Genoa: the recession summit


LONDON — Only a dozen streets from Genoa’s Ducal Palace, the protesters will be assaulting the barricades this weekend like medieval siege engineers. Inside the palace, the eight men who rule the world’s richest economies — well, seven of the world’s richest economies plus Russia, which is there by courtesy — will pretend to each other that they are in charge of the world’s economy. But the G8 summiteers don’t really control the global economy. In fact, even Alan Greenspan doesn’t.

The U.S. Federal Reserve chairman has cut U.S. interest rates every month since the start of the year, but the magic isn’t working any more. The world is teetering on the brink of a long, deep recession — which is, after all, what you’d expect at the end of a nine-year boom. As the International Monetary Fund said in April, in a belated admission of reality: “Experience has shown over the past several decades (that) soft landings are not easy to achieve.”

True, economists have predicted 15 of the past 20 recessions. True, too, that Greenspan has pulled a number of rabbits out of his hat over the past few years. But he failed to predict the recession of the early 1990s, and his pledge to do “whatever is necessary” to avoid the recession of the early 2000s rings hollow as all the indicators turn downward. If fiddling with interest rates was all you had to do to avoid recessions, there would be no such thing as the business cycle.

So what will the presidents, prime ministers and chancellors inside the Ducal Palace make of all this? The ones facing early elections, like France’s President Jacques Chirac, will be frozen like rabbits in the headlights. Those whose reckonings with the electorate are further away, like the host, Italian Prime Minister Silvio Berlusconi, and U.S. President George W. Bush, will be praying that it is a short, shallow recession, over and forgotten before the next election.

Their prayers are unlikely to be answered. “This U.S. recession will be deeper and longer than the consensus currently expects,” predicted the economics team at the HSBC bank in London last month. The U.S. investment bank Bear Sterns was even harsher: “Despite occasional signs of U.S. economic resilience, we think the world is falling into a long recession under the pressure of the ever-strengthening U.S. dollar and crude oil rationing. Debt burdens in Argentina, Brazil and Turkey are crunch points in the global slowdown.”

So what does all this mean for the Lords of Creation inside the Ducal Palace and the revolting peasants outside it? You might assume that the neoliberal consensus that has dominated the global economy for the past decade is in trouble, and that the antiglobalizers are going to win big in the hard times that are coming. It ain’t necessarily so.

The current political incumbents may be punished severely by the voters for the miseries they will shortly be enduring. (It isn’t really the “Bush recession,” just the one that was due around now, but that’s how it will be seen in the U.S.) Yet popular demand in the rich countries will not be to overthrow the system but to get it back on the tracks.

But what about the poor countries that the anticapitalist demonstrators see as the first and worst victims of globalization? Surely they will take new heart from the troubles of the rich, and begin the long fight against the system that has allegedly consigned them forever to the lower orders of global society. No, they won’t, because they are mostly doing well under the current dispensation.

Some Third World countries, especially in Africa, are falling ever further behind. Individuals and whole groups in every country lose out even when development is taking off. But a child born today in the developing world will live eight years longer than one born in 1970, and adult literacy has grown from 47 percent to 73 percent.

According to the 2001 Human Development Report published last week by the United Nations Development Program, average incomes in Third World countries have nearly doubled in the past 30 years, from $1,300 per year to $2,500. At the bottom end of the spectrum, the number of people in the developing countries living on less than $1 a day has fallen from 29 percent to 24 percent in the past decade.

The number of babies in the developing world dying before their first birthday has dropped by two-thirds, to what was the level in the rich countries in 1970. Nearly all children now go to primary school, a majority make it to secondary school — and the proportion of girls in school in developing countries has risen from half the number of boys to about 90 percent.

There are great disparities between different parts of the former Third World, but you must admit that this is progress. And while it may not be happening because of globalization, it is at least happening despite globalization.

So a recession, or even a full-blown financial crisis in the developed world, will not suddenly swing the world’s people behind the antiglobalization movement. The political careers of the suits inside the Ducal Palace in Genoa may be severely impaired by a lengthy recession, but the system will not be shaken.