Processes of social participation associated with the new international financial architecture

Pedro Páez Pérez | Plenipotentiary Representative of the government of Ecuador in topics related to the New Financial Architecture, President of the Presidential Technical Commission for the Ecuadorian proposal of a New Regional Financial Architecture

In the context of this structural crisis, to talk about social participation leads us to a key point: the role of political praxis in creating the historical subject within the scope of this systemic crisis of capitalism.

I would like to start by stressing that this one is not merely a financial crisis. What we are experiencing today is a confluence of various crises within the scope of a structural crisis of the capitalist mode of production. As events unfold, the issue of moral guidance in this process is of utmost importance. That is why we have to be very careful and think twice about executing a mere defensive and “balanced” policy. It is crucial to take initiative and to build a social reference as alternative to the frustration and rage of the people when it comes to create a historical subject, because at a political level there are real objective and subjective elements capable of turning this crisis from structural into a systemic crisis. Hence, it is vital to stop the oligarchic agenda and to reverse this ongoing concentration of power, currently prevailing upon the basis of the process of concentration and centralization of capital, which, indeed, has already seen an exponential pace of growth over the last centuries, but that with this crisis, that pace has truly reached exorbitant levels.

Recently, Forbes Magazine published an article about the list of the world’s billionaires: over the last year, not only has the number of people who have more than a billion dollars increased by 30%, but also the list of the world’s billionaires, which is not exhaustive, shows that the control over the financial activities held by this group of wealthy people has tripled. Over the same period of time, millions of people have lost their jobs, especially in the North. Meanwhile, in the South the majority of people do not even have the privilege of having a formal job in the first place: such circumstances do not only put their employment situation at risk, but also their basic living conditions, which are already precarious. Despite excellent scientific and technological advances, there are still millions of people suffering from serious food insecurity. According to FAO, since the outbreak of the financial crisis one and a half year ago, around 200 million more people joined the number of those already suffering from hunger. Then, beyond the official narratives and the popularized interpretations, the explosion of the crisis and the actions undertaken to “solve” it have worsened the conditions of vulnerability of billions of people, while rewarding the richest segments of the society, most of whom directly responsible of the corruption and incompetence in the financial operations that conducted the whole world to a dead-end road.

In this framework of accelerated social polarization, it is vital to identify the crisis as a class instrument, as a mechanism seeking to reduce the power of individuals, communities, and nations to a situation of powerlessness: with the threat of hunger, the notions of national and popular sovereignty take other dimensions. The fiscal, currency and banking crises, to varying degrees and extent, intensify this powerlessness also under different horizons of precariousness.

A fundamental part of creating the historical subject is to empower and to emancipate the individuals and, in doing so, the left has to recover the banners of freedom and the decision-making power for the individual. We need to rescue the role of the individual in history, in its collective dimension as a component of a historical subject, and within the scope of a national construction that goes far beyond the role of the small nation state and which points to another vision of the regions seeking to build a multi-polar world.

The horizon of a multi-polar world requires the strengthening and redefining of the ongoing regional integration experiences in the framework of a system of nation-states that has become dysfunctional to the oligarchic interest in the perspective of this structural crisis. Now, it is fundamental to garner political accumulation from the territories and the communities. This, however, is not only limited to the issue of “sovereignty” as it often tends to be the case in discussions here in Europe. Quite the contrary, the issue of regaining the nations’ capacity to act has to be addressed not only from the perspective of building a “Patria Grande” like in Latin America; but also from the perspective of rebuilding the concept of power from the territories and communities, or from what we would call supranational sovereignty, national sovereignty, sub-national sovereignty, popular sovereignty – basically everything as part of a coherent process of accumulation of power from below. The challenge is to develop a national guidance of this process based on assuming initiative in the short, medium and long-term which will enable the empowerment of the progressive forces, but not based on the traditional view of the political spectrum with its linear view of the structure of politics (this is how close we are to neighbouring parties of the centre). In this logic of linear geometry from right to left, we would already be conditioned by these formal proximities in the alliances.

