Archive for ‘Economy’ Category
Market responses to the US debt crisis and financial downgrade have been like king tides as of late, and inevitably speculation centers on the possibility of a “double dip” global recession (this speculation is more than rhetorical. Gold and other precious metal prices have spiked overt the last three weeks as investors flee the stock, bond, commodity and currency markets). There is much talk, some fearful and some hopeful, of a global meltdown of epic proportions. The argument goes that downgrading the US credit rating devalues US Treasury bonds and the dollar, which slows US private investment at home and abroad, decreases domestic consumption, increases unemployment and generally prolongs the recession begun in 2008. This ripples negatively across the globe given the interconnectivity of commodity chains and the central role of the US in them. Be it on the Left or the Right, the belief in state bankruptcy is taken as an article of faith.
The reality is different. What is happening is a fiscal crisis of the Western State rooted in a cyclic crisis of capitalism. Arguments about the blown-out US public debt obscure the fact that it is the result of the same conditions that produced the 2008 recession and which are at root the cause of the next one. For the last thirty years the ‘bubble” of private debt was replicated by the US Government, in the last decade under the strain of simultaneously fighting two prolonged low intensity conflicts. In Europe public debt was in part procured in order to compensate for private debt (via the provision of subsidized entitlements). Capital was lent on looser and looser terms as interest payment calculations came to rival returns on productive investment as the dominant macroeconomic logic. The market in financial derivatives boomed, then busted, bringing with it a crisis in small scale property ownership at the same time that major manufacturers were being bailed out by the US government.
There is a difference, however, between the private sector and the State when it comes to fiscal crises. The analogy between States and firms is overdrawn. Firms go bankrupt; States do not. States may default on loans and suffer the indignities of downgrading by financial institutions, but they do not go out of business. The reason is simple. States with a presence in the global economy may fail but they do not cease to exist.
Modern states are political entities with other measures of power beyond economic resources, are rooted in historical and cultural ties within more or less fixed borders, have distinct political systems and political regimes that govern them, and are therefore sheltered from the hard realities that beset wayward market agents in a globalised system of production, service and exchange. More importantly with regard to the social and political relations of production, the modern nation-state supercedes the market at any specific moment even while being generally subject to its rhythms and dictates. It is, after all, a capitalist type of state that is not reducible to the productive apparatus.
Imagine even if the US defaulted on its current obligations. Its credit rating would fall further in parallel with the value of its currency, but how long will that last? Even if the US fails its financial obligations, it would be the markets that push for a debt restructuring favourable to it. As the core of the global economy, the US is simply too big to fail because its financial collapse would reverberate widely and deeply through the world. In fact, with the exception of undeveloped failed states and microstates with minimal economic resources to promote, virtually all modern states can survive a fiscal crisis and default.
Take Argentina, which in 2000 defaulted on its foreign loans, uncoupled its currency from the US dollar and then renegotiated the terms of its obligations. Since most of the outstanding balance was interest rather than principal, foreign creditors were eventually forced to settle on terms favourable to the Argentines (about 60 cents on the dollar lent). The weakened Argentine peso stimulated commodity exports and attracted foreign investment in resources and primary goods. In spite of endemic corruption, political interference and a multitude of market inefficiencies, over the last five years Argentina has averaged growth rates in excess of six percent and attracted the highest levels of foreign investment ever even while maintaining a large public deficit.
Greece, the poster child of all that is supposedly wrong with governments and societies that do not couple entitlements with production, is another such case. What would happen if Greece defaulted on its recently rescheduled loans? Will it cease to be? what it could do is drop out of the Eurozone, replace the Euro with the much less expensive drachma, and print money to fund its domestic obligations. Somee foreign investors may flee, but local capitalists will continue to engage the domestic market, people will continue to consume, albeit at lower rates with regards to imported goods, tourists will still flock to see the historical sites and visit the islands, and the country will continue to exist. In fact, should it be successful at restructuring its economy on more internally-focused terms out from under the straitjacket of Eurozone obligations (say, by making its tax collection system more rational and efficient), it could serve as a model for the other “PIGS” nations—Portugal, Ireland and Spain—as well as Italy.
