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Wednesday: April 2, 2014 

When Will Chile's Post Office's Re-open? 

(PHOTO: Workers set up camp at Santiago's Rio Mapocho/Mason Bryan, The Santiago Times)Chile nears 1 month without mail service as postal worker protests continue. This week local branches of the 5 unions representing Correos de Chile voted on whether to continue their strike into a 2nd month, rejecting the union's offer. For a week the workers have set up camp on the banks of Santiago's Río Mapocho displaying banners outlining their demands; framing the issue as a division of the rich & the poor. The strike’s main slogan? “Si tocan a uno, nos tocan a todos,” it reads - if it affects 1 of us, it affects all of us. (Read more at The Santiago Times)

WHO convenes emergency talks on MERS virus

 

(PHOTO: Saudi men walk to the King Fahad hospital in the city of Hofuf, east of the capital Riyadh on June 16, 2013/Fayez Nureldine)The World Health Organization announced Friday it had convened emergency talks on the enigmatic, deadly MERS virus, which is striking hardest in Saudi Arabia. The move comes amid concern about the potential impact of October's Islamic hajj pilgrimage, when millions of people from around the globe will head to & from Saudi Arabia.  WHO health security chief Keiji Fukuda said the MERS meeting would take place Tuesday as a telephone conference & he  told reporters it was a "proactive move".  The meeting could decide whether to label MERS an international health emergency, he added.  The first recorded MERS death was in June 2012 in Saudi Arabia & the number of infections has ticked up, with almost 20 per month in April, May & June taking it to 79.  (Read more at Xinhua)

LINKS TO OTHER STORIES

                                

Dreams and nightmares - Chinese leaders have come to realize the country should become a great paladin of the free market & democracy & embrace them strongly, just as the West is rejecting them because it's realizing they're backfiring. This is the "Chinese Dream" - working better than the American dream.  Or is it just too fanciful?  By Francesco Sisci

Baby step towards democracy in Myanmar  - While the sweeping wins Aung San Suu Kyi's National League for Democracy has projected in Sunday's by-elections haven't been confirmed, it is certain that the surging grassroots support on display has put Myanmar's military-backed ruling party on notice. By Brian McCartan

The South: Busy at the polls - South Korea's parliamentary polls will indicate how potent a national backlash is against President Lee Myung-bak's conservatism, perceived cronyism & pro-conglomerate policies, while offering insight into December's presidential vote. Desire for change in the macho milieu of politics in Seoul can be seen in a proliferation of female candidates.  By Aidan Foster-Carter  

Pakistan climbs 'wind' league - Pakistan is turning to wind power to help ease its desperate shortage of energy,& the country could soon be among the world's top 20 producers. Workers & farmers, their land taken for the turbine towers, may be the last to benefit.  By Zofeen Ebrahim

Turkey cuts Iran oil imports - Turkey is to slash its Iranian oil imports as it seeks exemptions from United States penalties linked to sanctions against Tehran. Less noticed, Prime Minister Recep Tayyip Erdogan, in the Iranian capital last week, signed deals aimed at doubling trade between the two countries.  By Robert M. Cutler

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Entries in economy (1)

Thursday
Sep292011

The World Economy: They've Tried Everything: What Now? (PERSPECTIVE)

Protesters taking to Wall Street last week after being evicted from a temporary camp by New York City police. CREDIT: HUMNEWS

By Leonard Gentle

The world is tipping over into unknown territory. All the pundits are now starting to agree with US economist, Nouriel Roubini, famous for his prediction of the 2008 financial crash, that a second recession is inevitable.

South Africa’s Reserve Bank governor Gill Marcus has also added her voice to the chorus warning of another “Lehman type event.”Since the last one the major governments have spent in excess of $24 trillion bailing out the banks, dwarfing the money spent on rebuilding Europe under the Marshall Plan. And yet despite all the talk of recovery these measures have only taken us back to where we were in 2008...only with apparently no further options available.

Meanwhile the call from economists is for the politicians in the US and the EU to get their act together, to “act decisively,” to “satisfy the jittery markets.” It’s now all the fault of the politicians.

Yet what every politician has been doing is precisely what has been asked of them: showing decisive leadership to satisfy the markets - but it isn’t working, and its time to confront the need for alternatives to capitalism!