I believe the crisis opens up enormous opportunities towards the articulation of different form of coalitions – not necessarily electoral but programmatic – which will allow us to break free from these types of restrictions we are prisoners of, and with which will define precisely how to block the oligarchic agenda that is currently expanding.

I think it has been mentioned a few times; or it has been referred to implicitly in the presentations: This crisis of civilisation we are experiencing now, just like the crisis in the nineteen thirties, places us at a historic crossroad. It did so back then because among the projects that were on the agenda was the project of social regression. Today – due to the confluence of various types of crises – this could prove even more dangerous.

The solution to the structural crisis back then was eventually brought about by the victory of the antifascist forces as a whole. In the North this paved the way for the thirty glorious years of capitalism brought about by the Social Democratic Pact here in Europe and the New Deal in the United States, as well as the socialist bloc in the East and the national popular processes and national liberation processes in the periphery. Behind these events were issues that need to be addressed today as well.

We are not talking about a mere political issue, but we are also talking about the significance of having a governance combining politics and economics, but always from a perspective that favours the articulation of forces. Hence, it is important to have a resolute programme, which permits assuming initiative, while at the same time turning the progressive forces into a reference of a process of distinct political consolidation that will mark the process of popular construction. This process of empowerment, in the short, medium and long-term should allow blocking the neo-fascist project (the obscurantist project) and its attempts to revert the advance of the popular conquests. This also requires – beyond good will on our part – that we focus our work not merely on the objective forces, but also on the subjective forces in which our social actors operate.

That being said, I think it is crucial to grasp the current crisis in a responsible manner and without compromise as a systemic one. We are experiencing an exacerbation of the mercantile fetish, understood by Marx as alienation: the presence of the market as a monster acting as an external agent disconnected and independent from human volition. The current crisis, which was induced by the process of concentration and centralisation of capital also implies a centralisation of power that reduces humankind to a state of indefensiveness and powerlessness at the very moment when major and preventable events are presented to us as being a circumstance that is absolutely alien and immune to human volition, inescapable, inexorable, natural…

We need to defetish the crisis by adopting everyday political actions. And even though – within the destructive explosion we are currently witnessing – there are various long-term mechanisms put in place which do not exclusively cater to the special interests of one group or the other. The logic is still, however, that those actors holding political, economic and ideological power profit from this crisis. While it is crucial to study the crisis of capitalism in its most profound theoretical dimensions, we also need to analyse and understand the capitalism of crisis: How is capitalism fares in these difficult economic, financial and political times?

Part of the progressive political action is to spread the necessary social pedagogy so as to uncover that unemployment and adjustment policies are not mere natural phenomena affecting all of us equally, without anybody’s fault, just like an earthquake or flood catastrophe. It is crucial to place responsibilities in the hands of the powerful groups and denounce the logic of capital against life in this historical phase.

The wave of speculative attacks which we are currently witnessing in Europe (if you recall, we warned of this in our meeting last year) does not only form part of the technical conditioning of the mismanagement of public funds, but it is also related to specific economic, financial and political agendas embroiled in a bloody struggle within the global bloc of power.

It is very important to note that there is a very complex set of new circumstances and impasses emerging from the crisis which does not only point to a slowdown in the usual rhythm of the production processes and the accumulation process of goods, but also puts into question the process of reproductive significance: the crisis marks a unique opportunity to break with the criteria which have until now been perceived as “normal” in terms of rationality. Based on this perspective, taking into account the objective and subjective conditions of the actors, the left can start preparing a contra-hegemonic proposal, assume moral guidance of the process and also initiate the possible beginning of a new historic bloc.