It was Northern European, mostly German capital, directly and channeled through the European Central Bank, which sought to recycle in the European periphery the super-profits accrued during the last two decades of derivative market expansion. These are the creditors who took the risk in the PIGS and who now demand debt repayment schedules rooted in austerity measures and privatization programs. They are also the beneficiaries of a strong Euro, unlike the weaker Southern European economies now under siege. Should debtor countries in Europe decide to reconfigure their economies around a devalued national currency a la Argentina, the European Union will be finished as a currency regulator. Here the sub-regional ripple or contagion effect makes each of the PIGS too big to fail, something that is magnified in the case of the US. Loss of credit rating and a high debt to GDP ratio, in others words, does not translate into State bankruptcy.
The larger point is that states can default but they cannot be bankrupted because they are not solely economic agents but instead sovereign political actors with interests that transcend a financial bottom line. They can be upgraded and downgraded as financial risks, but even if investment falls and inflation rises, they will not disappear. Think of Brazil and Argentina in the late 1980s when inflation ran at over 1000 percent per year. Did they disappear? Did all foreign investment dry up? Did local markets crash?
Truth be told, capitalism, led by finance capital, was on overheated overdrive for the two decades before 2008, only slowing down briefly after events such as 9/11, even when objective conditions advised against the maintenance of the macroeconomic policies private agents used to calculate the speed of their returns. Western States emulated private agent logics, whereas Asian banks and sovereign wealth funds were less keen to adopt derivatives-led financial approaches backed by increasingly unsecured loans (although some of that did creep into Asian markets as regional economies attracted Western investment).
Here is where global networks come in. Rather than wage war on States with economies in default, other States that are debt free or less indebted work to cover their investments, and those of their private agents, in the debtor States. This means that even if private agents in the debtor States fail as a result of their market excesses or miscalculation, and State treasuries do n not have enough reserves to cover their debts, States remain open for business, perhaps even on more favourable terms depending on the nature of sovereign debt restructuring agreements (public debt for equity swaps are one measure that can improve State efficiencies as a result of restructuring). Inefficient producers are expelled from the market; inefficient States muddle along.
The entire Western capitalist combine was due for a retrenchment given the downward slope it has been on since spending, both public and private, exceeded productive output in material goods and services. So long as money could be made off of lending money and risks were passed on to increasingly lower-level actors, early 21st century capitalism saw States tax and spend without coherent productive purpose (which mirrored the approach of the financial markets). This was a good political calculation but not a sound economic grounding for future productive growth within current capitalist parameters. Thus the turn towards private sector retrenchment in 2008, with public sector retrenchment now following.
We hear about the demise of various States because they can no longer afford to repay what they have borrowed in order to maintain whatever it is that is considered precious to national identity and political stability–public goods and entitlements in Europe, a war machine in the US. Retrenching Western States may not be able to provide these services in the measure they used to, but thy remain (however diminished) as linchpins of an international system that has its origins in the Treaty of Westphalia rather than Bretton Woods or the Washington Consensus. States are the ties that bind that global system of exchange, and Western States continue to have a central role in it even as the system moves towards increased multipolarity.
Markets and politicians alike need to be cognizant of this fact, because as Keynes pointed out, it is political conditions, not economic conditions, that are the best guarantors of long-term investment. Rather than the economic particularities of a given investment climate at a specific moment in time, political stability offers better conditions for secure future private return. A stable national polity is the best guarantee of profit even if the public books are not balanced. That is the political cost for the social peace that is the basis for economic stability.
Ironically, it was the short-term focus of the macroeconomic logics that propelled the “bubble” that led first to the financial crisis of 2008 and now to the current conditions of political impasse and social instability in many liberal democracies. That is where the convergence of the fiscal crisis of the Western State and the cyclic crisis of capitalism can lead to liberal democratic State failure: when it produces a crisis of legitimacy of the political elite, often confused with regime crisis, that once rooted in and superimposed on the economic downturn and social unrest constitutes an organic crisis of the State. The UK evidences these type of pre-conditions.
