Public spending at issue as G-20 meets

TORONTO – The G-8/G-20 summit of finance ministers and heads of state gets under way this week in Toronto. With the ongoing threat of a double-dip recession, the coordination of economic recovery policies is at the top of the conference agenda.

The economic crisis of the past few years has given special importance to the meetings of the G-8/G-20 as governments have worked together to clean up their financial systems and prevent economic collapse. The Toronto summit, though, could represent a crossroads determining the future of global economic recovery, as the U.S. and Europe take up opposing positions on spending and budget cuts.

With the recent election of right-wing governments in a number of countries across Europe, it seems the Obama administration will be playing the role of defender of public spending. These new circumstances will mean new challenges for any future recovery efforts.

At last spring’s G-20 meeting in London, there was broad consensus on developing an international strategy focused on increasing public spending to reignite economic growth and reverse the recession. In the U.S., this resulted in the first Recovery Act, investments in public infrastructure, and help for homeowners. When the G-20 met at that time, the U.S. economy was still shrinking. It has now begun a slow increase, though unemployment remains high. On a global scale, trade increased 20 percent over the year.

In an open letter to the other G-20 heads of state last week, Obama cautioned leaders not to become obsessed with budget cuts that could threaten the tedious recovery. Curbing spending too quickly would likely prolong or worsen the economic crisis for millions of people around the globe.

The highest priority for the G-20, Obama said, is to strengthen the recovery and he urged other leaders to “learn from the consequential mistakes of the past when stimulus was too quickly withdrawn and resulted in renewed economic hardships and recession.”

These comments are especially directed at the new right-wing European governments. Leaders like Britain’s David Cameron and German Chancellor Angela Merkel have taken advantage of the debt crisis in Greece and the threat of similar meltdowns to push for slashing budgets and cutting stimulus. Merkel says she will be stressing the “importance of budgetary consolidation” to Obama. Canada’s conservative prime minister and the conference host, Stephen Harper, has also jumped on the budget cut bandwagon.

Obama’s fight at the G-20 is similar to the one he’s facing with Republicans and conservative Democrats at home. The Senate recently blocked a bill which would have put $120 billion toward job creation.

But the G-20 leaders will not be the only ones meeting in Toronto this week. Activists, academics and politicians have set a full schedule of workshops, meetings and protests to draw attention to the ongoing needs of working people. A weekend “People’s Summit” brought out several hundred to discuss struggles for more democratic economic and foreign policies, for gender equality, and against the big bank bailouts. Thousands more are expected at demonstrations over the course of the summit.

The activists oppose any turn toward austerity and the imposition of more neoliberal policies, both of which Canadian and European leaders have been pushing for. They are also critical of the undemocratic nature of these meetings, which often exclude poorer countries as well as input from the public.

“I’m not against countries meeting, but what we are seeing is the government colluding behind closed doors with business leaders,” said Jen Hassum, a Toronto student.

“It’s a corporate agenda because the public is kept out of the process completely, with our government spending over $1 billion dollars on security to keep people out,” she added. “If the G-8/G-20 meetings were democratic, talks would focus on how to build equitable economies that foster good jobs, clean environments, health and education services.”

The head of Canada’s leftist New Democratic Party, Jack Layton, challenged the leaders to put global poverty and climate change on the summit agenda. He also criticized the nearly $1 billion spent by the Canadian government on security for the conference, saying, “The security barriers that will surround the G-20 and G-8 leaders are visual reminders of our greatest fear for these meetings – that wealthy countries will further isolate themselves and ignore their commitments to developing ones.”

Layton also spoke in favor of a global financial transactions tax, which Canadian Prime Minister Harper has been arguing against among his fellow leaders.

Few observers are expecting there to be broad consensus at this meeting of the G-20 since the U.S. and Europe have publicly stated opposing positions concerning stimulus measures. Agreement on a global financial regulatory system has also been put in jeopardy with Europe’s shift to the right and Harper’s campaign in favor of Canada’s big banks. Whether the conference will produce any substantive results remains to be seen.

Photo: A session at the G-20 summit of finance ministers and central bank governors at World Bank headquarters in Washington, April 25. (AP/Cliff Owen)