Veni, Vedi, Vasectomy?

June 5, 2015 at 2:54 pm | Posted in Capitalism, democracy, Human Rights, international relations, Labor, Political Economy, Production, world politics | 1 Comment
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On June 3, when the President of the European Commission (EC), Jean-Claude Juncker conveyed the collective demands of Greece’s creditors—the European Central Bank (ECB), the European Commission, and the International Monetary Fund—to the embattled country’s Prime Minister, Alexis Tsipras, a member of his governing Syriza party said of the Greek delegation: “They came, they saw, and they had their balls handed to them.”

Five months after the anti-austerity party rode to victory in the Greek elections and had renounced efforts by previous Greek governments to impose austerity measures that had led the country’s debt grow from 124 per cent of GDP to 180 per cent and its unemployment rate soar to 25 per cent (and youth unemployment to 60 per cent) and its pensioners see their meagre pensions decline even faster, the German Chancellor Angela Merkel invited the IMF’s Managing Director Christine Lagarde and the President of the ECB, Mario Draghi to a previously scheduled meeting between herself, Juncker, and the French President Francois Hollande on June 1 to draft a common negotiating position among Greece’s creditors. Prime Minister Tsipras was notably not invited.

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Papering over their differences, the 5-page demands Juncker delivered to Tsipras made some concessions to Greece—lowering the demand that the primary surplus for 2015 be 1 per cent rather than the 3-4 per cent that had been the earlier demand—but also included “red lines” that the Syriza-led government had vowed never to cross such as generating 2 per cent of the GDP from cutting pensions and raising VAT to a uniform level (except on food, medicines, and hotels), not to reverse the labor market reforms that the ‘troika’ (the ECB, the EC, and the IMF) had forced down the throats of previous governments, and even to establish an ‘independent’ tax and customs agency and thereby making its operations beyond the ambit of elected officials.

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Yet, far beyond debates on primary surpluses and ‘red lines,’ the real struggle between Greece and its “European partners” is over politics. The positions are clear. Because of the single currency, an indebted country like Greece cannot devalue its currency and thereby cheapen its exports and with the increase in exports (and tourism) repay its debts. Hence the ‘troika’ (now renamed ‘the institutions’) were attempting to impose an ‘internal devaluation’ on Athens: forcing it to cut minimum wages and increase labor market ‘flexibility’ (making it easier to hire and fire workers and thereby also curb labor militancy) to force down the prices of Greek products to increase exports, to privatize government assets, improve taxation and efficiency in collecting taxes, and to sharply reduce government expenditures by severely cutting welfare programs and reducing public sector employment and pensions. Syriza and other opponents of the ‘austerity’ measures have argued that these measures actually impede Greece’s ability to repay its loans: if people don’t have money due to welfare cuts, job losses, etc., they cannot buy goods and hence more businesses fail. Indeed, Greece’s GDP has contracted by over 25 per cent in the five years of troika-mandated austerity and its unemployment remains high while its debt as a ratio of GDP has grown from 124 per cent to 180 per cent.

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As Robert Preston, the BBC’s economics editor puts it:

But although for the pride of the creditors, the question of whether Greece is obliged to generate a surplus on its budget, excluding interest payments, of a bit more than zero or 3%, feels like a world of difference – it is a rounding error compared with the money Greece owes them, which is equivalent to 180% of Greek GDP.

In the highly unlikely event that Greece could generate a 2% or 3% surplus year-in and year-out without its economy shrinking further (which few economists would anticipate), it would take around half a century for Greek public sector debt to fall to a level regarded as sustainable. gett A half century of austerity? In what modern democracy would that be regarded as a realistic option?

Most egregiously, sharp cuts in expenditure has meant that in some hospitals budgets have fallen by 94 per cent. How can this be sustainable in a continent as rich as Europe?

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It is clear that one way or another, as Nils Pratley wrote in the Guardian, there will have to be a debt write-down. What Greece’s European “partners” are unwilling to countenance is Syriza’s demands to reverse the “austerity” measures because they want to root out any left-wing challenge to the reigning neo-liberal orthodoxy. Once Greece caves in, subjects itself to ‘vasectomy’ in the words of one of its MPs, then debt-relief could be offered but not before. To offer a write-down of the debt is particularly terrifying to Spain where the governing party has already lost many local elections to a Syriza-like party, Podemos, which now controls the three major cities of Madrid, Barcelona, and Valencia. It is also threatening to other EU economies like Portugal, Ireland, and Italy which have been compelled to implement austerity measures.

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Syriza has, however, done its cause no favors despite some eloquent posturing by its Finance Minister, Yanis Varoufakis. It has not demanded a write down of the debt—and we must remember that when the troika made the first loan to Greece in 2010, Germany and France explicitly demanded that the austerity not be extended to the military—and Greece has been the best customer of the German arms industry. How is the cutting of pensions and salaries to workers while maintaining higher than the EU average in military spending morally justifiable?

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With Syriza maintaining the charade of negotiating with its European ‘partners’ over the last months, Greece’s position has rapidly deteriorated as frightened depositors have withdrawn their money from the banks and even transferred them outside the country. By the end of April, Greece’s bank deposits were at their lowest level since 2004 and by the end of last week deposits were being withdrawn at the daily rate of 1 billion euros.

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Interestingly, the Speaker of the Greek Parliament, Zoe Konstantopoulou, has set up a Debt Truth Committee to report to parliament on June 18

is said to be on the point of finding some of Greece’s original bailout debt, from either 2010 or 2011, was unlawfully contracted. In addition, Ms Konstantopoulou is armed with a finding from experts that Germany owes Greece €350bn in war reparations – more than the whole of its debt to Europe.