Rather than demand zero-sum tax cuts and a diminished State role in guaranteeing the social relations of production, the priority of the market during a State fiscal crisis should be to to express confidence in the State because delegitimisation of the latter is an absolute guarantee of disasterous market consequences for the private actors involved with them in the event that they are overthrown or fragment. That is where market ideologues have failed in their basic obligation: to help foster the political and socio-economic conditions in which stable rates of private return are generated. Instead, they are exacerbating the crisis with their jitters, demands and panic trading. This will not lead to an organic crisis in most liberal democratic states (which will muddle along), but it could produce legitimacy crises in newly democratic states or those with significant social cleavages. Even then the prospect of State, as opposed to regime or private sector failure, is unlikely.
All of which is to say that when it comes to the fiscal crises of modern Western States, this too shall pass.
A short while ago we were treated to the spectacle of a Royal Westminster wedding, a royal tour of Canada and the US, then another lesser royal wedding. The UK and colonial media went crazy with 24/7 coverage of the fairy tale personae involved, and the image conveyed was of stability and continuity in British foundational politics. All was well in the Realm.
In the months since the first royal celebration things have grown dimmer. There is the hacking scandal in which politicians and the police appear to be complicit in the illegal tapping of private information by media corporations (primarily but not exclusively Murdoch-owned assets). Added to this sign of elite criminal coziness, now there is a police shooting followed by wildcat riots that represent criminal opportunism rather than outrage about the death itself. The UK media are swamped with reporters, police spokespersons and politicians all chanting in unison about the “mindless thuggery” and criminality of the youth who are widening the scope of violence beyond Tottenham and London itself.
The official emphasis on criminality cannot hide a number of things that depict a reality that s a far cry from royal bliss. The youth involved, while criminally opportunistic in their looting and vandalism, are a mix of ethnicities, but all seeming of working class or unemployed status (On TV I actually saw some young Hassidic Jews amongst the rioters in Tottenham). Some may have participated in earlier demonstrations and rioting about restrictions on access to higher education and the cost of basic services. They appear to be coordinated–in yet another tweeter and smart phone fashion–enough to stay a step ahead of the thinly stretched British Police. The fire service is not attending to full alarm fires because of fears for their security and the Police cannot predict when the next smash, burn and grab will happen. The mob is ahead of the Man, and the mob is angry.
So far the British government has declined to send in the army even though suggestions have been made that they have very robust anti-riot capabilities in Northern Ireland. The language used to justify that non-action is precious: the government states that it does not deploy such hard assets on British soil. So the riot police in London chase rioters using shields, helmets, horses and batons while the British Army uses armoured personnel carriers, water cannon trucks and live ammunition to keep the peace in Belfast and beyond. Some Imperial habits are hard to break, even though the Empire is long gone and its post-colonial consequences have come home to roost in the capital itself.
The hard fact is that the criminality of the rioters is a political act whether or not those involved or the government and corporate media would like to admit it. At a time when the PM, Police Commissioner, Mayor of London, and assorted other leading officials were on vacation in places like Ibiza, Tuscany and Milos, the youth now on riotous display swelter in the housing estates where unemployment, racial separatism, ethnic conflict and everyday economic insecurity are rife. Like their counterparts in any number of less developed countries, they can see up close the material lifestyles and commodity consumption of the royals, celebrities, sportsmen and corporate elites, but do not have (and likely will never have) the means of access to them. Worse yet, they live in a world where the institutional framework is stacked against them, leading to the violent turn inwards when the opportunity presents itself. The Police response is to ask parents to lock up their children.
Be it Marx, Luxemburg, Lenin, Guevara, Marighella, Ayman al-Zawahari, or Muqtada al-Sadr, revolutionaries understand the potential of the criminal mass engaged in collective violence. Lumpenproletarians are the street vanguard who, however unconsciously, help to bring social contradictions to a head and expose the weakness of the elite response and the inherent fragility (sclerosis?) of the status quo as a whole. Where instigated or abetted by politically conscious cadres (and there is some evidence of this at play here), their actions are designed to accelerate the organic crisis of the State, in which economic, social and political cleavages overlap and congeal into compound fractures not resolvable by force, reform-mongering or after-the-fact piecemeal pacification. Given the ongoing repercussions of the 2008 recession and the increasingly global debt crisis, and no matter how they are disguised by ethnic and religious division, the structural foundations for a larger class war in the UK may be fixing in place.