There are no processes without historical subjects. It is very important in this context, in particular for Latin America, to understand the dialectics between “originating” accumulation (put it in the gerund, not only primitive or original accumulation, or accumulation by dispossession) and “ordinary” accumulation of capital. In contrast to the primitive accumulation – understood as a fact in the past, frozen in time, the “originating” accumulation constantly reinvents itself in the center, the periphery and the semi-periphery, although in differentiated ways. It is a sequential expropriation-reinstallation process of production conditions that are ever more precarious for the labour power without any other possibilities of self-sustain. The “originating” accumulation also includes what authors such as David Harvey refer to as accumulation by dispossession, operating in more widespread conditions precisely because of the process of the degradation of civilisation, which marks the current crisis in the senile phase of capitalism, in which not only the economic but also the political impacts of this process become evident – as I have already pointed out earlier.

The dialectic tension between this form of accumulation (“originating” accumulation) and the normal accumulation of capital (“ordinary” accumulation) defines historical structural limitations to the processes of creating a citizenship and the Hegel-Weber promise of a state as an expression of rationality- expression of a collective will.

The incapacity of capital to become in the periphery the predominant quantitative productive form (and not only the dominant mode of production) marks the limit in the reproduction of the historical subjects in terms of objective and subjective aspects, and constitutes obstacles to the capacity of introjecting the rationality of power.

Within the historic framework of an ever growing, widespread and problematic awakening of the peoples of the planet, the formation of culture more or less under the hegemony of the global North – where in its womb the canon of reality should not oppose, at least as a promise, these limitations of the periphery – establishes a set of universal values that clash with the realities and tendencies of the vast majority of humankind.

Based on these structural limitations of particular geographic definitions conceived according to the visions of the peoples, their frustrations and their de-legitimisation, there are at least two key and timely factors that are operating with intensity today:
One is the ever growing prevalence of human mobility, migration flows and transnational families; unfortunately I cannot delve into this here today. However, it defines a very concrete dynamic of comparisons, generalisations and expectations that are complex in terms of substance.

Secondly, the structural crisis itself

The conquests of civilisation propelled by the capital and which Marx and Engels praised over in the Communist Manifesto have now started to disobey the logic of the accumulation of capital and the structuring reality of the concentration of power; something we are currently witnessing and being victimized by. There is a tremendous concentration of power and therefore the speculation/war-profiteer agenda of these mafias, which are part of the political reality as well as of the structural impasse of capitalism, become ever more prevalent in terms of time and space.

Due to the structural crisis, there is a relatively sudden need to change what is perceived as “justifiable”, “normal” behaviour of power, which causes the mechanism of social legitimisation to lose power.

Facing the crisis of profitability at the core of the productive capital which has been evident since the sixties, the financialisation and globalisation that were offered as solutions mark a shift in the fundamental logic of accumulation towards circulation and short-termism, which has already posed enormous challenges in social control.

The financial explosion about two years ago marks an even more profound impasse regarding these possibilities of profitability, known as “real economy”. The fundamental mechanisms to improve the profit rate of the high finance – of the effective structures of power found at the peak of the system – are characterised by specific bouts of speculative bubbles, rip-offs and war bouts, which need distortions by the media, interventions in mass sociology and all different types of extreme actions to make it pass as “permissible” (read Naomi Klein).

There are clear priorities for political action today that have tactical as well as strategic impacts:
▣ War is always an easy and profitable business for them. Therefore, it is fundamental to organise the progressive political forces in such a way so as to block this agenda of hegemonic power surrounding these concrete possibilities of unpredictable dynamics.
▣  The economic pressures have played a very efficient role in disciplining the masses and therefore the construction of an anti-hegemonic culture arising from the progressive forces does indeed need to offer immediate solutions, and in the long-term also viable solutions vis-à-vis the crisis, like a civilizing imperative which breaks with the new framework of “impossibilities” which become generally accepted.

It is very important that we do rise up to this challenge that is theoretic as well as operative in nature. In contrast to the theories of classic imperialism, there are a number of macroeconomic and financial manipulations that have not been sufficiently analysed, neither in the field of economics nor in critical or heterodox literature, not to mention in the orthodox neo-classics.

