Global Current Account Imbalances - The IMF, Equality and Oil Exporters Surpluses
The economic situation underlying the revolution of North Africa is not just about low wages, unemployment, graduate frustration and bread riots.
For many years the oil exporting countries have been running current account surpluses and acquiring foreign - EU and US - assets. They have also of course bought a lot of arms from the US in particular, but again, also from EU countries.
For several years, countries like Saudi Arabia were running surpluses of 30% or more. These countries had a layer of privileged and corrupt people at the top who were unbelievably wealthy, while the vast majority remained on the bread line, kept in place by a police state and/or by their immigrant status as workers. Awareness by the population of the corruptly expropriated oil profits has been an important part of what has driven the Revolution.
This is all part of the history of "recycling of the petro dollar" the miracle process through which OPEC price rises were notionally to be turned into a continuing high standard of living in the west. Oil surpluses are notoriously "frothy", flooding hedge funds, high end property booms, and the banks. In the 1970s, it was oil money that overheated the Latin American economies, priming them for bust and for IMF debt entrapment. How much of the money flowing out of German and French banks into Ireland and Iceland, ultimately came from these sources ?
There has been a lot of focus on US efforts to get China to reduce its current account surplus. Much less on the oil exporters.
Today Dominique Strauss Kahn made a speech, available here on the IMF website, in which he said that the era of gross imbalances and inequalities was not sustainable. He proclaimed the end of the Washington Consensus ( predatory, neo liberal capitalism).
http://www.imf.org/external/np/speeches/2011/040411.htm
International capitalism is caught in a see-saw between the imperative to concentrate capital in the hands of the wealthy, even though it stultifies national economies and leads to social conflict, and the wish to try to even out and control these imbalances. (The system is made all the more chaotic by booms and slumps that result from overproduction)
The democratic revolutions of North Africa appear to offer potential to correct imbalances, by allowing more balanced and productive economies to develop in the oil exporting countries. However there is already a crisis of overproduction, due to the rapid increase in productivity of the BRIC countries. And at the same time, big capital fiercely resists any attempts and "spreading the wealth" as the dastardly Gaddafi appears to have to some extent done.
At the end of the day, economists may be able to identify these problems, but within the present system operated in the interests of private profit, they have no way of solving them.
http://www.businessinsider.com/how-c...e-years-2010-3
Global Challenges - Global Solutions - Strauss Kahn, IMF.
http://www.imf.org/external/np/speeches/2011/040411.htm
Before the crisis, we thought we knew how to manage economies pretty well. This “Washington consensus” had a number of basic mantras. Simple rules for monetary and fiscal policy would guarantee stability. Deregulation and privatization would unleash growth and prosperity. Financial markets would channel resources to the most productive areas and police themselves effectively. And the rising tide of globalization would lift all boats.
This all came crashing down with the crisis. The Washington consensus is now behind us. The task before us is to rebuild the foundations of stability, to make them stand the test of time, and to make the next phase of globalization work for all. This rebuilding has three core areas—a new approach to economic policies, a new approach to social cohesion, and a new approach to cooperation and multilateralism.
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Originally Posted by Theresa
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