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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Reversing the Tide? Southern European People’s Challenge to Neo-Liberalism

September 28, 2012 at 4:16 pm | Posted in Uncategorized | Leave a comment
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Earlier this week, confronted by massive street protests and criticism from his coalition’s junior partner, the center-right Portuguese Prime Minister, Pedro Passos Coelho, reversed his controversial plan for “financial devaluation.” When tax revenues fell by 3.5 percent in the first seven months of this year–due to unemployment rates spiking to above 15 percent–against a projected increase of 2.6 percent for the year, it became apparent that Lisbon would not be able to meet the budget deficit target of 4.5 percent of GDP imposed by the troika of the European Union, the European Central Bank and the Interantional Monetary Fund as a condition for disbursing the next tranche of the €78 billion bailout they promised.

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 Passos Coelho’s solution to this dilemma was to cut employer’s social security contribution by 5.75 percent and finance this by increasing workers’ contributions by 7 percent. This would have been tantamount to a currency devaluation by significantly reducing unit labor costs and was heralded as a “potential game changer” by the IMF’s Poul Thompsen.

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In the continued decline of the country’s GDP and high rates of unemployment, this proposal was condemned by members of the prime minister’s own party as well as by the leader of the junior partner in his coalition–the conservative People’s Party–and by many business leaders as well as of course by more than half a million people who marched in Portugal’s cities in the largest demonstrations since the end of the Salazar dictatorship in 1974.

 

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We are not the children of the revolution.” their posters said, “We are the parents of the next revolution.” Meanwhile, in Spain, the miners of Asturias have been battling the police for months with rocket launchers, and protestors jn Madrid were met with a fusillade of rubber bullets. With over half the youth unemployed, and the government of prime minister Mariano Rajoy planning to implement deeper austerity measures in order to say that these were taken by their own volition rather than imposed by the troika as a condition for a bailout, the right and the left united in opposition. In recognition of this united opposition, the riot police in Madrid hid their identity badges:

A startling example of police culture came in a tweet from José Manuel Sánchez of the Unified Police Union (SUP). “We support them not wearing badges for violent demonstrators,” he said during the demonstration. “Give it to them hard.” Television pictures of baton charges and rubber bullets suggest they did exactly that.

 And in Spain’s second city, a million and a half people led by the provincial government marched for Catalan independence–here it was not merely the demonstrators but the regional legislators who were challenging the post-Franco accord.

 

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 Athens exploded as well in a burst of flames as the unions called a general strike grounding flights, shuttering shops, museums, and monuments, and docking ships for hours as over 200,000 people demonstrated outside parliament protesting the new round of austerity measures the three-month old government of prime minister Antonis Samaras. Though details of the cuts were not made public, it was expected to slash pensions, wages and benefits even more.

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All across Europe, these riots seem a repetition of the ‘anti-IMF’ riots that raged across Latin America and Asia in the 1980s and 1990s. As Ha-Joon Chang writes 

it is ironic to see the European governments inflicting an old-IMF-style programme on their own populations. It is one thing to tell the citizens of some faraway country to go to hell but it is another to do the same to your own citizens, who are supposedly your ultimate sovereigns. Indeed, the European governments are out-IMF-ing the IMF in its austerity drive so much that now the fund itself frequently issues the warning that Europe is going too far, too fast.

Just as the IMF number crunchers did not take into account the people whose livelihoods would be crippled by the savage cuts being proposed by the troika and imposed by their puppets in Athens, Lisbon, Madrid. But as the Gurardian editorialized:

Amid all their talk of haircuts (on debt values) and tranches (of loans), European leaders have barely talked about the people who are bearing the brunt, first of the crisis and then of the throat-clearing that passes for firefighting in Brussels. This is not accidental. The euro project has relied upon draining the politics out of the inherently political: the very existence of a 17-nation economic union without a common treasury is testimony to that.

The protests are now inserting the politics back into the issue–demanding that those who had no part in the financial mess created by the collapse of housing bubbles, bad loans, and high deficits should not bear the price of these costly gambles made by bankers and politicians. it is not merely the question of bad financial regulations–it is the more the question of democracy that is at stake in Europe. The Portuguese reversal of its “financial devaluation” is the first step towards reversing the tide of neo-liberalism! A small step for Portugal, a giant leap for Europe!

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.

 

Will Barack Obama be the first American president to invade Africa?

