On Saturday, the 2010 G8 meeting in Toronto comprising Canada, USA, Japan and Russia; together with EU member states France, Germany, Italy and the UK came to an end with an external show of unity. The real economic and financial business followed on Sunday at the meeting of the G20. Is the G20 the future of world politics, or are we on the road to the G2 with every other country mere observers?
Meanwhile in the UK, on Sunday’s BBC Politics Show, we witnessed a Labour MP with his pants on fire and his nose getting longer each time he opened his mouth. He claimed that Labour’s borrow and spend policy had been the correct action for the economy; they were right and the voters were wrong; and rubbished the tax increases and spending cuts in last weeks Budget. He continued that there was no economic reason for the Coalition Government to reduce borrowing as the UK had the lowest debt in the EU and Labour had reduced the National Debt.
This left the rest of the invited panel with open mouths. The annual interest on the National Debt is now £42.9billion. The National Debt in 1970 was £33.1billion and had risen to £197.4 by 1988. When New Labour came to power in 1997 it was £352billion and then doubled in 12 years; and it will double again by 2014.
This is defeated Labour’s spin on the mess they created and left to be cleared up. To be charitable we must assume that he was not a liar, but merely repeating the official party line put out by the spin doctors and had not checked the figures for himself. It is true that in terms of the National Debt as a percentage of GDP, Gordon Brown in the first three years did slightly reduce it but the percentage increased in the following ten years.
Within the EU only Germany, Italy and France have higher total national debt than the UK. So those G8 countries are the worst culprits; Germany – E1,762,211million, Italy –E1,760,765million, France – E1,489,025million, and the UK – E1,067,819million. As a percentage of GDP the ranking is Italy 115.8%, France 77.6%, Germany 73.2%, and the UK 66.1%. The ranking for last year’s deficit as a percentage of GDP was UK 11.5%, France 7.5%, Italy 5.3%, and Germany 3.3%.
Although the current focus is on the EU’s basket case, Greece, which has the second highest percentage of total debt (115.1%) and deficit (13.6%), in reality their total debt is quite small. Ireland’s total debt is less than half as much again and a lower percentage of GDP than the UK. Although they had the highest percentage deficit last year (14.6%) this was an aberration that will be eliminated in double-quick time. No, the real problem is the four G8 EU member states and Italy is the real basket case.
The deliberations of the G8 and G20 at Toronto need to be viewed in that light. Although the final communiqué has been framed to give the impression of unity and show that all the countries are determined to reduce deficits by half by 2013, it is clear that the difference between the countries is very wide. Canada and the USA are still committed to print, borrow and spend for stimulating the global economy and in this they are supported by the BRICK [Brasil, Russia, India, China and Korea] countries who are export led and do not want their markets to dry up. Japan has reversed its failed policy of the last 20 years, which resulted in stagnation, and is now in the EU camp of debt reduction. Both sides of the argument say it is possible to do both without affecting the recovery, but they know it is not possible. Pressure has come on China and Japan to use their trade surpluses to stimulate the global economy, but the same could be said of Germany.
This disunity will have repercussions and as in the previous financial and economic collapses will originate in the USA. Obama is cutting defence spending but increasing spending in other areas. The US continues to increase monetary supply and print bonds for borrowing. While ever China continues to buy US treasury bonds (and they hold $1trillion) they will increase their tightening grip on the USA. China is the world’s leading exporter and sucks in much of the world’s natural resources to feed its industry. They also produce 97% of the world’s rare earth minerals which the USA needs to import.
China is also monopolising the natural resources of the African continent to the exclusion of the rest of the industrialised countries. The EU does not get a look in as they are ex-colonial powers because of USA policy following WW2.
The overwhelming economic power of China will make them so dominant that they will in the future come to also dominate politically, and resulting from that will be the temptation to exercise that political domination by military means. This will mean the USA must accept their indebtedness or try to control China by encircling it and rely on their military prowess to enforce an economic embargo. History tells us that encirclement as a policy results in wars. It has all the makings of another world-wide conflagration.
Within that scenario, where stands an enfeebled but controlling European Union with its multi-presidencies? And where stands the United Kingdom with its Liberal Labour Party, Liberal Conservative Party and liberal Liberal Democratic Party? If the answer is a Progressive Alliance, then we are asking the wrong question.