Andrew Glyn Archive   |   ETOL Main Page

Andrew Glyn

Summit for Nothing

(August 1978)

From Militant, No. 417, 4 August 1978, p. 6.
Transcribed by Iain Dalton.
Marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

In a second article, Andrew Glyn analyses the background to the Bonn Economic Summit

The Bonn summit, as we showed last week, completely failed to come up with a programme for expanding the capitalist world economy and regaining full employment.

But expansion was not the only issue discussed at the summit and other international economic meetings of recent weeks. For the stagnation of the world economy has intensified the competitive struggle for markets, and many of the measures announced recently can only be understood against this background.

Fall of dollar hits European capitalists

At first sight, it seems extraordinary that the Japanese and German capitalists have been pressurising the Americans to reduce their massive current account deficit, forecast at $25 billion this year. But most of this deficit reflects extra imports of oil, rather than representing a market for Japanese and German manufactures.

In fact, the US deficit is highly damaging to its competitors because it drives down the value of the dollar and drives up other currencies – particularly the Deutschmark and Yen, the currencies of the ‘strong countries’ with balance of payments surpluses. This makes it less profitable for German and Japanese capitalists to export.

The president of the Keidanren, the Japanese CBI, was reported in Business Week (24th July) as complaining that a record number of exporters (1,500 per month) were going bankrupt “directly because of appreciation (rise in the value relative to other countries) of the Yen.”

Bankruptcy of exporting industries is not the only problem caused by the weakness of the dollar. As the Economist explained (18 July) failure of the US to curb its deficit “is putting the world’s whole monetary system at risk. For the dollar is the currency in which most of the world holds its international resources. The danger of a dollar slide, however well managed, is that at some point too many holders may finally decide to cut their losses and push the dollar of the precipice, sending unwarranted tidal waves of money across the world’s exchanges.”

Carter fails to stem US oil imports

The pressure on the US also partly reflects the fact that it has increased the use of oil by 1% compared with 1973, whereas the other major countries have cut their consumption by 10–15%. The other capitalist countries realise that continued rapid growth of US demand for oil would soon eliminate the temporary glut of oil caused by the reduced demand from the other countries. This would strengthen OPEC’s power to raise the oil price.

Carter would like to reduce dependence on imported oil for strategic reasons; and the US oil producers have less patriotic motives for seeing a price increase of oil in the US to cut demand and thus imports. But the price rise is bitterly opposed by those sectors of American capital which have benefitted from cheap fuel, and it is hard to see how Carter will be able to honour his pledge to raise the US price to world levels by 1980 and to cut imports by 2½ million barrels a day 1985.

Strong economies want new “snake” to strengthen their position

The German and French proposals to relink the currencies of Europe in a new “snake” which would then slide up and down against the dollar, also represents an attempt to maintain the position of the relatively strong countries. The fundamental advantage for them is that, by linking up with the weaker pound and lira, the Mark would rise less rapidly against other currencies (since March 1973 it has risen by 36% against the dollar). Holding down the Mark would help preserve the competitiveness of German exporters in relation to American and Japanese firms. It would at the same time improve their position against their weaker European competitors (UK and Italy especially).

Since March 1973 the pound has fallen 45% against the Mark, but if tied in with the snake such a fall would be impossible. The low productivity growth (0% in the UK since 1973 and ½% a year in Italy as compared with 3% per year growth in Japan, Germany and France) could no longer be partially hidden behind a falling exchange rate. British and Italian capital would be unceremoniously bundled out of European markets.

The German and French capitalists are offering as bait a huge 50 billion dollar fund to support the currencies of the weak countries. But this “generosity” is simply aimed at speeding up the business of taking over the weak countries’ markets. No wonder the British Treasury reacted to the scheme with “deep suspicion that the system is little more than a means of holding down the Mark and imposing restrictive policies on Germany’s partners” (Times, 11 July). Only eurofanatic Edward Heath argued that “it could greatly improve claims of more jobs” (Times, 13 July), – without saying how, of course!

The “Tokyo Round”: under the shadows of trade war

Despite desperate efforts to secure a dramatic agreement on trade in time for the summit, all that emerged was a “framework of understanding”. After five years of bargaining, tariff cuts (cuts in taxes on imports) between the EEC and USA of one third are considered likely while “there is much discontent with the Japanese offers of tariff cuts, and the Community has gone so far as to reduce its own offer to Japan” (Times, 18 July).

But even the reductions between the EEC and USA are trifling, being spread over eight years and amounting to a cut of tariffs from about 10% to 6–7%. These will do nothing to counteract the host of special tariffs, quotas, special marketing agreements etc., which GATT estimates have been extended over the past three years to $50 billion worth of textile trade and another $50 billion worth of trade in other commodities (steel, electronics etc.).

At the Tokyo talks the bitterest battle is between the USA which wants many of the subsidies used to support ailing industries banned, whilst the EEC is objecting to the USA’s use of import duties against any commodity which is subsidised.

But Britain and France are in turn pressing for the freedom to put selective import restrictions or any “disruptive” inflow of imports from a particular source, this being aimed at low-cost Far Eastern suppliers. Even Japan’s pledge at the summit to prevent the volume of exports rising this year is empty as the rise in the Yen has already caused a 5% fall.

The necessity of socialist planning

Whatever “agreements” on trade and exchange rates are patched up over the coming months will only be compromises on the degrees of protectionism as the capitalist world lurches towards full-scale trade war. All the sweet-talking cannot hide the fact that economic relations between states are fundamentally competitive under capitalism.

This becomes most obvious in the present situation of deep crisis and highlights the necessity for a socialist planned economy to overcome the anarchy of capitalism internationally as well as within the individual countries.

Andrew Glyn Archive   |   ETOL Main Page

Last updated: 1 November 2016