We indeed have a systemic crisis and the alternative solutions to get out of the crisis are also systemic. There are stumbling blocks that can inevitably be felt by the way the system works in certain moments in time. In “normal” times all the “cogs in the wheel” of the system (objective and subjective) are running smoothly and unfettered. But in times of systemic crisis blocking and clogging occurs that is increasingly hard to mend, in objective as well as subjective terms. If we manage to channel social and political energy towards these neuralgic points, in these stumbling blocks of the system, the possibility of bringing about change is much bigger than in “normal times”.

We need to engage once more with doctrinaire and theoretic rigour in the analysis of the capitalist mode of production, not only as a productive mode (in that sense, the capitalist enterprises will have a long life) but also as a criterion of totality, as an organizer and a systemic regulator of the global economy as a whole. This mode of production is currently stuck in a senile phase and a good part of the reforms which thirty or forty years ago could have been absorbed are now simply no longer compatible with the current power structure, or with the new need for exploitation – neither here in the North nor in the South.
Far beyond a bit of spark that was present in the discussions about the socialism of the twenty-first century, some of the reforms which were included in this perspective are those formulated by the Alliance for Progress, the World Bank in its early days, and the advanced positions of the right and the centre right in the sixties in Latin America. We are not trying to dogmatically infiltrate these possibilities, quite the contrary; we are trying to assess with all the theoretical rigours the potential these options bear for the articulation of the empowerment of the people and for the construction of popular, national and supranational sovereignty. We also explore other theories. We are trying to avoid encapsulating ourselves in any prefabricated model of socialism we deem desirable obtain.

Focusing on the reforms which tactically allow us to empower the people and strategically open up objective and subjective conditions to lead superior social struggles will enable us to advance the creation of the historical subject and reclaim the true role of the left in government coupled with the nurturing and construction of popular power, with the aim of regaining the capacity of individuals and communities to take decisions.

With this vision we can already overcome the limitations that come with measuring the left in government against pre-established recipes or parameters. It cannot be required as a rule, for example, for us to pin ourselves down to a certain position with regard to the processes of nationalisation. Starting with decision-making capacity, we need to find other considerations: the concrete analysis of the concrete situation and not widespread dogmas. We have a serious problem, to put it mildly, with a priori solutions.

For example, the significance of an efficient public bank that is guided by strategic objectives in the process of change must not be underestimated, and the call for public control of a bank that has received a bailout from the state is not to be undermined. That being said, it is still very risky to nationalise a bank that is in serious trouble (as has been done in Island). In some circumstances this nationalisation means taking on a gigantic debt and getting entangled in serious economic, political, and ideological problems, the consequences of which will thwart the interests of the people. The thesis of nationalisation has to be preceded by rendering priority to debt service mechanisms, the separation of the speculative part and the protection against bankruptcy for the productive process and employment.

I think it is very important to understand that at this historical junction, it is necessary to develop a programmatic agenda that includes tactical as well as strategic tasks so as to respond to the immediate political discussion and envision changes in the mode of regulation and the regime of accumulation, the mode of production and the mode of life.

Not only are we faced with a crisis of the capitalist mode of production, but we are also faced with a crisis of the mode of life: this is a concept of longer duration that forms part of the Latin American experience of countries such as Ecuador and Bolivia, where it is known as Sumak Kawsay: living in self-realisation (vivir en plenitud), living well (el buen vivir). This goes very much beyond the mere discussion about overcoming the mode of production: it is about a different kind of relation between humankind and nature and also about a different type of relation among human beings.

This is how serious the task is, when talking about reactivation policies within the framework of a new model of development and a new model of civilisation at the same time: we cannot subscribe to the illusion harboured by some sectors that we can change the mode of life without overcoming the dominant mode of production; this in turn is not possible without changing the regime of accumulation which defines it (in terms of priorities and rhythm of investment, distributive dynamics, division of labour and articulation with other productive logics), and doing so implies reassessing the mode of regulation (a combination of economic policies and institutions) which makes this regime of accumulation viable.