This could open up a host of legal challenges even if Tsipiras was to finally cave into the troika’s demands. The question is whether the Left Platform within Syriza is strong enough to prevent a cave in when there is nothing the troika would like than to install a government of national unity with a rump Syriza. That would, temporarily at least till Spain’s November election, decapitate the European Left. Will it happen?

In the short run, if no resolution is found, Greece will be unable to make scheduled payments to its creditors and being declared to be in default would make its borrowing costs in private capital markets intolerable; Syriza’s reluctance to impose capital controls would lead to the swift collapse of its banking sector unless the government begins to issue a virtual currency against future revenues which could ease the liquify crunch domestically at least. But Greece cannot be thrown out of the EU without its consent as all decisions must be unanimous. Even if Greece were to exit the common currency—Grexit as it has been dubbed—it would call the whole European project into question. It is also unrealistic to expect a country as bankrupt as Greece to police its borders when hordes of refugees from Africa and the Middle East are streaming to Europe—and from Greece, they could move to any country in the Schengen area. Will this be enough for its European ‘partners’ to blink?

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Imperial Hubris: European Subservience to the United States

July 3, 2013 at 10:53 pm | Posted in Capitalism, democracy, Human Rights, International Relations, Political Economy, World Politics | 1 Comment
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Rarely in modern history has a statesman’s words been so at odds with his actions as those of French President Francois Hollande in dealing with US spying on its allies. When Mr Edward Snowden, the former US National Security Agency (NSA) infrastructure analyst, revealed that the NSA had bugged the European Union’s offices and embassies of several EU member states, tapped into communications cables, and bugged the 2009 meeting of the G20 leaders in the UK, the French president thundered that this was “unacceptable behaviour” among friends and allies. Yet, on suspicion that Mr Snowden may have been on board the Bolivian President Evo Morales’ plane, Paris took the unprecedented step of refusing the plane permission to fly over its territory on Tuesday.

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Actions speak louder than words and while European leaders have feigned outrage about the US eavesdropping on the communications of its citizens and bugging of their embassies, they did not want the man who revealed the extent of US espionage to seek asylum in their countries. If Mr Snowden were on the Bolivian president’s plane and if he were to ask for asylum during a refuelling stop, it would have placed the government of a European state in an impossible situation. Since EU-wide laws prohibit the extradition of persons to countries with capital punishment, it would be politically suicidal for any government to deliver him to Washington. Yet, while European leaders were vociferous in denouncing US espionage, none were willing to defy the US on the issue.

What do you think of national security leaker edward snowden pollHence, France, Portugal and Spain took the unprecedented step of revoking pre-arranged flight permissions for President Morales’ plane—an action in which they were subsequently joined by Italy.  When the plane, running low on fuel, finally landed in Vienna’s Schwechat airport, President Morales was prevented from leaving for 13 hours while the Austrians satisfied themselves that Mr. Snowden was not on the plane.

Let us be clear: Mr Snowden is not a spy. He did not steal US secrets at the behest of a foreign power. He did not publish the contents of the espionage. He merely revealed its massive reach, and its sheer illegality and violation of human rights on a planetary scale by tracking the communications of citizens the world over. He is a whistleblower. The UN defines a whistleblowers “as individuals releasing confidential or secret information although they are under an official or other obligation to maintain confidentiality of secrecy.”

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The special UN rapporteur for the freedom of expression in 2004, along with his counterparts in the Organization for Security and Cooperation in Europe and the Organization of American states, the Guardian newspaper reports, enjoined all governments to protect whistleblowers from all “legal, administrative or employment-related sanctions if they act in ‘good faith’”. By revealing the magnitude of US espionage against their citizens and governments, Mr Snowden clearly acted in public interest.

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Indeed, before Mr Snowden’s revelations, the Director of US National Intelligence, Mr James Clapper had testified to the US Senate Intelligence Committee that in March that the NSA did not collect data indiscriminately on millions of Americans—a testimony he was compelled to retract this week on the scarcely credible ground that he had “simply did not think” of the relevant provision in the Patriot Act that permitted the collection of such data. Likewise, President Barack Obama had claimed several times that the NSA was not eavesdropping on phone calls domestically without warrants—a claim that is proven wrong by Mr Snowden’s revelations.

Jean Asselborn, the foreign minister of Luxembourg, observed that “Americans justify everything by terrorism. The EU and its diplomats are not terrorists.”

Let us also recall that these very same European governments—especially Spain and Portugal—allowed the use of their “airspace and airports for flights associated with CIA secret detention and extraordinary rendition [torture] operations” as the Open Society’s Globalizing Torture: CIA Secret Detention and Extraordinary Rendition investigation uncovered in a report published earlier this year. An ongoing investigation in France is examining whether the government permitted similar CIA flights. Victims can be carried over their airspace to be tortured but whistleblowers who reveal breaches of their citizens’ privacy and of their own sovereignty cannot! And this from member states of the EU that won the 2012 Nobel Peace Prize for the “advancement of peace and reconciliation, democracy and human rights in Europe”!

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Speaking out against US actions while surreptitiously aiding Washington is, of course, not a novel practice for its European allies. Ten years ago, the then French president Jacques Chirac loudly proclaimed that an assault against Saddam Hussein’s Iraq was unacceptable to Paris but when the US assault started Chirac opened French airspace to US military flights—something he had not done as premier for Reagan’s attack on Libya in 1986. Though Germany also opposed the Iraq war, once it had begun, its foreign minister prayed for the ‘rapid collapse’ of the resistance. Even Russian president Vladimir Putin for a decisive victory for the US ‘for economic and political reasons,’ just as he offered asylum to Mr Snowden on conditions that he knew would be unacceptable.

