Its sheer diversity makes any kind of consensus within a diverse group of this sort is unlikely. But on one point there was little disagreement at Havana—the global economy is badly out of joint and unsafe in the hands of the managers entrusted with the job of fixing it.

SELF-SERVING PROGRESS

A day after the G77 summit concluded, finance ministers from the Group of 7 -- a cabal of rich nations that has under American tutelage dictated global economic trends for close to two decades—met at Washington for a tour d’horizon of the world economy. Seemingly oblivious to the message from Havana, they emphasised the "underlying strengths" of the world economy. The "basic momentum of expansion" in the world economy, said American treasury secretary Lawrence Summers, ‘is sound". The outlook in other words, was for a more robust phase of economic growth than was forecast even a few months back.

Since the air-waves recognise no embargoes, it is difficult to understand how the G7 could have affected this manner of indifference to the message from Havana. But the following day, the streets of Washington showed a different reality as the International Monetary Fund and the World Bank began their annual spring meeting. The thousands of demonstrators who gathered to lay siege to the World Bank and IMF buildings had one clear message to deliver: the two institutions had gone on far too long as hand-maidens of the rich, making the world’s poor pay for their poverty. The American siege of Cuba notwithstanding, the powerful signals from Havana were clearly not lost in Washington.

In arriving at their self-serving prognosis, the G7 finance ministers could have with little qualm, ignored the developing countries as also the demonstrators on the streets of Washington. But to disregard the signals from Wall Street, that quarter of New York city that has in a sense become the pivot of the world economy, would be something else altogether. Ironically, the G7 forecast of a strong phase of global economic expansion came just a day after Wall Street plunged into one of its most precipitous drops ever.

All the three indices of share prices took a beating, most so the Nasdaq composite index, which supposedly reflects the glittering promise and limitless prospects of the U.S. high technology industry. Indeed, in the preceding week, the Nasdaq had lost a quarter of its value, making it the worst historic performance ever for an American stock market index.

Wall Street has in recent years become variously, a metaphor for irrational speculation and a symbol of the unfettered spirit of enterprise. Objective analysts have pointed out repeatedly, that its exuberance and seeming vitality have been totally at variance with the realities of a global economy that is sunk in gloom. In a rare moment of clarity just before the IMF-World Bank meeting opened, Lawrence Summers admitted that the imbalances that had emerged in the global economy were a cause for concern. Overtly strong growth in the U.S. and exceptionally weak performances in other parts of the world, needed to be firmly addressed, he said on April 13.

One aspect of this imbalance is the massive deficit that the U.S. is today running on its trade and current account. After all its earnings from the rest of the world—from exports of goods, technology transfer and overseas investments among other things—the U.S. as an economy needs to borrow over $ 1 billion every day merely to sustain its current level of consumption.

On an annual basis the U.S. current account deficit is today running at no less than $ 400 billion. And to convey a sense of the manner in which this figure has been growing without any seeming bound—just last June, the annual estimate of the U.S. current account deficit was of the order of just $ 250 billion.

INFIRMITIES OF AMERICAN MIRACLE

Digging slightly under the surface, the infirmities in the American economic miracle begin to emerge.

First - economic growth today is being underwritten as never before by massive consumer spending. The growth in consumer spending today is the highest since the mid-1980s.

This in turn, is premised upon the appreciation of share values. Household incomes alone can hardly sustain the kind of consumer spending that is seen today. What is evident instead, is the "wealth effect"—of households incurring massive debts in the belief that the appreciation of share market values will more than balance their books in the long term.

Second - optimistic projections of continuing economic growth assume that household expenditure will be in excess of income for the next five years, pointing to a faster accumulation of debt.

Crucially again, much of this debt is incurred to overseas creditors, through the burgeoning American trade deficit. Over the last few months, the U.S. trade deficit has topped 4 percent of GDP. A part of this is explained by higher investments by American industry, which could conceivably bring in returns in future years. But a large part of the explanation lies in debt-financed expenditure by American households.

Summers' remedy to this situation is to suggest a "balancing up" rather than a "balancing down" of the global economy. What he means by this is anybody’s guess. But the consequences that could emerge from any kind of a slippage in the stockmarkets is evident.

Households suddenly confronted with an erosion of wealth would find themselves unable to service their debts. The American household—whose over-consumption is today the main engine driving the world economy—would slip into debt induced distress. And the various myths that have been advanced on behalf of globalisation as a phenomenon of universal human benefit, would finally be exploded.

CASTRO'S WARNING

Cuban President Fidel Castro was pointing to the need for the Third World to take preemptive action against this inevitable denouement when he addressed the concluding plenary session of the G77 summit.

"We fight for the most sacred rights of the poor countries", he said: "But we are also fighting for the salvation of this first world, which is incapable of preserving the existence of the human race… And much less of governing the world".

Nigerian President Olusegun Obasanjo, Chairman of the G77, forcefully asserted the need for the Third World to re-enter the global councils of decision-making from which they have effectively been excluded for a decade or more: "From now on we will play our part in shaping this order into one that is just, fair and mutually beneficial to all sides".

In other words, no longer could the developing countries afford to be the passive recipients of aid and advice from the IMF and the World Bank. It was time now for them to assert their own interests and force a global policy environment that would accommodate their concerns.

 FINAL DECLARATION

The final declaration adopted by the summit enshrines these principle of equity and participative decision-making. Liberalisation of world trade, it points out, has not brought any benefits to the developing countries, making it essential that their confidence in the multilateral trading system be restored. Moreover, the G77 declaration asserts the right of every country to choose the model of development that is appropriate to itself. There should be no external interference in the setting of national priorities, it demands.

If the G77 believes that the democratisation of the World Trade Organisation and the reform of the IMF and World Bank are essential, American thinking clearly tends in a different direction. In league with other developed countries, the U.S. is today pushing for a new round of global trade negotiations that will greatly expand the areas of domestic policy over which the WTO maintains jurisdiction.

Mental conditioning of American policy makers being what it is, the responsibility for the massive U.S. current account deficit is likely to be ascribed to other countries, which supposedly follow mercantilist policies antithetical to the credo of free trade. This makes it almost axiomatic that the U.S. will now start a coercive new round of trade diplomacy, which will transfer on to other countries the onus of adjusting to its massive current account imbalances.