PAUL JAY: Welcome back to The Real News Network.
I’m Paul Jay in Baltimore. We’re continuing our series of interviews
about the global economic crisis. Now joining us again from Geneva is Dr. Yilmaz Akyüz.
He’s the former chief economist and director of the Division on Globalization and Development
Strategies at UNCTAD. He’s now chief economist of the South Centre, an intergovernmental
think tank of the developing countries, based in Geneva. Thanks for joining us again. So how dangerous a moment are we in? How dangerous
or how close are we to another major global economic meltdown? Will the developing world’s
markets save the global economy? YILMAZ AKYÜZ: I think we are in a sort of
a global depression situation, in the sense of economic capacity, productive capacity,
is not fully used. And China, which is the only developing country that’s capable of
continuing with rapid growth, is in deep structural difficulties, recognized by the policymakers,
and therefore slowing. I’m not anticipating, I’m not predicting a meltdown in China, as
some do, but a significant slowdown in China could mean a lot for other developing countries. The other BRICS, if you exclude Russia, the
oil–major energy exporter, exporter of commodities, you have Brazil, India. Actually, these countries
are not major players in the world economy. They may look like major players, but their
share in world trade, their share in world income–not measured in purchasing power parity,
because purchasing power parity is a misleading measure when you are looking at the country’s
global importance–it may be useful to compare living standards, but not to assess countries’
global importance. So neither Brazil nor China are important players, and they’re actually
looking elsewhere, including China, in the case of Brazil, for further growth. And, in fact, these are structurally deficit
countries. They are not–they are facing balance-of-payments problem as soon as they start growing. And
we saw it in the case of India recently: their payment deficits are rising, despite the fact
that India receives more than 3 percent of GDP in remittances from workers. India is
exporting skilled and unskilled labor, a lot of them manufactures. Brazil is increasingly becoming dependent
on commodities. In fact, during the new millennium, in the latest surge in capital flows and commodity
prices, there has been a continued deindustrialization in Brazil. So these countries are not big enough, important
enough players to come to the rescue of the world economy. And if China slows down considerably,
then a lot of countries exporting commodities are in trouble. So the situation is more on
the side of the real economy. Now, when downturns come in a big way–in
China, of course, you had the risk of a bubble bursting, debt problems emerging for state
economic enterprises and local governments, although I believe the Chinese government
will be capable of dealing with these problems. But still this won’t prevent the economy from
falling or slowing considerably. So what I see is actually I see more difficulties
ahead for developing countries in the coming years. And I’ve been talking about that in
the last six years, almost, or five years, what have you. There was this exceptional performance of
developing countries before the financial crisis, when growth rate in these countries
exceeded the growth rate in the north by five percentage point. That is unprecedented compared
to one percentage point in the previous three decades. And people thought that developing
countries actually decoupled from the north. Even before–in the early days of the crisis,
many people expected them to decouple from the difficulties of the north, including the
IMF. But after the collapse of Lehman Brothers, they all went down. But because of, first, the quantitative easing
and interest rate cutting in the United States, which–and Europe, of course, which played
a major role in the recovery of capital flows to developing countries, mainly speculative
type, and secondly, which played an important role in the recovery of commodity prices as
a result of financialization of commodities, and secondly, a strong investment package
in China–and that explains the continued upturn in some developing countries in 2010-11,
and many of which actually exceeded growth rate higher than before the crisis; but that
growth was demand-led, domestic-demand-led rather than export-led. But from 2011 onwards, we have considerable
slowdown. So all of them are going back to their historical averages. India grows 5,
6 percent. Brazil, Latin America, Turkey, South Africa, it was 2 to 3 percent, 4 percent. So what I’m seeing is that the exceptional
performance of developing countries before the crisis was actually due to bubbles created
by the United States and Europe, bubbles created by United States and Europe. And these bubbles
were unsustainable. And because of that, the exceptional performance of developing countries
that they show before the crisis are not sustainable. I’m not saying that they did not propose reform,
there weren’t domestic factors, but a very large proportion of this upswing in developing-country
growth was due to the bubbles created by policies in the North and China, and both of them have
come to an end now. JAY: So what does the rest of this decade
look like, assuming these policies don’t change? AKYÜZ: Well, the rest of the–I mean, IMF
chief economist has said that this crisis will take at least ten years to clean up.
And it seems that we run out of ideas what to do about this crisis, because in the case
of United States and Europe, as I said earlier, we’re operating in the orthodox domain, we’re
not–we don’t have the courage to think beyond that, to think beyond that in terms of debt
writeoffs, in terms of government spending not adding to government deficit spending. In the case of China, the problem is recognized,
the problem I’ve been talking about is recognized by the Chinese authorities. But I think there
must be some political impediments to bringing out the solutions as rapidly as they can.
So as a result, I think the years ahead [are] going to be quite difficult, particularly
for developing countries, particularly for developing countries, including Latin Americans
and Sub-Saharan Africans dependent on commodities. And these countries do not have much policy
space. Two most important determinants of economic performance in Latin America and
Africa are capital flows and commodity prices, neither of which are within the national control.
They’re both beyond the control of the domestic policymakers. So they do not really have much
policy space in responding to global slowdown in the coming years. JAY: And what does this mean for a country
like Canada? AKYÜZ: Canada, I mean, like Australia–of
course, Australia is having some difficulties recently. I think these are–although commodity-based
economies, they are quite diversified. They’re not commodity-based in the same way as Brazil,
as Argentina, or as Sub-Saharan Africa or Russia. There are diversified economies we
have also in Europe, commodity-based economies, commodity-rich, natural-resource-rich countries,
some Nordic countries–Norway, Sweden. But they are highly diversified economies with
strong manufacturing sector. JAY: Okay. In the next and final segment,
we’re going to take another look at what should be done, what kind of policies might make
a difference. So please join us for the continuation of this series of interviews on The Real News