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The current generation of European leaders have not known a time in their lives when the United States did not dominate their countries—in the economic, political, and perhaps even cultural arenas. For them to symbolically challenge the US is one thing, to challenge it substantively is another thing altogether. Hence, even when their sovereignty was violated with the bugging of their diplomatic missions and EU offices, and when the privacy of their citizens was infringed by the tapping of their phones and digital communications, all they could do was to do all they could to see that Mr Snowden does not seek asylum in their countries even if that meant endangering the lives of President Morales and his entourage. Would they have done that if President Morales was of European descent?

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Poverty of Political Imagination

August 17, 2012 at 11:48 am | Posted in Capitalism, democracy, Free Trade, International Relations, Labor, Political Economy, Production, World Politics | Leave a comment
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Though it should not have caused any surprise, the news that Eurozone economies had contracted by 0.2 percent in the second quarter of 2012 underscored the deepening economic crisis faced by the 17-state bloc. Though the German economy may have grown by 0.3 percent, France recorded a third straight quarter of no growth, and the Finnish, Italian, Portuguese, and Spanish economies all fell sharply. Greece, of course, suffered the steepest fall: 6.2 percent in the second quarter–and was 18 percent below its GDP level in the April-June quarter of 2008.

There is little doubt that the declines have been aggravated by a failure of political imagination. Confronted by budget deficits brought about by high levels of government borrowing and by the collapses of housing bubbles, the creation of a common currency has meant that indebted Eurozone economies have not been able to resort to a currency devaluation to gain a competitive edge. Consequently, the troika of the European Commission, the European Central Bank, and the International Monetary Fund sought to impose an “internal devaluation” on these economies by forcing budget cuts to lower government deficits and wage cuts.

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It follows as the night the day that if budgets and wages are cut, the economy will shrink. Lower government spending due to budget cuts means welfare and pension benefits fall, the cost of health care rises, and educational opportunities vaporize. These impact far more adversely on the elderly and the young. With wage cuts, people have less money to spend and this will depress all sectors of the economy–as sales reduce because of lower spending, companies will slash their work forces leading to greater declines in sales and to further cuts in employment. In the most severely affected of the southern European economies, unemployment rates for the youth are already at 50 percent or more. By May 2012, unemployment in the euro zone had already reached 11.1 percent or 17.5 million people and the International Labor Organization (ILO) estimates that it would rise to almost 22 million in the next four years. And if the euro zone were to break up, the ILO estimates unemployment in the 17-state bloc could reach 17 percent.

The adverse conditions created by the stringent cuts mandated by the troika are aggravated by the greater interest rates imposed on the weaker economies by international financial markets–thus for instance, while Austrian banks and other financial institutions can borrow at 2 percent, Italian banks have to pay 6 percent. As these higher interest costs are passed on by the banks to their borrowers, the cost of doing business in Italy, Spain, Portugal, or Greece increases correspondingly and could even negate the wage cuts imposed by the troika!

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The effects of economic contraction will spread to the better performing economies. After all, Germany has been able to have a strong industrial sector because cheaper credit to other eurozone members had allowed them to buy German products while the German small-scale sector–which employs 60 percent of the country’s labor force–did not have to worry about currency movements in other European countries or fear that a strong German mark will price them out of the market in other countries.

As Susan Watkins has written, German lessons on debt repayment are especially galling to the Greeks.

Under the Nazi occupation, a hefty monthly payment was extracted from the Greek central bank to cover the Wehrmacht’s expenses; in March 1942 an additional forced loan of 476 million Reichsmarks was levied by the Axis powers. Greek partisans put up some of the toughest military resistance to the Nazis in Europe; the damage wreaked by the occupiers’ revenge was commensurate. Reprisals were exacted on the civilian population at a rate of fifty Greeks for every German killed. Much of the country’s infrastructure was destroyed; forced exports and economic collapse helped bring about one of the worst famines in modern European history.

German occupation (strictly a tripartite occupation since the Italians and the Bulgarians also participated) of Greece also led to hyperinflation–Richard Clogg says it was

five thousand times more severe than the Weimar inflation of the early 1920s. Price levels in January 1946 were more than five trillion times those of May 1941. The exchange rate for the gold sovereign in the autumn of 1944, shortly after the liberation, stood at 170 trillion drachmas.

After the war, the question of German reparations were deferred till German reunification and in the so-called 2+4 (Bonn and Berlin with the US, the USSR, the UK and France) agreement of 1990, Greek claims were excluded. Though several Greek politicians including the current prime minister, Antonis Samaras when he was the foreign affairs minister in 1991, had raised the issue of 476 million marks with the Germans, their demands were summarily dismissed. If this money had, in fact, been paid as the Germans are legally obliged to do, with interest for more than half a century, Greece would no longer be a problem economy.

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It is galling too because while ancient historical myths as Greece being the ‘birthplace of democracy’ are routinely trotted out in discussions of the contemporary situation, recent history that people over 70 remember are carefully hidden from view! Be that as it may.

What is crucial is that the crisis demonstrates that capital and finance markets need to be regulated more stringently. It was irresponsible lending that led to high government deficits in Greece and to the housing bubbles in Spain and Ireland, to the subprime crisis in the US, and to the meltdown of the Icelandic economy to mention just the most obvious cases. Financial markets are continuing to demand punitive rates of interest from the weaker economies. The unchecked power of finance must be corralled–or we will enter another great depression just as the obsession with the gold standard led to the depression as Karl Polanyi showed in his Great Transformation.

What is required is a new political imagination not the shrill advocacy of measures that have already aggravated the situation!

What Difference Will Hollande’s Victory in France Make for Europe, for the World?