This does not mean that the British government will not be able to quell the disturbances this time around. But what these riots may be is a dress rehearsal for more to come, perhaps in conjunction with the Olympics next year, where militant planners accelerate the pace, focus and intensity of mass collective violence at a time when the British elite are exposed to global scrutiny and their security resources are already working at full capacity. That raises the issue of whether the official approach to rioters will shift to the more lethal Northern Irish “solution” set, and whether those charged with adopting a more lethal approach will have the ideological conviction to respond in such a way to the actions of fellow citizens rather than foreigners (I note that it will be possible for the official narrative to scapegoat “outsiders” drawn from minority ethnic communities that hold non-Western beliefs, but even that may fail to overcome foot soldier or beat police reluctance to turn their weapons on their own).
In any event, we should see the riots for what they really are: an expression of mass subordinate discontent and disaffection, the product of profound alienation, expressed through collective criminal violence operating in seemingly opportunistic and decentralised fashion in the face of official incompetence or lack of will. That, by most reasoning, is a good sign of a pre-revolutionary situation, one that has the potential to become more of an existential threat to the status quo should tactical guidance and coherent ideological justification be given to it. After all, if what we are experiencing is a crisis of capitalism in the liberal democratic world, then it was only a matter of time before superstructural conditions and precipitating events would combine into a violent rejection of the system as given in countries in which the societal contradictions were most apparent. Be it in Greece, in France, in Spain or now in the UK, should these contradictions continue to fester and combine, it will not be Tea Party-type clones that will lead the insurrectionary charge, nor will they be as polite.
PS: Before Red Dave and other ideologically militant readers opine that I am belatedly joining their ranks, let me state that I do not see this as the beginning of a global revolution or necessarily of one in the UK. It is a pre-revolutionary moment, which means that the UK government still has the ability to engage in divide-and-conquer, selective application of force and reform-mongering tactics (along the lines I mentioned with regard to the Arab uprisings in an earlier post dedicated to them). There is a fair bit of ground to cover before the Arab Spring gives way to a Red European summer.
Jane Kelsey’s latest book on trade, an edited collection titled No Ordinary Deal, was launched last night in Auckland. Other launches will follow in Hamilton, Wellington and Christchurch this week before the road show heads to Australia. As a contributor to the book I attended the launch and enjoyed the speech given by another contributor, Lori Wallach, a trade specialist at the US research institute Public Citizen (founded by Ralph Nader in 1971). Lori, who wrote the chapter on the US domestic agenda and approach to the so-called Trans-Pacific Partnership (TPP) negotiations, noted that the model for the TPP is not the General Agreement on Tarriffs and Trade (GATT) but instead the North American Free Trade Agreement (NAFTA), which essentially is an investor’s guarantee agreement rather than one about free trade per se.
In her chapter and her speech, Lori noted that among many other downsides to the TPP, it would exempt foreign investors from domestic regulations in NZ, and should the investor be made to comply with those regulations by court order, the costs of compliance would be borne by the NZ taxpayers in the form of mandatory compensation. She went on to note how local pharmaceutical regulations and control boards would be circumvented in favour of US drug company standards, and explicated the dumping and market monopolisation efforts of US agri-businesses under this type of trade regime. As a sidebar she noted how NZ dairy exports would not appreciably increase to the US under the agreement, as well as the fact that the recent midterm elections have ridden on a backlash against trade because of presumed US job losses tied to it, which means that the possibility of the US ratifying the TPP in the next two years under the new congressional leadership (even if negotiations are concluded, which itself is unlikely) are improbable at best. Her basic premise was that she would not object to the TPP if it were about free trading of goods and services as per the Ricardian ideal. What she objects to is the use of free market rhetoric to cloak cross-border commercial arrangements that are less than free or fair and which contain pernicious costs for smaller national partners and wage labour-dependent consumers in general.