The question now is how are we going to do this in the face of these concrete conditions? In answering this question, I would like to restrict myself to Latin America, which is the case I know the best. We have been prisoners of a historical matrix of dependency for 500 years in Latin America. This was aggravated by neoliberalism over the past thirty years, which has not only led to a rapid deterioration of the productive fabric, mostly build up in the context of the capitalist modernization but also to an institutional dismantling which has been at the heart of a transformation process of social actors who the progressive forces have to attend to.

I would like to briefly mention those monetary, financial and macroeconomic elements that do not usually form part of the progressive discourse.

The role of Latin America as a supplier of primary commodities based on an extractivist model, wherein labour power and nature are our only “comparative advantages” was originated by the Borbonic reforms (and the Pombal reforms in the Portuguese case) dating from the eighteenth century, redefining – from a “British” idea of free trade – the international division of labour.

Even today, in economies that reached a diversified and dense productive potential, such as the Brazilian and at some point also the Argentinian and Mexican ones, the productive engine ultimately depends on and is shaped by the level of our international insertion on the basis of lowering labour and natural resources costs. The structural plunder committed against labour power and nature goes largely against the idea of an alternative model of development.

The nation-building endeavour explored alternative horizons including the political experiences that emanated from our liberators’ dreams of the continental project of the Patria Grande and the experience of Paraguay before the War of the Triple Alliance; and during the twentieth century, the popular-national and democratic-revolutionary processes which, based on ISI (the import substitution industrialisation) found diverse expressions in the attempts of several countries of the continent (Vargas in Brazil, Perón in Argentina, Cárdenas in Mexico and even Chile during the Allende era). Historical proof shows that it is not technical elements or endogenous economic factors – as suggested by the specialised literature – which defined their limitations and failures, but rather political and military defeats which stifled them.

It is very important to reconsider these processes from a critical and rigorous perspective that is not constrained by conventional thinking imposed by the right and which will allow us to advance with concrete instruments so as to use the participation in the government again as part of the effort for creating the historical subject.

Assuming governance involves regaining the tools required to give back to the individuals, the communities and the nations the instruments and capacities to make decisions with regard to critical aspects. Among the defining factors of the “generation of impotence” there are processes, in hierarchical order, such as the erosion of monetary functions, financial transnationalisation, the transfer of traditional instruments towards the “automatism of the markets”, if not even the open surrendering of sovereignty, such as in the extreme case of the official dollarization.

The legacy of three decades of neoliberalism in Latin America is an exacerbation of the extractivist model for the supply of primary commodities, a higher dependency on differential rents and hence also a higher dependency on the reproduction of the dominant class on the basis of a rent-seeking strategy. Workers are pushed into an even more precarious situation; their role in the formal subsumption of labour under capital is ever so diminished; and therefore they are less involved in creating and building spaces of struggle, such as the trade unions (with important exceptions in Brasil and Argentina). In the unions the formation of the consciousness of the working class per se starts being dissolved at the hand of mechanisms emanating from everyday-life that are stained by the culture of “Every man for himself!” the omnipresent fierce competition, postmodernism and consumerism.

I would like to briefly show – without trying to be exhaustive – some figures which characterise the development of Latin America over the last decades. Many, including us in the left, have bought into the idea of the neoliberal mode of regulation offering a leap towards modernism and efficiency, because that is the model of entrepreneurs who will stimulate investment. In practice however, the statistics of ECLAC (CEPAL)1) show that the rate of investment under the accumulation regime of ISI was between 25-30% of GDP. Due to the neoliberal governments and policies that were put in place by the nineteen eighties, profiting from the debt crisis, it dropped to 15-20%. This rate will only recover when progressive governments come to power.