May 6, 2012 at 4:25 pm | Posted in Capitalism, democracy, International Relations, Labor, Political Economy, World Politics | 6 Comments
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Francois Hollande has defeated Nicolas Sarkozy to become the first Socialist president of France in 17 years. He campaigned on a platform to renegotiate the austerity package that the German Chancellor Angela Merkel and Sarkozy had championed, with the support of the British Prime Minister David Cameron and other ‘center-right’ politicians in Europe. The victorious Hollande argued that the way out of the fiscal crisis enveloping the Eurozone is to focus on growth rather than to reduce deficits. The austerity packages, by sharply curbing government expenditures not only leads to unemployment but also reduced payments to the elderly, the young, and the unemployed. They can therefore no longer consume at their previous levels leading to further unemployment as businesses curtail production and the economy continues its tailspin–as has already happened in Greece, Portugal, Italy, Spain, and Ireland.

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But will Hollande be successful in reviving the Eurozone economies? Will this ‘marshmallow’ man (so-called because he hates fights) be strong enough to stand up to Merkel? His potential choice as prime minister, Jean-Marc Ayrault. has suggested that rather than reopening the draft fiscal treaty driven by Sarkozy and Merkel., Hollande will seek to incorporate a minor amendment on growth. This would not be surprising as Hollande’s previous experience in government was as an aide to the last Socialist president of France, Francous Mitterand, who in his second term initiated a wave of neo-liberal reforms that de-regulated much of the French economy.

Socialist and Labor parties in Europe, as political expressions of trade unions since the late nineteenth-century, have floundered as manufacturing has shifted to lower-waged countries and trade unions have suffered a tremendous erosion of memberships. After Margareth Thatcher defeated the miners strike in 1984, European unions have steadily declined in political and social significance.

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What, too, is a ‘growth’ strategy has never been addressed except to say that it should not be based on austerity measures. As manufacturing is becoming increasingly automated–labor costs amounted to only $7.10 of a total production cost of $178.40 for Apple’s iPhone 4–high-paying jobs in industry are simply disappearing. In large, vertically-integrated industrial operations, workers going on strike in a singe shop can disrupt the entire assembly line and hence undermine corporate profits. If workers in a gear-box plant down their tools, the entire auto assembly line will soon grind to a halt. Workers in the service sector–in the fast food industry or tellers in banks–simply do not have this structural power and hence their ability to bargain for better wages are far more limited. And as industrial production relocates overseas, more and more workers enter the service industries.

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With lower incomes, their ability to consume is more limited. And this makes it less profitable to produce more goods and so industrial production continues to plummet as capital is increasingly allocated to financial speculation. This has the strange effect that whenever an election is held, the first question asked by the talking heads on TV is what would be the reaction of the markets to the results–because after the de-regulation of capital controls, the flows of capital into and out of a country are crucial to its economy and there is not government mechanism to regulate these flows.

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In these conditions, governments are compelled to maintain market-friendly conditions and this is not something Hollande is likely to change. So what does growth-oriented policies mean? This needs to be spelt out beyond saying that it is the opposite of austerity programs, How is the economy going to add well-paying jobs in a situation when manufacturing is being steadily downgraded in the hierarchy of economic activities?

Europe: The Democratic Deficit

April 12, 2012 at 10:45 am | Posted in Capitalism, democracy, Free Trade, Human Rights, International Relations, Political Economy, World Politics | Leave a comment
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“A typical sight during the pre-election protests,” in Spain last year Katherine Ainger wrote in the Guardian, “was a respectable middle-aged man with a cigarette in one hand and a marker pen in the other going from municipal bin to municipal bin writing ‘Vote here’ on the lids.” A few months later, at the other end of the Eurozone, in return for loans from the European Union, leaders of all three major political parties in Greece were required to sign pledges not to rescind a savage austerity program cutting more than 3.3 billion euros from the budget, rendering these pledges concrete and irreversible regardless of the outcome of the general election in April 2012. If the ‘typical sight’ during last year’s Spanish elections suggested that all political parties are the same, the demand that the EU wrested from the Greek politicians proved that their general election, announced for May 6, was rendered meaningless as the victors could not implement a new program. Elections become meaningless.

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Paradoxically, just as French President Nicholas Sarkozy and British Prime Minister David Cameron after a brief hesitation, abandoned their client dictators in North Africa–even violently  overthrowing the Gaddafi regime in Libya and chafing at the bit to do the same to the Bashar al-Assad regime in Syria–Sarkozy and German Chancellor Angela Merkel abandoned all pretense of supporting democracy when they forced then Greek Prime Minister Giorgios Papandreou to cancel a referendum he had proposed on the harsh terms imposed by the European Union for a bailout to Athens in November 2011. Threatening to expel Greece from the Eurozone, they effectively forced Papandreou to resign two days later and for him to be replaced by a national unity government headed by a former Vice President of the European Central Bank, Lucas Papademos.

Reporting in the Guardian, Helena Smith wrote:

For a country not only burdened by debt but closer to default than ever before, his appointment at the helm of a transitional government in Athens would be widely welcomed. An avuncular figure, Papademos is well respected in the European Union. In the corridors of power in Paris and Berlin, the capitals that count in deciding Greece’s fate, he is seen as a safe pair of hands, more capable than most at navigating the crisis-hit nation away from the shores of economic Armageddon.

Yet, this ‘safe pair of hands’ was the very one who, as president of the Greek Central Bank cooked the books so that Greece could enter the monetary union–and he was helped in this creative accounting by the European division of the Goldman Sachs—which is to be headed soon by the current president of the European Central Bank, Mario Draghi—for a fee of $300 million. Northern European governments only feign ignorance of their Mediterranean neighbors’ debts and subsidies, as Wolfgang Streeck notes, because their surveillance agencies could not “have failed to notice how countries like Greece saturated themselves with cheap credit after their accession to the Eurozone.” In fact, as government subsidies slowed down in conditions of budget consolidation, it was private flows that made up the difference–and it profited the export industries of the north because of the improved purchasing power among the Mediterranean countries—the prosperity of the north was predicated on the indebtedness of the south! Despite the fact that Eurostat had disclosed in 2004 that billions of euros had been shifted off public records in Greece, Athens continued to enjoy triple-A ratings.