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29 thoughts on “Is the Global Economy on the Verge of Another Meltdown?”

  1. He's basically saying that the global depression will last at least 10 years because the US & Europe don't have the balls to enact any real reform. Developing countries are fucked because they have shit to sell. And China could help but those authoritarian asshats couldn't run an economy if it was printed step by step for them in a goddam fortune cookie (paraphrasing).

  2. that is the point of trn to get to the facts without spinning them when they interview someone they do it with a serious journalistic effort

  3. So by increasing overall budgets and printing more money for the next 10 years. By NOT ever engaging in actual austerity (reducing spending to equal or below income within a year). And by using more stimulus than ever in the history or the world, but still NOT enough, and to the wrong ppl. We'll suffer immense stagflation for the next 10 years.

    Which makes Keynesian macroeconomics correct…

    I've seen suicide cults make more sense than this.

  4. Did you go to school in the American educational system? It sure doesn't sound like it. Its true that there are a lot of things that could be improved in the educational system here in the US. But I know that the majority of my classmates and I, understand economics. I don't really have a lot of faith in my country, but you sound like an arrogant fuck. The educational system has its flaws, but its hard to characterize the majority of three million people.

  5. real news? why not cover the free energy devices thats being manufactured around the globe and the struggles they face in bringing this free energy to the populus? or how iceland removed its government to become sovereign again raplacing with open minded people? an end to current government (govern) is well on its way it's time the people took back their power and removed the system that creates war and divide, the massive polar shift going on, hardly anything interesting just bs dying politics.

  6. I still think the chance of a global economic meltdown happening any time in the near future is slim. Nations keep producing and people keep buying. Consumers here especially in the U.S. have been buying. So I don't see any type of reversal. I don't think consumers in the U.S. and around the world will slow their consumption down.

  7. The chickens have to come home to roost at some point. Excessive money printing and stimulus programs never work in the long run. Time is running thin…

  8. Basically, the developing countries have to developing in other for the developed countries to maintain there standard of living. Their commodities must never be nationalized and their banks policies must never be in their control, but in the control of privately owned businesses.

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