The production slowdown and the deindustrialisation changed the material basis of the workers’s struggle by significantly reducing their participation in the generation of national revenue with escalating social effects marking a rise in indigence (15% since 1980) and poverty (34%), in absolute as well as in relative terms. This is only alleviated when progressive governments come to power later. Notwithstanding their efforts, the social programmes these governments implement continue to be largely ensnarled in direct transfer policies that remain within the same epistemological and operative framework defined by the World Bank.

The confluence of diminished investments in the production capacity, social polarization and a restriction of domestic markets, characterises a regime of accumulation that leads to more uncertainty, and therefore desperation and dependency on international markets. It is also responsible for the much poorer development of GDP, not only in terms of the historical average, but also with regard to its degree of volatility.

This is not idiosyncratic to Latin America. An global inventory conducted by the International Monetary Fund itself finds that there have been 267 financial banking and balance of payments crises since the beginning of the era of neoliberalism. However, neoliberalism was sold to us as the model we so needed. Judged according to its own parameters, the regime of accumulation that was fuelled by neoliberal policies does not lead to an increase in growth or to the improvement of fiscal sustainability or the sustainability of the balance of payments. While ISI lead to a dependency with regard to capital goods and imported inputs and a frailty in the external sector, the regime of accumulation brought about by neoliberalism reproduces this frailty that is now, however, linked to the massive import of con- sumer goods and luxury articles.

The last decade has seen a recovery due to very favourable conditions presented by the continent – international terms of exchange – conditions that have never been recorded since statistical surveys were first conducted in Latin America more than a century ago. This explains to a large extent the accumulation of reserves, the reduction of external debt and the fiscal improvement in the region.

The role of the progressive governments of the continent needs to be redefined with respect to several nuances. The limitations and possibilities of these progressive governments within a structural context to create the historical subject also have to be reconsidered. We are directly put at risk by this new phase of the expanding crisis that now poses more serious threats. It is crucial for us to understand the ferocious and brusque nature of the newly emerging vectors of change, and to address them with due caution; taking them into account will help bring about a radical transformation in our political and economic agendas.

Let me kindly remind you that a year ago we had a similar meeting; and who would have thought back then that the Euro would be under such serious threat in such a short period of time. An adequate interpretation helped shape a swift response. It is probable that the next victim of the speculative attack is going to be Latin America, which hitherto has fared relatively well.
I insist, we do not only need to understand the crisis of capitalism, but also the capitalism of crisis.

The reduction in export markets in terms of price and quantity, which we already saw in the previous phase of the crisis, the credit crunch, the speculative bubbles which define a latent balance of payments crisis and a stronger anxiety regarding hard currency liquidity, is exacerbated in the current period by a qualitative dislocation of basic adjustment mechanisms of global markets: above all, we see a distortion in the formation of commodity prices. Prices of our main commodities, such as crude oil, soy and copper have less and less to do with reproduction costs, but are increasingly subject to stock-market speculation.

On the other hand, we have the metastasis of the basic vectors of structural insolvency of the financial system. Apart from the nominal inflation of financial assets linked to real estate at the centre of the system, we now also see its dispersion into other areas and instruments as well as an ever increasing destruction of the basic mechanisms for the generation of revenues: reductions in real wages, employment and public spending.

There are also new elements that make the global situation very vulnerable and fragile; their full scale has not yet become visible. However they increase incentives for speculative attacks against attractive assets and siphoning out mechanisms that facilitate wealth distribution from the subsidiaries to the parent company in transnational corporations (be very careful with the Spanish flu!).

This has adverse effects for the recovery of internal credit; it affects the animal spirits of entrepreneurs, which tend to increasingly make use of defensive strategies instead of making long-term investments, which could help boost production and employment. Given the potential convergence of these elements, the robustness of the banks could be called into question, which in turn often gives rise to speculation, short-termism and predatory behaviour on the part of large financial groups inside and outside of the continent.

Even though they have only a minor impact, these elements exacerbate the extractivist model for the supply of primary exports. Whether progressive or not, from the government we all have to look after the soundness of our currency which assures macroeconomic – financial stability and external viability is key in that sense. With the current deregulation in the exchange rate markets, hard currency shortage is the splendid occasion for speculative attacks.