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Even the money being borrowed by Greece may have been the money of wealthy Greeks sent abroad as the Greek upper classes were practically tax-exempt as Stathis Kouvelakis has pointed out. When PASOK took office in 1981, it began to institute a social welfare system but did not seek to enlarge the tax base and even the middle class and the moderately wealthy remained exempt. In a sense then it is the untaxed money of richer Greeks, recycled through European banks, that is the source of the Greek debt! Yet, precisely because these funds were recycled through European banks, a Greek default would undermine the whole European financial system.

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It is no wonder then that Sarkozy and Merkel refused to countenance a referendum in Greece and not only installed their own man at the helm of the government in Athens but placed officials from the ‘troika’–the European Union, the European Central Bank, and the International Monetary Fund–to oversee the operations of the government. Unless the Greek government complied with the stringent terms of the agreement imposed on it, funds in the escrow account will be withheld from Athens: a 32 percent cut in the minimum wage for those under 25, a 22 percent cut for those above 25, a cut in pensions by 25 percent on top of the laying off of some 200,000 workers over the past 12 months.

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Given that politicians are hand-in-glove with the banks–from Goldman Sachs helping the Papademos shift billions of euros off the books to the Greek police beat up its Greek citizens to impose order for banks and hedge funds–it is no wonder that citizens are turning their backs on the politicians!

Notes on the Spanish General Strike

March 31, 2012 at 2:19 pm | Posted in Capitalism, democracy, Human Rights, International Relations, Labor, Political Economy, Production, World Politics | Leave a comment
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To be in Barcelona on Thursday March 29, 2012 was to be a witness to a massive tidal wave of humanity on the streets, stretching beyond the horizon in every direction from Placa Catalunya, the city’s symbolic center. This was a response to the general strike called by Spain’s two largest trade unions–Union General de Trabajadores (UGT) affiliated to the Socialist Party, and the Comisiones Obreras (CCOO)–in response to the conservative Partido Popular (PP) government’s decision to announce the most austere budget since the transition to democracy 37 years ago. As evident on the streets of Barcelona, it was much more than a workers’ protest: though some 30 percent of employed workers had said that they would participate in polls before the strike, Spain has a high rate of unemployment–23 percent or double the European rate and almost half the people under 30 are out of work.

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The unemployed are the backbone of the indignados (“the outraged”) movement that in May last year that with their tents in city centers and their emphasis on transparency, diversity, egalitarianism, and direct democracy, inspired the Occupy movements across the world. The employment situation is only likely to worsen as Mariano Rajoy, the new PP prime minister who took office in December last year, enacted an Emergency decree two months ago that sharply curbed labor rights. Permanent workers in Spain were eligible for 45 days’ pay for each year of employment if they were fired; this was substantially reduced to a maximum of 33 days and in Andalucia alone eight times as many workers were let go in the two months after the decree was promulgated than in the corresponding period last year. Companies were also permitted to reduce working hours.

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The greater flexibility to hire and fire workers provided by the new labor laws may provide greater incomes in the short run to employers but will further depress prospects of economic growth in Spain. Spanish wages are already the lowest among the EU 15 (members of the European Union on 1 May 2004 before the inclusion of states from the former Eastern Europe) and the new law would further depress wages in the context of the high rates of unemployment and provide for more short-term employment–which will lead to a reduction in effective demand.

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Moreover, Spain’s economic problems do not stem from high government deficits but from the burst of a property bubble and absurd laws governing liability of borrowers. The Spanish government had run a balanced budget from the time it joined the Euro in 1999 to 2007–that is to say it did not borrow at all during this period unlike many other economies, including Germany, even though interest rates on Eurozone countries fell sharply. However, though Madrid resisted borrowing at lower rates, Spanish citizens could not resist the lure of cheap interest rates and it fueled a housing boom–housing prices rose by 44 percent between 2004 and 2008.

Houses in Spain couldn’t be built fast enough. Great swathes of the coast and the countryside became clustered with urbanisations, instant housing estates thrown up to cater to what seemed to be an endless stream of Britons, Germans, and other norther Europeans now able to live the kind of life abroad of which their parents could only have dreamed.

Once the bubble burst with the financial crisis, however, the economy unraveled rapidly–the number of empty and unsold properties in the country is estimated to be between 700,000 and 1,500,000–and some 40 evictions are taking place across the country per day. Employment in construction collapsed and laid-off construction workers account for fully a third of the unemployed. What is more, Spanish law does not allow homeowners to simply hand over the keys and walk away from a property if they can no longer pay the mortgage. They remain liable for the remainder of the mortgage if the sale of the property does not cover the full extent of the mortgage–and they seldom do in a period when property prices have fallen by more than 19 percent. Hence, unlike most other countries, the unemployed in Spain not only lose their houses but remain responsible for part of their mortgages. This has meant that young people who had moved out of their parental home have often had to move back–and even that grandparents have had to use their pensions to help support their children and grandchildren. In turn, the iaiaflautas or retirees and grandparents have mobilized themselves to occupy buses to protest against price hikes, bank lobbies to oppose bailouts, and health departments to turn back cutbacks.

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Hence, even if reports say that the general strike led to a fall in electricity consumption by 16.3 percent compared to a fall of 16.9 percent in the general strike of September 2010, it doesn’t account for the vast mobilization of the indignados, the unemployed, the students, and the iaiaflautas. What it underlines is that a new politics is emerging, a politics that as Ferran Pedret has put it “is characterized by the absence of leaders, by assemblies as a form of organization, and a diversity and transversality.”

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it was this that was responsible for the massive turnout–what the strike symbolizes is a new politics, a politics beyond those of political parties because the parties are fully integrated into the system itself that must be changed. So no mere percentages of electricity consumption, businesses that stayed open, or workers participating in the strike can adequately assess its impact.

