Competitive devaluation and financial warfare

Published on Pambazuka News, by Horace Campbell, Nov. 11, 2010.

As G20 leaders mull the global consequence of quantitative easing in the US, Horace Campbell highlights the need for a democratised international body that can hold major powers accountable. Without such a body, the kind of competitive devaluation that has been initiated by the US could be a recipe for full-blown warfare … //

… The experiences of Africans over the past 30 years are most pertinent within the context of the Group of Twenty (G20) meeting in South Korea. This meeting has four main items on the agenda, namely:

  • 1) Building a framework for strong, sustainable and balanced growth
  • 2) Strengthening the international financial regulatory system
  • 3) Global financial safety nets
  • 4) Modernising the international financial institutions.

If we look at the language and orientation of this agenda, we can see that the political leasers have not really learnt that the world is in a transition into a new international system. The other lesson that has not been learnt is that the West cannot keep exploiting the former colonised peoples forever. The structural adjustment policy measures that were initiated by the Bretton Woods Institutions against the oppressed nations and peoples are now being promoted in the West in the name of ‘austerity measures’ for global economic recovery. The escalation of the impact of the depression from Africa, Asia, and Latin America has now reached the working peoples of Western Europe and North America. When the managing director of the IMF referred to currencies as a weapon of war, many interpreted his statement as a volley against China. But could it be that he was addressing US leaders when he said, ‘Many do consider their currency as a weapon, and this is not for the good of the world economy.’ Robert Zoellick, the head of the World Bank followed in October by reminding the world that, ‘If one lets this [currency war] slide into conflict or forms of protectionism, we then risk repeating the mistakes of the 1930s’ … //


The financial war, as manifest in the statements and actions from Brazil, South Africa, Thailand, India, South Korea and Germany, has been lost to many citizens of the North who had been faced with the barrage of misinformation that the imbalance in the world economy stems from the undervaluation of the Chinese currency. Western leaders have been explicit that they want to pressure China to revalue its currency. The Chinese political leadership which has agreed to a gradual revaluation has explicitly stated that the demand for massive revaluation is a demand meant to trigger instability and unrest leading to the break up of China as we know it today. Chinese Prime Minister Wen Jiabao recently warned: ‘[D]o not pressurize us on the renminbi rate. Exporters would close; workers would lose their jobs… If China saw social and economic turbulence then it would be a disaster for the world.’ It is precisely this kind of disaster that the conservatives probably want in order to save capitalism. But this could be a recipe for another world war. One of the challenges of the Chinese people is to make their capitalists accountable so that the present alliance between sections of the Chinese finance capital and US finance capital is broken. The world doesn’t want new superpower, whether from the West, East, North, or South.

We want to reiterate that the G20 is a holding operation until there is a democratisation of the international system. This democratisation must also include the political literacy of the working people throughout the world and the internationalisation of the control of capital. Africa remains the most vulnerable in these currency wars and already South Africa has seen its currency appreciate to the highest level in the past five years. This crisis sharpens the push for African Unity and the creation of a common currency in Africa, backed by the vast resources (human and material) of Africa. We started out by making reference to the fatal bullets that were, for 30 years, shelled upon Africans from the barrels of the financial weapons of forced currency devaluation and neoliberal policies of the US-backed Bretton Woods institutions. These conditions await citizens of the Western world unless there is a break with the present mode of economic organisation. (full long text).

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