The dollar dependency, then, is a key factor for our underdevelopment. In order to maintain the dollar inflows, our “comparative advantage” it is indispensable, and in order to “improve” it, we need to keep the wage costs and natural costs low. But even in the short-term, the depredation of labour power, biodiversity, and ecosystems will not prevent but rather aggravate the latent conditions of a possible financial and economic crisis on the continent.

These reflections are an invitation to discuss the electoral calendars in Latin America, Europe, and the United States and establish programmatic lines that include but also transcend them.

In the light of all these circumstances, the progressive governments in Latin America are faced with a potential and sudden deterioration in their capacities to act effectively. As a further possible consequence, a big question mark also hangs over the process of integration, which contrary to the European case, in which supranational sovereignty grow at expenses of the national one, in Latin America determines the capacities of each nationstate to act within the limits of their own borders.

Far beyond the important progresses made in the field of politics and institutions, the field of economics, the current schemes of integration have been whittled down to the conventional framework of tariff policies and continue to be extremely weak; because part of the countries are tied to extra-regional free trade agreements which have undermined the possibility of a common external tariff. And this is happening amidst growing pressure for bigger concessions in the negotiations with the European Union and within the World Trade Organization. Suffice to show the impact of a “market correction” (within the framework of exchange rate wars) of the Brazilian Real on the productive apparatus of Argentina, the stability of the Argentine government, the continuity of the progressive processes in that country, and the possible domino effect it has on the rest of UNASUR (Venezuela, Colombia, etc.).

The crisis can be turned into a powerful weapon to reduce nation-states, governments and individuals to a state of powerlessness. From this perspective, the New Financial Architecture appears to be a necessary, minimal and insufficient condition to defend ourselves and guarantee the basics: creating the conditions for a response on the part of individuals, communities and nations.

A global proposal is needed with regional and national contents. One cannot speak of a Global Financial Architecture and a New Regional Financial Architecture without also speaking about a productive transformation which requires a New Domestic Financial Architecture in order to create a new type of economic policy. Paraphrasing the thesis 11 on Feuerbach, as other colleagues have done, we would in this case say that it’s not about taking over the government but transforming it.

The technical challenges of the economic policy in Latin America have to guarantee the dynamic coherence of the mode of regulation so as to strengthen the viability and the sustainability of a regime of accumulation that in the long-run moves away from primary exports and in this way empowers people, giving them back their decision-making power. Only a mode of regulation focused on capacity building is able to promote development. This means that a series of institutions and policies are needed to strengthen the articulation between private capital, the de-privatised and non-corporatist state and the Popular Economy in all its diversity. The New Financial Architecture would be instrumental in achieving this by establishing a new relationship between the financial system and the productive system, be it big or small, capitalist or not capitalist. Based on this, a renegotiation of the international division of labour and the general patterns of the generation and distribution of revenue would eventually become feasible.

It is important to break with the monopoly of global liquidity held by Wall Street and the US “Federal Reserve”, who finance multi-billion dollar bailouts for banks, the expansion of the wars in Iraq, Afghanistan, Pakistan and other countries as well as the fourth fleet in Latin America, the seven military bases and the deployment of US troops to the national bases of various countries of the region. Obtaining the issue of annual Special Drawing Rights (SDR) without conditions, as has been achieved by the G192 and the “emerging economies” in 2009, can help redirect this liquidity towards new mechanisms of South-South cooperation based on regional agreements such as ours in Latin America, and it would also pave the way for a new type of North-South relations.