April 21, 2011 at 9:29 pm | Posted in Arms Control, democracy, Human Rights, International Relations, Political Economy, World Politics | 1 Comment
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One month into the bombing of Libya by NATO forces, if anything the situation is worse than before. After an initial assault, the United States withdrew to a supporting role but those of its NATO allies that chose to participate in the military attack against Colonel Muammer Gaddafi’s forces–mainly France and the UK, with some support from Spain, Denmark, Canada, and Belgium–have discovered that they do not have the military force required to roll back the Libyan government troops. Without anti-tank planes, they were unable to stop the pro-Gaddafi forces’ advance against the rebels in the east or to relieve the siege of Misurata. President Barack Obama has now authorized the use of US Predator drones and is gradually being drawn out of the supporting role he had sought. Will the NATO allies and the US have to commit ground troops to resolve the impossible situation they have got themselves into? Will Barack Obama go down in history as the first American president to invade an African state?

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Despite the aerial bombardment of Colonel Gaddafi’s forces, the ragtag militia of the rebels do not have the training or the weaponry to withstand his forces which have now adapted measures to blunt the effectiveness of air raids–using human shields, riding in pickup trucks, using camouflage. About the rebels, a New York Times correspondent wrote:

… by almost all measures by which a military might be assessed, they are a hapless bunch. They have almost no communication equipment. There is no visible officer or noncommissioned officer corps. Their weapons are a mishmash of hastily acquired arms, which few of them know how to use.

Military chiefs on both sides of the Altantic had urged caution but France’s Nicholas Sarkozy to boost his domestic poll ratings and Britain’s David Cameron seeking some of the glory that Margaret Thatcher reaped from her victory over Argentina in the Malvinas conflict urged President Obama to support their ‘humanitarian intervention’ in Libya. Yet, there was never any clarity as to who the rebels were–as General Carter Ham, commander of the US Africa Command, told Congressional leaders and it appears that they represent coastal tribes of Cyrenaica while the tribes of the interior and the west continue their allegiance to Colonel Gaddafi.

Most notably, the objectives of the NATO mission in Libya are unclear or cannot be achieved merely by an air campaign. Its efforts have certainly postponed the defeat of the insurgents but without ground troops, it cannot oust the Colonel from power even though Sarkozy, Brown, and Obama have all called for his departure as the only acceptable solution. Note that this was not mandated by the UN Security Council resolution 1973 which sanctions the NATO operation and the resolution had explicitly forbidden ‘foreign occupation troops of any form.’ Yet, Britain, France, and Italy have all said they would send ‘unarmed military advisors‘–a prospect almost certain to involve deeper involvement: what would happen if these ‘unarmed’ advisors were targeted by the Libyan government forces as they surely are a legitimate military target?

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Insistence of the removal of Colonel Gaddafi from power rules out a negotiated settlement. A more likely prospect is that Libya will be partitioned into an eastern part which will effectively become a NATO protectorate with the bulk of Libya’s oil supplies. Neither France nor Britain has sufficient forces to keep pro-Gaddafi forces from attacking the Benghazi enclave–and it would require US boots on the ground–making the first African-American president of the US to be the first American president to invade and occupy an African state! After all, Khalifa Haftar who has been claiming to be the field commander of the rebel forces had been living near the CIA headquarters in Langley, Virginia for 20 years and they had provided him with a training camp.

The whole of Libya–east and west–would require massive reconstruction assistance given the damage done to its infrastructure by civil war and aerial bombardment. Who is going to fund this reconstruction? Is it ‘humanitarian to bomb the hell out of a country and then leave it in shambles? After all, the neo-conversatives claim that Iraq–which has far greater oil reserves–can pay for its own reconstruction remains hollow eight years after the US invasion.

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Even if the Gaddafi regime were to implode due to economic sanctions and the loss of the bulk of its oil revenues, his boast of arming every Libyan is likely to plunge the country into a prolonged phase of violent disruptions.

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!

 

Eurozone’s Woes

December 4, 2010 at 5:47 pm | Posted in International Relations, Political Economy, world politics | Leave a comment
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The Euro–the single currency adopted by 16 states–has been under siege for over a year beginning with the election of a new government in Greece in September 2009 which sharply revised the country’s public deficit from 6 percent of GDP to 12.7 percent. This led to a loss of confidence in the government’s ability to repay loans and raised the cost of borrowing, creating greater difficulties for the government to repay the 300 billion euro debt bequeathed to it by its predecessor in office. Normally, a government faced with high debts could devalue its currency and thereby increase the competitiveness of its exports and attract both foreign investments and tourists but the adoption of the common currency ruled out this option.

