On the last day of November, 2018 the centre of the city of Buenos Aires was put on lock-down by the police, the military, and the secret services of twenty nations to protect their top government representatives; men and women who call themselves ‘leaders’.
The Group of Twenty (G20) is like a big boy?s club. Sure some G20 leaders are women. Three to be precise: chancellor Merkel, prime minister May and the IMF’s Christine Lagarde. While they get to smile in G20 photo-opportunities, membership of these groups (the G2, G6, G7, G8 and the G20) is decided not on gender but on size. The only number that is important is the size of a nation’s Gross Domestic Product (GDP) which is closely correlated with transactions made by transnational corporations in local territories and the financial power of that nation’s banking sector.
The United Nations (sometimes called the G196) has one seat for each nation, but here in Argentina only the twenty largest GDP’s are present. So what’s wrong with that? It’s is good to have a big GDP, right?
GDP is an apparently neutral measurement. As an accounting device, it is used to measure national production. In international trade GDP is indeed a force to be reckoned with. Big GDPs and big exports give surplus nations like China, Germany or Saudi Arabia extra cash as measured in each nation’s ?external’ accounts. Deficit countries, on the other hand, are on the receiving end of this curious generosity, their debt is the global motor for national external debt, some owed to the IMF but most to private banks.
The global economic system works like this: if you can pay for imports you are fine. If you can’t, you can buy on credit. This credit you create (up to a point) by emitting interest paying bonds to be paid for by future taxation. If you’re lucky, you’ll be kicked out of office and paying off this debt will hamper the popularity of your political opposition. This seems to be president Macri’s plan. However, when deficit countries get in deep trouble they no longer have choices, nobody wants their bonds, instead they fall into the hands of the International Monetary Fund (IMF).
The IMF’s job is to build growth and to prioritise repayments to external creditors, many in the private sector, by rewriting local economic policies. These policy stipulations are called structural adjustments, in Greece they are called austerity measures; here in Argentina we use the term ajustes ‘adjustments’. The Argentine citizens of the G20’s poorest nation are calling for the expulsion of the G20 mostly because the people associate the G20 nations with the damage done by debt and debt payments to Argentina under right-wing governments and the IMF.
Christine Lagarde smiles widely in the Argentine G20 photos. IMF officials enjoy working with flexible right-wing governments who are willing to put their citizens into future debt and pay exorbitant interest rates to prop up their deficit enlarging policies: generous state subsidies to the private sector. There is simply no better place to be. Local government bonds in Argentina pay 60% interest rates on an annualised basis, spiking above 85%. The IMF have been in Buenos Aires for some months now ever since president Macri invited them back — the previous government had paid the IMF off in full so that they could kick them out of their offices in the Argentine Ministry of Economics. Macri’s Cambiemos coalition threw their arms in the air when they had to pay close to 50% interest for credit and their market sensibility resulted in them losing control of the currency and inflation. Now the IMF is back with a vengeance. Argentina’s first IMF disbursements of this record new fifty billion US dollar loan ? made to Macri’s creditors to pay the exorbitant interest ? have proven insufficient. Macri went back to Ms. Lagarde cap-in-hand to look for more money and as early as possible. Lagarde was willing to oblige for a little extra interest.
In more technical terms GDP measures the sum of goods and services, including financial services. Financial services include bond investments (in national debt for example) and also foreign direct investments such as corporate buy-outs and land grabs. Investment funds make their decisions out of offices in G20 cities like New York, London, Frankfurt and Tokyo. It is not a coincidence that G20 nations are also the largest purveyors of both classes of weapons of mass destruction: armaments and fossil fuels. Saudi Arabia is also present in Buenos Aires, they sell oil and buy arms.
However possibly the most destructive concept of all is the G20 logic of nationalist economic competition itself, the primitive pursuit of an ever larger national GDP no matter what is the cost to others or to the environment.
A valid G20 alternative could be to promote solidarity between nations rather than competition. By combining their vast wealth, the research from their greatest universities, the smartest ideas of their most able people, the G20 could help tackle international emergencies like climate change.
Unfortunately neither the concept of nationalism nor the logic of the IMF and ever-growing GDP allow for such measures. Only maximising national GDP remains. The ‘D’ in GDP stands for Domestic! Domestic politics; domestic product! President Trump embodies this nationalism but he’s far from unique in this Group of Twenty.
One big problem with an ever expanding global GDP comes from the energy that powers G20 economies (communist China included) which still comes primarily from burning fossil ‘fuels’. The resultant emissions continues to change atmospheric chemistry, the very air we breathe. This in turn changes our climate because of global warming and we know this is about to go critical if it has not already. This is not the only problem with infinite economic growth on a finite planet, other side effects are the extinction of biodiversity, increasing pollution and more plastics in our oceans. So what to do? First let’s take a negative example then a positive one.