Without entering into details, suffice to give you the gist of a global proposal for a New Regional Financial Architecture that is to rearrange and deconcentrate the unipolar power structure of the old institutional architecture that still prevails. Reflecting the economic, cultural and historic conditions of each situation, these regional bloc agreements would include a new type of a development bank which sets out another set of priorities focusing on the logic of life instead of the logic of international financial capital. Such priorities are sovereignty in the field of food, healthcare provision, energy, production of knowledge, the financing of the popular economy in all its diversity so as to provide decent jobs for people. This proposal is steered towards generating options and conditions so that this social and productive energy can unfold all its potential. In contrast to the demands made by transna- tional financial capital for big profits in very short periods of time, our focus will be on other forms of community participation favouring a family economy and popular economy. The Bank of the South is the beacon of hope for South America in this context.

A second component includes the creation of a space of monetary and regional financial sovereignty linking the surplus regional currency to real direct transactions via the payment compensation schemes that value the work and the production of the people via a balanced exchange, far from the primary object of today’s key currencies: speculation. The most innovative project in Latin America in this context is SUCRE (Unified System for Regional Compensation)2), an instrument already used in commercial exchanges between members of ALBA.

These components require a third pillar for their protection: a netlike support of supranational financial security that consolidates regional recovery of the coherence of flows and the productive machinery. Ecuador has formulated a proposal in Latin America, titled Fund of the South and is based on the connection and transformation of the central banks of the continent with regional savings procedures, and a synergy governance of international reserves, national currencies and joint currencies. In this new institutional framework the global SDRs, for example, can be part of the mainstay for the issue of regional SDRs, like SUCRE, offering a scheme that would set free a massive quantity of resources currently trapped in fear of speculative attacks to be invested in the generation of wealth and well-being.

Various initiatives of bloc-to-bloc cooperation in the global South based on similar mechanisms would redefine a new multi-polar balance based on the real priorities of the peoples and the reinvention of the currency as a form of recognition and a driving force for labour and creativity.

For the North, these SDRs can hardly be more than just an accounting item. Generally the restrictions of globally accepted currencies are not exogenous restrictions, but self-imposed restrictions. Apart from regaining the capacity for action by giving the universal right to employment priority over bailouts of banks, the North could well donate its SDRs shares for the compensation of the historic debt and also the financial explosion of this global crisis. These annual resources could be used as an agile fund to alleviate humanitarian catastrophes, acute hunger, extreme poverty and environmental catastrophes. With minor changes in the current norm, these resources would reactivate the North’s own international markets without inflationary pressure, financial costs and without budgetary disputes (no industrialised country has used its SDR for fiscal financing), thus significantly redefining its relation with the South when it comes to finding effective solutions to these global problems (such as global structures offering efficient incentives to change technical norms and paradigms that are contaminating, dislocating and predatory in terms of production, consumption and transport).

Making headway in these few aspects would without a doubt cause resistance and retaliation. We should therefore insist in putting in place a series of measures that we have been working on for a long time:

The moratorium and the audit of debt as global proposals

▣ New and immediate directories with representative officials of the regions to provide and administer resources for productive reactivation without conditionalities and also preventing the International Monetary Fund which has multiplied its sources from reviving its blackmail power.
▣ Universal prohibition of speculative mechanisms, such as short selling, CDS and others, and limiting the long positions of food, energy and precious metals in futures markets due to the harmful effects they can have.

Regulation of Hedge Funds

▣ Separation between the finance strictly related to the productive process and the rest (mostly devoted to speculation) in the spirit of the 1933 US Glass-Steagall Act.

This means establishing a specific agenda that is based on the interests of the peoples and not on the interpretation of the information gathered in opinion polls with regard to what the position of the left should be. The social productive processes cannot be re-launched without the massive destruction of the fictitious capital linked to this prevailing parasitical hypertrophy; and this inevitably defies the structures and the culture of the oligarchic and imperial powers. It is humanity that is at risk.

1) Economic commission for Latin America and the Caribbean.
2) Span. SUCRE: Sistema Unitario de Compensation Regional de Pagos.
* First published in 『The left in government: Latin America and Europe compared conference documentation of the 2nd conference June 2010 Upsurge in Latin America – Europe on the Defensive』 by Rosa Luxemburg Foundation Brussels