(Weekly Organ of the Communist Party of India (Marxist)
February 08, 2009
Davos Meet: Theatre Of The Absurd
BY all media accounts, the annual gathering of the global business financial and commercial elite at the Swiss resort, Davos – the World Economic Forum – enacted the theatre of the absurd. This glitzy superstructure that was created and sustained on the basis of the speculative boom of the financial bubble was described by one of the columnists as follows: “Just as a neutron bomb destroys life, while leaving structures intact so Davos goes on while the culture that supports it is dead.”
Jullian Glover reporting from Davos in The Guardian says, “There is no real sense of collective guilt, or serious consideration of what to do next, other than rebuild the world that has just been lost. Davos has the air of a crash inquiry into an airline that intends to keep on flying.”
This year, this annual five-day bash of the `rich and the beautiful’ reflected the complete helplessness and lack of any comprehensive explanation or an analysis of what had happened and how it had happened, leave alone offering any solutions or even producing a roadmap for the future. The forum reported that the global crisis `has destroyed 40 per cent of world’s wealth’. This is the real wealth and not the virtual wealth created by the financial bubble. The size of this bubble, as noted in these columns in the past, was over 40 times the real GDP of the world. When the bubble bursts, not only is the virtual wealth wiped out but, in its impact, a large portion of the real wealth also gets liquidated. The chairman of the global private equity giant, Blackstone, said, “almost incomprehensible” amount of cash had evaporated since the financial crisis broke out. The near unanimous opinion at the forum was that the worse is yet to come and it would take a long, long time to retrieve lost ground, if ever this was possible.
Given this vacuity amongst those who made money without knowing how they were making this money, it was only natural that the cries for larger bailout packages reached a crescendo. There were calls for a $4 trillion bailout package to restore the previous health of the global financial markets. Clearly, the causes for the current global crisis which was brought about by turbo charging cheap credit are not yet understood or there is a complete denial on this score. The crisis was precipitated by the incapacity of the borrower to return the loans that were virtually forced (through sub-prime terms) on him and not due to the incapacity of the lender. Any amount of bailout strengthening the lender will provide no succor to the borrower who continues to be ruined with the crisis already throwing millions of people out of their jobs across the globe. This only further weakens the economic strength of the borrower. The solutions suggested by Davos is akin to the near $ 20 million of bonuses announced by the Wall Street banks to its executives from the bailout packages given to them from the tax payers money, drawing president Obama’s public disapproval. The bailout may fatten the pink-stripe suited financial executives but it does not either solve the global crisis or provide relief to the common civilian who is its worst victim.
It was left to one of the leaders of the South African liberation movement, Archbishop Desmond Tutu, to say that, “We worshiped in the temple of cut throat competition, and so some cooked the books, because the treasure is so great.” “We spend billions on banks when we know that a fraction of this money could save all the children in the world.”
KEY ROLE OF CHINA-RUSSIA
Naturally, under these circumstances, the political leaders who received the maximum attention were the Chinese premier Wen Jiabao and Russia’s Vladimir Putin. Davos expects both these countries to register positive economic growth (the Chinese premier assured the forum that its anticipated 8 per cent GDP growth rate would be achieved this year) while most of the developed countries are expected to register a negative growth rate.
These countries which were once, in the height of the Cold War ideological confrontation, the targets of ideological annihilation (post USSR’s disintegration, though Russia embraced capitalism, it was treated more as a source for appropriation and not as an equal by the West) are, today, being looked upon as the primary factor to help global capitalism to emerge from this crisis. So much for the once jubilant cries of `eternality of capitalism’!
It is, therefore, not unusual to have seen a rare spectacle that the media headlines from Davos were not exclusively on economic matters. The forum on the Middle East saw the Turkish prime minister, Erdogan, take on Shimon Peres of Israel on the latter’s military aggression in Gaza that has left thousands dead and a trial of untold human misery. Erdogan left midway of the discussion accusing Davos of siding with Israel, threatening never ever to return, to a hero’s welcome back home in Turkey. Remember, Turkey and Israel are supposed to be allies!
At the end of five days, where more than 2000 business and political leaders all over the world discussed the crisis and described the problems, there was no solution in sight. The founder of the World Economic Forum, Klaus Schwab, said at the conclusion that, “Now the hard work begins.” He announced a `global design initiative’ to reform banking, financial regulation and corporate governance. While it was claimed that almost all political leaders present endorsed this initiative, including China and Russia, the forum dared not to call for the restructuring of the Bretton Woods institutions – the World Bank and the IMF.
COMPARISON WITH GREAT DEPRESSION
How serious would be such a restructuring? How far will it go in resolving the present crisis? A serious comparison of the current crisis with the Great Depression of 1929 would show an amazing number of similarities suggesting that very little has been learnt. John Kennith Galbraith (not Karl Marx!) had said in connection with the Great Depression that the biggest deterrent preventing the recurrence of such a financial meltdown was not new laws or new institutions of regulation but public memory which did not want a repeat of such misery. With the waning of such a memory, the repeat of crisis re-surfaces on capitalism’s agenda. What he had said of the Wall Street then appears, unless told otherwise, as a comment on the current crisis. “The machinery by which Wall Street separates the opportunity to speculate from the unwanted returns and burdens of ownership is ingenious, precise and almost beautiful. …..The purpose it so accommodate the speculator and facilitate speculation. But the purposes cannot be admitted. If Wall Street confessed this purpose, many thousands of moral men and women would have no choice but to condemn it for nurturing an evil thing and call for reform. Margin trading must be defended not on the grounds that it efficiently and ingeniously assists the speculator, but that it encourages the extra trading which changes a thin and anemic market into a thick and healthy one. Wall Street, in these matters, is like a lovely and accomplished woman who must wear black cotton stockings, heavy woolen underwear, and parade her knowledge as a cook because, unhappily, her supreme accomplishment is as a harlot.”
Unless the high priests of international financial capital recognise this reality and character of speculation, no amount of regulation and legislation can prevent the recurrence of large-scale destruction of the livelihood of the vast mass of people and misery from the recurrence of such crisis. However, the refusal to recognise this is the precise character of capitalism. The crisis is, therefore, systemic. This is so because the system engenders what is superficially seen as the greed of a few. The greed is universal. There, however, would be spectacular expressions of individual greed. This, in fact, is the rule, not the exception, under capitalism.
The eyes of the world now turn to the G-20 summit to be held in April, 2009. The very fact that attention has shifted from Davos to the G-20 is an admission of the failure of global capitalism to offer any viable solutions for this crisis. The tragedy, unfortunately, would be the mounting misery in the livelihoods of billions of people in the world.