Just this week Argentina proudly proclaimed the preparations for the nation’s first large export shipment of Liquefied Natural Gas (LNG). The gas is extracted in the Vaca Muerta field in the Patagonian province of Neuquen. Vaca Muerta (Dead Cow in English) has been heralded as the world’s second largest unconventional oil and gas field. Shipment to customers is planned in a floating storage/production vessel, a sort of boxy oil tanker designed for gas transport. Some marketing genius gave this enormous vessel the moniker Caribbean FLNG. Built in China, and flying a Liberian flag, this single ship has a 29 thousand gross tonnage, the ship itself weighs twelve tonnes. They like to do things big here in Argentina, in China too.
Curiously LNG gas exporters now pay less royalties on exports to the Argentine government. The peso charge in royalties (per US dollar of LNG exported) has been reduced from about four pesos to about two. Meanwhile, just in 2018, the peso has depreciated 50% against the dollar. The effective tax cut of 75% in royalty payments means empty pockets for local government (and less money for the IMF debt repayments) but higher profits. The Argentine Cambiemos government reduced royalties on all mining products, another example of the right-wing government penchant for deficit enlarging policies.
This natural gas comes from new oil and gas exploitation in Vaca Muerta which is mined using destructive and expensive hydraulic fracturing, commonly known as ‘fracking’ and using horizontal drilling. Global greenhouse gasses have risen this year as global emissions resumed upward growth after a short hiatus. If governments really want to control greenhouse gases and maintain a habitable climate, they need to export less and less of such damaging products, but doing this would imply a drop in Argentina’s GDP making the external debt harder to repay. Less mining goes against the logic of the IMF. The Argentine government in a quandary chooses to ignore the environment. All GDP-addicted governments do, those are the rules of the current suicidal system.
If October?s IPCC report is correct, and the IPCC usually err on the side of optimism, then the G20 could guarantee the inevitability of the collapse of human civilization in just twelve years by pumping more CO2 into the atmosphere at current rates. G20 nations together produce about 80% of the world’s greenhouse gases from mining, transport and consumption. This is just the sort of economic activity encouraged by the IMF to prioritise debt repayments. Competitive GDP growth is linked inexorably to the destruction of the environment, it is also a motor for global inequality. How much more evidence will it take to convince our leaders that maximising GDP could be the deciding factor in our mutual destruction, or could it be they more interested in being on the happy side of global inequality?
While three thousand accredited journalists in Buenos Aires write copy on the horse-trading between Saudi and Turkish leaders over the dismembered body of a US journalist. While these same journalists fervently defend ‘free’ trade against a political spat between the US and China, time is running out for our finite and fragile planet.
Turns out this is all about ‘decoupling’.
Economists have proven that GDP growth cannot be ‘decoupled’ from the energy sources that power economic growth. Put simply you need more energy to power more GDP. The planet needs a new energy source. We simply cannot burn all of the rest of the fossil fuels remaining under the planet?s crust into our atmosphere. The problem is analogous to giving an alcoholic a bottle of whiskey and telling him not to drain the last sip. For a while anyway transitioning off fossil fuels will imply less energy consumption and less energy would mean less GDP (not more). This will mean less debt repayments and less economic growth! What would the IMF say?
Scientists tell us we need to get off fossil fuels fast. Such a transition to a new global economy that will consume less energy is incompatible with continuous economic growth, in just the same way as burning ever more fossil fuels is incompatible with life on our planet.
One policy paradox is governments paying oil, coal and gas companies to extract more fossil fuels. The G20 at least said they would try to deal with this issue at the London G20 summit (in 2009). An agreement was reached to eliminate these subsidies in the ‘medium term’. Some progress was made at first but subsidies are again on the rise.
NGO?s, such as the UK-based ODI, track fossil fuel subsidies. The International Energy Agency (IEA) also tracks these subsidies, also tracking CO2 emissions. Despite assurances to remove them, G20 governments continue to subsidise the mining, transportation and consumption of coal, oil and gas. If the Buenos Aires G20 meeting could agree on the complete elimination of fossil fuel subsidies by the end of the decade, it would be an important step. Sadly our leaders have not yet proven themselves willing to do so, instead they are backtracking on the 2009 decision.
The planet is still waiting for the global economy to clean up its act. So too are its human populations, 70% of whom live in G20 nations. The G20 representatives in Buenos Aires hold the keys to making this happen, but the system prevents them from turning the lock and opening the door. Who exactly do these people represent in Argentina if not their citizens that live on their coastlines, on their floodplains, the margins of their deserts, or in their fire-prone forests? Their citizens depend on stable planetary weather systems for their food and, ultimately for the chance to live full lives. We all do. How long do these representatives reckon they can get away with this insanity?
How many more G20 summits will it take for them to act as leaders for a change?
(Copyleft) Tony Phillips