Eventually, the European Central Bank (ECB) and the International Monetary Fund (IMF) cobbled together a rescue package of €110 billion ($146 billion) in May 2010 in return for Greece implementing very severe austerity measures. European policy makers also set up a European Financial Stability Facility (EFSF) to create a safety net of upto €750 billion to preserve financial stability among member states of the common currency.

These floodgates came under renewed threat when German Chancellor Angela Merkel made a statement that in future financial crises, creditors must also share in the losses rather than only the tax-payers. As Ireland was the most indebted economy within the Eurozone, this caused interest rates on Irish bonds to spike causing a further crisis in confidence. Unlike the Greek crisis which was caused by high public deficits, the Irish crisis was caused by a collapse of its housing bubble.

Soon after the introduction of the single currency, weak economic demand in the main Eurozone economies–Germany’s real domestic demand in 2008 was only 5 percent higher than in 1999–fueled an asset price inflation-especially in Ireland and Spain. As the former taoiseach (Prime Minister) Garret Fitzgerald noted, the house construction rate in the Celtic Tiger in the last two decades was six times that of Britain–leading to an extraordinary housing bubble stimulated by the Anglo Irish bank and a host of overseas banks. When the bubble burst, instead of the banks’ creditors sharing the losses, the government assumed their payment obligations, nationalizing the Anglo-irish Bank and creating the National Asset Management Agency to take over large loans from other banks, effectively transforming private debt into public debt.

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The ECB and IMF have once again cobbled together a rescue package of €85 billion ($115 billion) but this has not stopped a massive gap in the bond spreads (an increase in the cost of borrowing for the weaker members of the Eurozone, especially Greece, Ireland, Portugal, Spain, and Italy) and the fear is that if the crisis spreads to Spain and Italy, two of the largest economies, the EFSF would be inadequate and it would cause an enormous political conundrum: citizens of the stronger states will become increasingly unwilling to bail out the more ‘profligate’ states, and citizens of the latter would be unwilling to put up with increasingly stringent long-term austerity measures.

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Spain is fortunate because a large amount of its government debt is owed to its own banks rather than to overseas banks. At the beginning of 2010, Spain’s public debt was only 53 percent of GDP, about 20 percentage points below that of the Eurozone average and half that of Italy’s. Last year, when the budget deficit stood at 11.1 percent of GDP, Prime Minister Jose Luis Rodriguez Zapatero also pushed through an austerity package that led to the government’s deficit falling by 47 percent in the first ten months of 2010. The problem for Spain is its high private debt–especially the heavy borrowing from overseas banks to fund home construction in the years up to 2008, Before the start of the recession, Gilles Moec of the Deutsche Bank estimated that private sector debt was 210 percent of GDP compared to 130 percent for Germany, France, and Italy.

If the extent of the impending crisis have left many to wonder about the future of the euro, the problem surely is not in the common currency. As Philippe Legrain wrote in the Financial Times there is a lot to be said for

enabling capital to flow from one member country to another without exchange-rate risk is a key advantage of the euro. If this were possible globally, emerging economies would not feel compelled to amass huge reserves to protect against crises and could be net recipients of investment instead.

What was the problem was that capital from the stronger members of the Eurozone was channeled to fund asset bubbles in Ireland, Spain, and elsewhere. Tighter regulations of cross-border investments can mitigate this problem. But more importantly, why are lenders coddled in cotton wool while taxpayers are burdened with huge debts they had done nothing to incur? Ordinary Irish citizens, as Paul Krugman, has underlined are:

bearing a burden much larger than the debt — because those spending cuts have caused a severe recession so that in addition to taking on the banks’ debts, the Irish are suffering from plunging incomes and high unemployment.

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Earlier when Iceland and Kazakhstan faced financial crises, creditors shared in the pain. The external debt of Kazakhstan’s banking sector which had stood at 26 percent of GDP when the crisis struck in February 2009 had been cut almost in half by September 2010 by making creditors share in the losses and accepting various combinations of senior and subordinated debt. There is no reason to let banks off the hook. In Iceland, the crisis caused the election of a left-leaning government which also were able to get better terms.

If the current crisis enveloping the Eurozone leads to the election of more left leaning governments, and to a refusal to nationalize private debt and to greater regulations over the economy, it may be the final nail in the neoliberal coffin!

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