 

Iceland–An Independent People

April 20, 2011 at 2:49 pm | Posted in democracy, Free Trade, International Relations, Labor, Political Economy, World Politics | 2 Comments
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In the midst of the NATO campaign against Libya and the budget deal between Republicans and the Democrats in the US, a far more historically significant event appears to have fallen off the radar. On April 9, 2011, the people of Iceland voted for the second time to reject a government proposal for Iceland taxpayers to repay some €4 billion to the governments of Britain and the Netherlands which had compensated their domestic depositors in the collapsed online bank, Icesave. Initially, the British and Dutch governments had pressured the Iceland government to agree to repay them over fifteen years at a 5.5 percent annual interest–which was estimated to cost each household in the tiny island nation about €45,000 over the period. This was rejected by 91 percent of the voters in a referendum in March 2010. After subsequent negotiations, London and Amesterdam agreed to lower the interest to 3.2 percent and stretch the repayment period to 30 years between 2016 and 2046. The deal was accepted by a large majority of 44 in favor and 16 opposed in the Althingi, Iceland’s parliament, which also rejected a clause to submit the bill to another referendum. Nevertheless, as the President, Olafur Ragnar Grimsson, refused to sign the bill, it was automatically subject to a referendum wherein it was rejected by almost 60 percent of the voters.

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The Dutch and British governments–which had used anti-terrorist legislation to seize assets of the failed Icelandic banks–have threatened to scupper Iceland’s application to join the European Union and to take the island nation to court. Reykjavik has insisted that the two governments would get most of their money back and the assets of the Landsbanki bank which set up the Icesave operation would be sold and was expected to realize 90 percent of the Icesave debt. What was at issue in the referendum was not whether London and Amsterdam would be compensated or not–but whether private citizens should be expected to shoulder the burden of repayment of a bank’s debt in which they had no hand in incurring and from which they did not benefit. The threat to take Iceland to court is important because it is to frighten off other states which also face indebtedness due to the financial crisis like Greece, Ireland, and Portugal. It is simply the question of whether the bankers have to bear the burden of the bad loans they have extended.

Iceland is, in fact, a case study of neo-liberalism gone awry. Before the late 1990s, Iceland’s financial sector had been small and the banks were largely government-owned. In 1998, the two leading parties–the Independence Party and the Centre Party–embarked on a privatization of the banking sector, assigning Landsbanki to grandees of the Independence Party and Kaupthing to the Centre Party. A new private bank, Glitnir, was also set up merging several smaller banks. None of these banks had much experience in international finance, but like South Korean banks a decade earlier, these banks tapped into abundant cheap credit and easy capital mobility. Unlike the South Korean banks, their strong ties to political parties, the merger of commercial and investment banking, and low soveriegn debt meant that they got extremely high grades from the credit ratings agencies and as Robert Wade and Silla Sigurgeirsdottir note: “government policy was now subordinated to their ends.”

With the government relaxing mortgage rules to permit loans up to 90 percent of value, the banks rode the wave–by buying shares in each other they inflated share prices and enticed depositors to shift their savings to shares. In less than 10 years after the privatization of banks, Iceland had the fifth highest GDP in the world, 60 percent higher than that of the United States, and the assets of their banks was valued at 800 percent of Iceland’s GDP. As land prices soared, Icelanders loaded up on lower-interest yen- or Swiss-franc debt.

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By 2006, Iceland’s current account deficit had soared to 20 percent of its GDP. Late in that year, Landsbanki established an online bank, Icesave, to attract deposits from overseas clients and by offering highly attractive interest rates, it raked in millions of pounds from England, and later millions of euros especially from the Netherlands. This was soon copied by the two other banks. These were established as ‘branches’ rather than as ‘subsidiaries‘ which meant that they were to be supervised by the icelandic Central Bank rather than regulators in Britain or the Netherlands. Because of Iceland’s obligations as a member of the European Economic Area to insure bank deposits, no one thought to worry about whether the Icelandic Central Bank had the capacity to oversee the vastly extended operations of the island’s three major banks.

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This happy bubble burst in September 2008 when Lehman Brothers collapsed, within a fortnight of which the three big Icelandic banks collapsed and by November of that year the krona had fallen from its pre-crisis level of 70 to the euro to 190 to the euro, so sharply cutting the islanders’ purchasing power that the three McDonald’s franchises were forced to close as the cost of importing ingredients made the price of burgers prohibitive! The country’s stock market lost 98 percent of its value! If ever there was a definition of crisis, this was it. It was the first time in over 30 years that a ‘developed’ state had to seek assistance from the International Monetary Fund.

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In the light of all this, Iceland’s voters have had the courage to face up to the crisis. It was the first country to kick out the government which had failed so spectacularly. Unlike its neighbor in the North Atlantic–Ireland which underwrote its own banking collapse and loader every household with €80,000 in debt–Iceland let the three banks go under and they imposed capital controls to prevent the flight of capital. Though unemployment in Iceland today is 7.5 percent in Iceland–up from 2 percent in 2002–but just over half of Ireland’s 13.6 percent. Though the krona lost almost half its value, inflation is down sharply and without having to pay back foreign creditors, its government finances are in much better shape than those of Greece, Ireland, or Portugal.

Libya and the Politics of Intervention

March 28, 2011 at 10:17 pm | Posted in Arms Control, Human Rights, International Relations, Nuclear Non-Proliferation, World Politics | 2 Comments
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US-led attacks appear to have turned the tide against Colonel Muammer Gaddafi’s counter-revolution in Libya. Attacks by some 120 Tomahawk cruise missiles–each costing $575,000–and some eight days of air raids have established a ‘no-fly zone’ over Libya and US, French, British, Danish, Canadian, and other air forces have also targeted the Libyan government’s ground forces to deadly effect. The Libyan rebels, who had been virtually encircled in Benghazi have, as a result been able to roll back the government forces from Brega, Ras Lanuf, Ajdabiyia, and other towns in the east and are now attacking the town of Sirte, Gaddafi’s birth place.

