya for its liberation, as another Russian-populated region. But Russian suggestion of compromise is not regarded as a compromise. The West wants to develop its attack against Russia and the ethnical Russians in Ukraine.
How does that go with the rather grim forecast that Mr. Cameron has voiced the other day, saying that the global economy is on the threshold of a major catastrophe?
Sergei Markov: I think that the Western leaders want to solve the global economic problems by Russia and its resources. They want to divide the Russian territory. They want to take control over the Russian nuclear power, gas and other natural resources. And this is regarded by them as a way out of the crisis. I don’t think that it is realistic, but I think that the ability of the Western leaders to resolve the problems is quite low. And they are mostly insisting on the continuation of the present system, which is burdened with the crisis.