September 21 heralded the spring equinox in the Southern hemisphere but a dark foreboding autumn in the financial capitals of the world. When the US Federal Reserve (the Fed) announced another bail out – this time a $400b bond-buying scheme called Operation Twist - the event precipitated more market chaos. This bailout is about the Fed buying US$400bn worth of long-term Treasury bonds and selling shorter-term bonds. The measure is aimed at driving down long-term interest rates in an attempt to reduce the cost of borrowing.

Once again the thinking is “let’s give the banks cheaper money so that they will lend to firms who will restore productive economic activity and produce jobs and growth.”But with profitability levels in long term decline in productive economic activity and stagnation in global markets for real goods and services, there is no incentive to invest in expanded production of real physical goods. So the cheaper money just fuels the frenzy of financial speculation and the trading in debt further.

In Europe, Italy and Spain have joined Ireland and Greece in the debt crisis. In Greece unemployment is approaching 900,000 and is projected to exceed 1.2 million, in a population of 11 million. GDP fell by a further 7.3% in the second quarter of 2011.

In early 2010 Greece was effectively bankrupt. In its wisdom, the European Central Bank and the IMF underwrote Greece’s debt and then imposed policies of severe austerity and deregulation consistent with the neoliberal ideology of the EU. Quite predictably, demand collapsed and banking credit became scarce, with the result that the core of the Greek economy was crushed.

The rest of the world has its problems as well. New IMF leader, Christine Lagarde, noted that the repair job to the global economy, after the 2008 recession, was supposed to involve two rebalancing acts: 1) a shift of demand from the public to the private sector, and 2) stronger domestic demand from surplus countries such as Germany and China to allow deficit nations like the US to export more.

Neither is happening.

The truth is that the political choices made by politicians to promote, or comply with financialisation has delivered us all into the hands of the speculators, the financialised corporations and the private equity holders who have made debt tradable and money chase money – taking private profits to enrich themselves in the good times and foisting their debts onto all of us in the bad times.

 All that has happened is that we have swapped a private debt crisis in 2008 with a sovereign debt crisis in 2011. Rather than let the banks and the speculators carry the can for their impropriety, they were deemed to be “too big to fall” and governments spent trillions of dollars bailing them out.

 This was not a Keynesian or “New Deal” style spending programme on full employment and stimulating demand to boost economic activity. This was a bail out of the banks, re-directing state spending away from full employment, public services and stimulating demand.

But a much deeper understanding of the current crisis would be to trace its origins to the events of the 1960s, a time of the Vietnam War and the US in trouble. This is when capitalism started experiencing dramatic drop-offs in the high growth and profit rates that the major industrialised countries had experienced after World War II.

Fuelled by the rebuilding of Europe and the Far East as well as the expansion of global demand with welfare states ensuring near full employment and public services – and operating within the Bretton Woods regime of regulated financial markets and fixed exchange rates, the capitalist world recovered from the Great Depression of the 1930s. At the epicentre stood the US as the imperial hegemon with its currency - the dollar - the global means of exchange and the world’s reserve currency.

But the combined effects of the US’ expensive adventure in Vietnam, the resurgence of Germany and Japan as competitors, the holding of dollar reserves outside the US and the stagnation of global markets saw corporate profit rates decline. By the early 1970s, the US sank into recession. With the additional shock of the oil crisis, the US devalued the dollar, tore up the Bretton Woods Agreement and began to wage war on the welfare state and Keynesian perspectives of capitalist growth.

By the end of the 1970s a new strategy was unleashed on the world, called variously neo-liberalism or globalisation, which has as its figureheads politicians such as Margaret Thatcher and Ronald Reagan and economists like Milton Friedman, but which has also become the biggest restructuring of social relations, tearing up the Keynesian consensus and taking us back to the 19th century idea of dog-eat-dog.

Neo-liberalism is often falsely understood as mere “market liberalisation” or taking the state out of the economy. In fact it has been little more than a new form of capitalism – one that has altered our lives way beyond what people understand to be economics. Stretching from the deeply personal sense that we are all just private predatory beings with no social solidarity (seen in the way middles class houses have high walls with privatised “home entertainment”) to the way our children are indoctrinated to hero-worship “entrepreneurship” at school, all the way to Greece shutting down hospitals and schools because a rating agency has junked its bonds.

It’s a world of casual labour, outsourcing, cost centres, denuded media rooms and billions being made (or lost) in a day because of the behaviour of derivatives. Far from the state having withdrawn from markets and the economy it is a world in which the states act against their own democratic mandate, taking public money to bail out banks and arresting people who protest against such corruption.