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How are we to react to this exercise of Western military might against a state of the Global South? People like Gilbert Achcar and Juan Cole have vigorously defended the intervention in Libya. To them, the alternative would have been a brutal massacre of Gaddafi’s opponents by the better trained and equipped militias of the regime. For them, there were no other countervailing forces capable of intervening–not the African Union or Arab States. Western intervention was the only available option to stop a murderous dictator. It was sanctioned by the Arab League and the rebels themselves had pleaded for a ‘no-fly’ zone–a plea from a popular movement that could not be ignored. This was, a humanitarian intervention and not an attempt to secure access to Libya’s oil resources. After all, as Achcar points out, virtually all Western countries had oil companies operating in Libya already: “Italy’s ENI, Germany’s Wintershall, Britain’s BP, France’s Total and GDF Suez, US companies ConocoPhillips, Hess, and Occidental, British-Dutch Shell, Spain’s Repsol, Canada’s Suncor, Norway’s Statoil.”

There is of course the obvious objection: the West applies double standards, not only to Israel’s murderous assault on the Palestinians in Gaza but also to the brutal repression of protest movements in Bahrain and Yemen. As Richard Falk puts it:

How is this Libyan response different in character than the tactics relied upon by the regimes in Yemen and Bahrain, and in the face of far less of a threat to the status quo, and even that taking the form of political resistance, not military action. In Libya the opposition forces were relying almost from the outset on heavy weapons, while elsewhere in the region the people were in the streets in massive numbers, and mostly with no weapons, and in a few instances, with very primitive ones (stones, simple guns) that were used in retaliation for regime violence.

Indeed, almost from the very beginning of the protests, the rebels had taken arms and before Colonel Gaddafi’s forces launched a counter-assault, ragtag rebel militias had taken towns militarily from the regime’s gendarmes. Claiming that the regime was using African mercenaries, the rebels targeted anyone who looked “African’ including members of Libya’s African tribes because it is both an African and an Arab state.

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Analogies are often drawn to the situation in Rwanda but as the allusion to the African tribes in Libya suggests, no binary ethnic divide exists in Libya. There are many tribes and the confrontation between the regime and its opposition does not fracture along a single overriding ethnic divide and there is no genocidal intent in what is essentially a civil war between the regime and its opponents.

The character of the opposition also remains ambiguous–they include former members of the regime, local notables, radical Islamists, and eastern tribes opposed to western tribes. This was not the democratic movement that had swept autocrats from office in Tunisia and Egypt. The Arab League and the Gulf Cooperation Council may have supported the imposition of ‘no-fly’ zone but they do not speak for the Arab street and many of their members–Bahrain, Yemen–are actively engaged in brutally repressing democracy movements in their own states, and Saudi Arabia and other members of the Gulf Cooperation Council have intervened in Bahrain to help the al-Khalifa family crush its opponents.

The United Nations Security Council authorized the intervention–but only because the five members who abstained (Russia, China, India, Brazil, Germany) did not exercise their responsibilities. If they did not have enough information as the Indian delegate said–they should have abstained. The Russian Foreign Minister has subsequently said that the US-led air raids have far exceeded the Security Council’s authorization: this had been also raised by Amr Moussa, the Secretary General of the Arab League before he was pressured to retract his words.

Moreover, since Gaddafi has paid off many tribes, especially in the west, with oil revenues over the last 40 years, he has a solid core of support. What happens when the rebel forces attacks these population centers? Does the Security Council resolution to ‘protect the civilians’ not apply to them?

As also mentioned in an earlier post, if the regime follows through on its promise to arm its supporters, it could lead to a prolonged period of civil strife if Gaddafi is ousted as remnants of his supports could mount an armed resistance. This could lead to a new flow of African asylum-seekers to Europe. After all, as Achcar notes, a deal struck between Italy’s Silvio Berlusconi and Gaddafi reduced the flow of asylum-seekers to Italy from 36,000 in 2008 to a mere 4,300 in 2010. A prolonged stalemate or civil war in Libya, moreover as Vijay Prashad has written would constrain the West’s “ability to transit the oil that sits under its soil, and so dangerously harm the “way of life” of those who matter. Events had to be hastened.”

Intervention in Libya also raises a question: if Gaddafi had not abandoned his nuclear program in 2003, would the West have intervened in its civil war. Even though Gaddafi had sided with Idi Amin, President Yoweri Museveni of Uganda harshly criticizes “by now habit of the Western countries over-using their superiority in technology to impose war on less developed societies without impeachable logic. This will be the igniting of an arms race in the world.”

Finally, to the argument that there was no alternative to Western intervention in preventing a blood bath, the African Union had created an ad hoc commission to negotiate between the Libyan regime and its opponents but it was not allowed to begin its work on account of the air strikes and missile launches.

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It is also perhaps worth wondering whether the United States which had been opposed to the French and British clamor for intervention, suddenly changed its mind just as Der Spiegel published photographs of grinning American troops posing with Afghan corpses–an event that got scant coverage in the event of the war against Libya. Otherwise, it may have got as much coverage as the atrocities in the Abu Gharib prison in Iraq. So much for humanitarian intervention!

 

No-fly zones, Libya and the Arab Revolt

March 17, 2011 at 8:26 pm | Posted in democracy, Human Rights, International Relations, World Politics | 2 Comments
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The United Nations Security Council–with the abstention of Russia, China, Germany, India, and Brazil–has done what military analysts have said would be folly: it has voted to impose a ‘no-fly zone’ on Libya and ‘take all necessary action’ short of ‘a foreign occupation force of any form’ to force Colonel Muammar Gaddafi out of power. ‘All necessary action’ could involve a ‘no-drive zone’ to cripple the Libyan regime’s armored vehicles from attacking Benghazi, Misrata, Tobruk, and other remaining rebel strongholds as well as sending in military advisers.