The bottom line is that the TPP is fraught and the public need to be aware of the very large downside to it. It is not a genuine “free trade” agreement in the proper sense of the term. Instead, it is a US-centric investor’s agreement skewed in favour of large (mostly foreign) corporate interests rather than consumers and local producers. Among other topics, chapters (there are 19 in all) explore the impact of the TPP on indigenous rights, climate change, intellectual property, cultural exchange and, in my contribution, security. They are well worth reading, and often eye-opening.
The book is designed to promote informed debate on the matter by offering a critical counter-point to the received wisdom of the policy elites who attempt to sell it as as “win-win” universal good for all involved. As I have noted previously when writing about asymmetric trade, this is a far cry from the truth and carries with it not only the potential for a loss of economic freedom and sovereign control of strategic assets, but also the very real danger of increasing both physical and emotional insecurity in the smaller partners involved in such agreements. Since insecurity breeds fear (be it fear of job loss, fear of environmental harm, fear of forced dislocation from one’s land or cultural roots, to say nothing of fear of physical harm by direct or indirect means), and freedom from fear is considered to be an inalienable human right, the downside of the TPP needs to contrasted againt the supposed upsides championed by those who stand the most to benefit from the deal, and who constitute an elite and often unaccountable minority among the constituencies involved.
More publisher information on the book and the launches can be found at www.bwb.co.nz. An information sheet on the book is here:
No Ordinary Deal
None of these arguments stacks up. All nine participant countries except Vietnam are heavily liberalised, deregulated and privatised.* They already have many free trade deals between them. Who really believes that US dairy markets will be thrown open to New Zealand, or that China, India and Japan will sign onto a treaty they had no role in designing?
No Ordinary Deal
Above all, No Ordinary Deal unmasks the fallacies of the TPPA and exposes the contradictions of locking our countries even deeper into a neoliberal model of global free markets – when even political leaders admit that this has failed.
*The US, Australia, New Zealand, Brunei Darussalam, Chile, Peru, Singapore and Vietnam. Malaysia joined in October 2010.
Distributor: HarperCollins, PO Box 1, Shortland Street, Auckland
The Contributors: Jane Kelsey, Bryan Gould, Patricia Ranald, Lori Wallach, Todd Tucker, José Aylwin, Paul Buchanan, John Quiggin, Warwick Murray, Edward Challies, David Adamson, Geoff Bertram, Tom Faunce, Ruth Townsend, Susy Frankel, Jock Given, Ted Murphy, Bill Rosenberg, Nan Seuffert.
There is a small island country in which, in spite of their avowedly private market-oriented ideology, government leaders have directly involved themselves in negotiations with foreign film makers in order to keep production of a film series on the islands. The foreign studio bosses threaten to take their production elsewhere; the famous director–a local boy made good– fumes and blames union organisers for raising production costs (in a film that is mostly based on computer animation and special effects rather than humans acting, in a country where the local currency is less than 80 cents of the US dollar). Although the film production is no long-term investment and will not bring employment stability or trickle down benefits beyond those connected to its production and its purported positive impact on tourism (supposedly because foreign tourists will come to the islands to see a movie set called “Hobbitown” in which gnomes abound), the government agrees to offer the foreign studio bosses NZ$100 million in tax and marketing breaks and to change local employment law so that actors are classified as contractors rather than employees while working on feature films (should the law apply to all actors this could well extend to TV, stage and radio actors working on local productions as well).
Although the film industry is currently an significant source of revenue for the country and has spawned a considerable technological base associated with it, it does not add to the long-term national development growth of the island state. Compared to core national industry, it is much like a diamond in a coal mine–a source of pride and joy but not a basis for long-term prosperity.
All of which is to say: foreign corporate masters involved in an industry that does not add long-term value to a nation’s economy have managed to get the island country’s leaders to bow before them in order to secure short term economic gain for a small local industry with limited direct ancilliary impact and a more hypothetical than concete follow-on revenue generation effect. To do so, not only was money offered to appease the foreign masters. The basic law of the land was changed at their behest as well.