It is this neo-liberal world, which has now dragged us all to the brink of the abyss.

Of course the economic crisis may be global, but its causes and effects are manifested differently across the world. Temporarily some countries were favourably positioned, including South Africa. Gold reached record levels of more than $1600 dollars an ounce benefitting South African corporations. Likewise SA’s bond markets boomed in the midst of the crisis as investors switched to emerging markets and drove up the value of the rand.

But, as every priest intones at funerals: “The Lord giveth and the Lord taketh away.” A further intensification of the crisis has seen investors pull their money out of developing country bonds and move back into US Treasury bonds and the dollar - the very sites that were deserted yesterday in favour of the “emerging markets.”

From being the flavour of the year in 2011, the rand has become the worst performing of 18 emerging market currencies against the dollar this past week. Nearly R14bn left South Africa in the first few days of September – R6.3bn due to equity sales and R7.7b from bonds.

Net portfolio investment in South Africa for 2011 fell from R35.4bn to R25.5bn in a matter of days. This compares with cumulative portfolio investments of nearly R56bn at the end of the second quarter, according to the Reserve Bank’s quarterly bulletin.

South Africa is now showing signs of reaping the same whirlwind sweeping over other countries. A recent small news item - that the Mandela-Rhodes development in the Cape Town city centre was a victim of the Irish meltdown - has given these events some local poignancy.It is therefore inappropriate that all this bad news is seen as an economic problem – something of interest to business people only and economists. The choice of language for characterising this is also so modest - “recession.”

“Recessions,” in the language of economists, are little more than two successive quarters of decline in GDP. Recessions do happen, they’re inconvenient, somebody loses (most of us) but the system is, according to the economists, self-correcting so the pundits normally predict a new return to growth in the near future.

None of this can compete with Malema or the Springbok Rugby team in the battle for news. So while everyone had an opinion on the choice of Chief Justice and the long-term consequences for human rights of selecting the wrong guy to head up the Constitutional Court, in stark contrast there is absolute silence on our privatised Reserve Bank, the selection of interest rate economic policies and the people who make these choices on our behalf. 

And then there are the economists, ostensibly specialists who are the only ones who can really tell us what’s going on.  By way of sustaining this power the language of economic analysis is buried in dense impenetrable jargon - quantitative easing, the markets, investor confidence, etc. - which hide the very human guesswork, the decision-making and the choices that shape our world – and which on the basis of all the available evidence out there, shows that we’re on the edge of an abyss.

And, while the world order of the last 30 years is collapsing around our ears, the economists largely have no idea what’s going on and how to do anything different.

In Britain Observer journalist, Will Hutton, has come up with the most honest assessment of a mainstream economist:

“Eighty years ago, faced with today's economic events, nobody would have been in any doubt: we would obviously be living through a crisis in capitalism. Instead, there is a collective unwillingness to call a spade a spade. This is variously a crisis of the European Union, a crisis of the euro, a debt crisis or a crisis of political will. It is all those things, but they are subplots of a much bigger story: the way capitalism has been conceived and practised for the last 30 years has hit the buffers. Unless and until that is recognised, western economies will be locked in stagnation which could even transmute into a major economic disaster.”

Of course a crisis of capitalism does not mean that socialism is on the horizon. The 1930s crisis strengthened the calls for socialism, but also gave rise to fascism in Europe as sections of capital sought “final solutions.”

 Unless the left is organised as a popular social force the fallout of crises can produce the opposite - the victims fall prey to internecine battles, seeking scapegoats for their declining living standards. The same Greek streets that are home to the protests of the “indignant” and debates about democracy are also roamed by gangs attacking immigrants. Right wing sentiments and xenophobia are on the rise throughout Europe and the crisis sees centre left parties disgracing themselves by using their electoral credibility to carry out the austerity cuts demanded by the “markets.”

Thirty years of neo-liberal capitalism have produced levels of inequality unprecedented in modern history. The mighty citadels of power are cracking whilst millions of people all over the world are beginning to express their anger and disgust in various ways. Keynesian economic policies saved capitalism before…only to be replaced by the disaster that is neo-liberal globalisation. What’s left in the kitty for capitalism?  

 Gentle is Director of the International Labour and Research Information Group. This article first appeared on the website of the South African Civil Society Information Service (SACSIS)