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Advocates of the resolution have evoked humanitarian reasons–chiefly the regime’s brutal counter-assault using its air force and paramilitary forces to roll back the rebels–for intervention. This is buttressed by the belief that Libya is not even a third-rate power and its defenses can easily be destroyed. And the rebels are clothed in the accoutrements of democracy though the only thing that unifies the rebels is their opposition to the Gaddafi regime and it is not clear what a post-Gaddafi Libya will look like or even whether it will remain unified.

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If humanitarian reasons are the chief justification, then it is clear that there is a double standard that is applied. Much has been made of the Arab League’s call for the imposition of a no-fly zone over Libya, but there has been no report of the fact that it was opposed by both Syria and Algeria. The states in support of the resolution–Saudi Arabia, Bahrain, Kuwait, the United Arab Emirates, Jordan, Oman, and Yemen–are hardly paragons of democracy. The governments of Yemen and Bahrain have brutally crushed demonstrations in their own countries; and Saudi Arabia and four other Gulf Cooperation Council states have sent more than 2000 troops to Bahrain to help the regime stay in power! Saudi Arabia has moreover prohibited protests in its eastern province, declaring such protests “illegal and un-Islamic”–and Saudi Arabia has more than 8,000 political prisoners!

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More importantly, there has been virtually no report in mainstream media in the West, that the African Union has condemned attempts to impose a no-fly zone on Libya. The AU’s 15-member peace and security council resolved, to “reaffirm[s] its firm commitment to the respect of the unity and territorial integrity of Libya, as well as its rejection of any form of foreign intervention in Libya.” It formed an ad hoc committee composed of South Africa, Mauritania, Uganda, and the Democratic Republic of Congo to engage in dialogue with all parties in Libya for a speedy resolution of the crisis.

There is no certainty that the military operation will be a smooth and easy one. Less than a month ago, US Secretary of Defense, Robert Gates, had told cadets at West Point that any secretary of defense who advises a president to intervene militarily in Asia or Africa ought to have his head examined. Admiral Mike Mullen, the Chairman of the US Joint Chiefs of Staff, has said that even the imposition of a ‘no-fly zone’ let alone all the other ‘necessary actions’ voted on by the Security Council will be “an extraordinarily complex operation to set up”–and of course, the major burden will be on the United States which is already engaged in two wars. British Prime Minister David Cameron may have led the charge for a ‘no-fly zone’ but Britain does not even have an aircraft carrier! General Wesley Clark, who commanded NATO forces in Kosovo, has argued that intervention in Libya does not meet critical tests: it is not in US national interest, the purpose of intervention is not clear, political prospects were Gaddafi to be ousted is unclear.

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A ‘no-fly zone’ moreover, might have had a chance of success ten days ago when the Gaddafi regime launched its counter-assault. Now with the rebels in full retreat, and the regime ascendant–with the regime poised to assault the rebel capital of Benghazi–it is not clear whether a no-fly zone alone will suffice. A ‘no-drive zone’ is an even more ‘complex operation’ and increases the odds of British, American, and French casualties–Germany has refused to contribute troops to a NATO operation against Libya and Turkey is unlikely to participate as well. Colonel Gaddafi has promised to take the battle into the Mediterranean and that increases the prospects of Western civilian casualties and an escalation of the war. It will be a war Gaddafi may well lose, but it is not likely that NATO can extricate itself easily–and remember there is no international sanction for a foreign occupation force ‘of any form’ in the Security Council resolution!

If intervention is to promote democracy, George Monbiot notes that the Economist Intelligence Unit ranks Libya 158th of 167 countries on its Democracy Index while Saudi Arabia is ranked 160th–and in Libya “women are not officially treated as lepers were in medieval Europe.”

Here, the double standard is all too obvious. Saudi Arabia in the only remaining “swing producer”–the only oil-producing nation with enough excess capacity to raise production if supplies fall short of demand. But US diplomatic cables released by Wikileaks suspect that Saudi claims of reserves are exaggerated by almost 40 percent.

The Arab Revolt is not really about democracy–elections have not delivered results in the past, and when election results have angered the United States as in the Hamas triumph in Palestine, the US has condemned the results and applauded Israel’s punitive punishment of Gaza. The protests are about a wholesale change–not merely a change of rulers–because where there is a legal opposition, the opposition is often equally discredited.

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Key to the revolt has been an explosion of information–not only through al-Jazeera, but also through the Internet, travel, and TV–and the enormous growth of people aged below 25 to levels unmatched almost anywhere else. The youth exposed to a wider range of information and experiences have greater aspirations–and now that two of the tyrants have been ousted, the sense of empowerment is raised as Brian Whittaker notes.

It is this sense of empowerment that will take a beating if Western forces occupy Libya for a long while. It will signal pro-Western governments in the Persian Gulf–Saudi Arabia and the other oil-rich sheikdoms that they can count on mealy-mouthed appeals for restraint from Washington, London, and Paris as they crush their domestic oppositions. Ironically, this may play well in Iran’s favor. The Islamic Republic is very careful not to portray the conflicts in a sectarian light: if it can portray it as an attack on Muslims, and when Saudi Arabia, the Custodian of Holy Places, sends its troops to slaughter other Muslims, Iran raised the issue not with the Arab League but with the Organization of Islamic Conference. The Iranian Foreign Minister asked the Conference: “How can one accept that a government has proceeded to invite foreign military forces for the crackdown of its own citizens?” Tehran will gain even more credibility with the Arab forces when American, British, and French forces intervene in Libya.

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