The recent meeting of the G20 leaders in Pittsburgh has seen the USA radically restructure the management of global capitalism’s finance and economic systems. The G20 came in to existence in the late 1990’s as a response to the first globalised financial crisis – the Asian crisis.

While the world economy has been globalised for decades – some argue that since the 1920s – finance has only become globalised since the 1990s. The globalisation came about as financial markets were liberalised and the barriers to overseas investment brought down. Together with these two trends has been the growth of technology and coupled with that complex financial instruments (derivatives) whose values could not be compared quickly enough until the arrival of cheap powerful computing power.

This has led to a globalisation of institutions, trading and products. Many of these products are driven by fundamental economic measures which have led to economic crisis in one area being globalised financially. Examples have been the Asian crisis, the Russian debt crisis and most recently the sub-prime lending crisis.

Economic crisis feed into the global financial system causing a crisis there which feeds back into the economies exacerbating the crisis and spreading it globally.

The G20 was set up to tackle such crisis and is in effect the twenty finance ministers (in the UK that is the chancellor of the exchequer) of the largest economies – they account for 85% of the wealth produced in the world – but they represent a minority of the world’ population – just 15% of the globes total countries.

The USA sees G20 as the board of directors of global capitalism plc discussing and setting policies. The IMF is to be the executive of the G20 making sure the polices are implemented globally. Political leadership will be taken by the G8.

The objective of this restructuring is to ensure the eastern emerging economies are assimilated into this global management and take their share of the responsibility in ensuring capitalism operates smoothly and that the pain for solving a crisis is shared equally.

Rather than confront a country such as China with import tariffs far better to have cooperative pressure to have them free their currency from the US dollar so that it strengthens and have implicit trade tariffs instead.

The other aim was to create a level playing field for US capitalism by having uniform: accounting standards; capital requirements for banks and leverage ratios for financial institutions (how much they can bet against their capital). Current regional rules favour the continental European banks and their governments as a consequence did not have to spend as much money bailing them out. This has allowed Germany and France to have modest economic recoveries with more money to be spent on stimulus programmes.

Bit these measures will not be introduced until 2013 because the financial system is not yet out of the crisis. These new rules if introduced now would mean that governments around the world would have to pump more of our money into the banks to keep them afloat. This would create huge deficits for most western governments. The plan is that by 2013 the crisis will be over and then is the time to control the financial system when the crisis has finally petered out

Agreement over bankers’ bonuses is a cover to allow governments to boast they are squeezing bankers’ pay. There will be in fact no reduction in bankers’ bonuses but 40% to 60% must be deferred over several years. This will only stop bankers hoping jobs not cutting their obscene wealth.

The meeting reflected the weakness of Europe with the USA- seeing the UK and France as weak economies with dwindling importance. That is why they want them off the IMF executive committee to make way for the Chinas and Indias and Basils of the world. They would rather displace them than Saudi Arabia and Russia who while having weak economies have huge natural resources which the US sees as being key to controlling for their own survival.

Pittsburgh offered no new solutions to the crisis but rather a restructuring of global finance’s management controlled by the USA with a diminishing role for the weakest European economies while co-opting the new emerging giants such as China.

At the G20 finance minister meeting in ST Andrews on November 7th we should demand and an end to the bank bailouts with our money and instead the use of our resources and wealth to build a just society that ends global poverty, that meets peoples need and not the needs of Global finance and capitalism.

Reprinted from http://www.leftbanker.net/g20-usa-restructures-the-management-of-global-capitalism