Since the country has been engaged in a long-term debate about changing its national flag and its status relative to its colonial master, perhaps it is time to also consider changing its name.
Bananazelandia. Say it with a Spanish, French or Portuguese accent and it just rolls off the tongue.
Posted on 16:05, July 27th, 2010 by Pablo
In the debates about the proposed labour law reforms there appears to be fundamental misunderstanding or ignorance by National and ACT of the purpose of unions in capitalism. The latter are seen by NACT as at best a source of inefficiency and profit loss; at worst parasitic wealth destroyers. They appear to misunderstand that capitalism left to its own devices, with no collective counter-weight provided to workers, is akin to a political regime without opposition parties. That is, it is inherently an authoritarian status quo in which owners rule and workers obey. Thus, if we hold it self-evident that democracy is a better form of regime than dictatorship precisely because it allows for the existence of a freely organised competitive political opposition that can contest power and times compete for it, then we must also recognise that capitalism needs unions in order to be representative and fair to the society at large. The trade off between democracy and capitalism is exactly that: a diminished rate of exploitation in direct proportion to the measure of voice exercised by workers in pursuit of a fair share for all.
That is why unions were organised in the first place: to bring a subordinate group vehicle of voice and redress to the economic system. Whatever their very evident flaws (Leninist organisation, iron law of oligarchy bureaucratic rationales), unions provide a democratic counter-weight to unfettered capitalist exploitation. Just as it is preferable not to have a closed, unaccountable (or at least vertically unaccountable) oligarchical elite run the affairs of state, so too is it undesirable, from a democratic perspective, to have a closed, vertically unaccountable economic elite determine the social relations of production. If one believes in democratic capitalism, one must believe in a central partnership role for unions within it.
This is true whether labour-based or capitalist-oriented parties are in power, since in capitalist societies the material welfare of all is dependent on the investment decisions of capitalists. But capitalists need workers to realise their investment, and workers need to be productive for profits to occur. There is consequently a structural bias in favour of providing the working conditions and larger social context in which profitable production can occur over the long term. For that to happen workers need to accept the system as given, which is a function of them perceiving a partnership stake in it. That means a modicum of voice and representation. Democratic capitalists consequently understand the need to exchange super-exploitation and authoritarian control of the workplace for increased working class representation in both politics and production. In turn workers (and their political representatives) accept the capitalist foundations of society and the dominant role of capitalists within it (in other words, they forego a move towards socialism). This exchange is at the heart of democratic capitalism. Although negotiating the margins of the democratic capitalist social contract can occur depending on the nature of the government in power, “touching the essential” aspects of it is not.
Authoritarian capitalism offers many short term advantages to business, but it does not guarantee long term gains. Unmitigated authoritarian exploitation, be it in the workplace, politics or both, breeds resentment. Born of a lack of consent to the dominant system, resentment can be manifest in everything from petty acts of social defiance to industrial sabotage to revolution. Short term acquiescence may be bought with material rewards, but the long-term picture remains clouded so long as workers do not buy in to the system as given and instead resent their subordinate status in it. Absent mass consent and given the inevitability of working class resentment, the resort to the “weapons of the weak” negatively impinges on profit, if for no other reason then that the costs of repression grow larger the longer authoritarian control is maintained. After all, you cannot repress the same amount of people in the same measure over time. Since capitalists abhor uncertainty and seek stable rates of secure return, a peaceful, consent based socio-economic and political order is preferable to an imposed one. That gives economic utility to democratic capitalism.
In fact, where democratic capitalist systems work best (hegemonically, as it were), many if not most workers strive to become capitalists themselves (small businesspersons, at a minimum). They see themselves on a continuum of upward mobility based on workplace fair play and merit. Socialism is not their preferred option. The proof is in the mythos: is this not the Kiwi, Ozzie and American dream?
Here is where NACTs reforms and the demands of the employer class says much about their true orientation. They claim belief in freedom of choice and the benefits of market competition as the great levelers of social ambition. If that were true, then they would welcome workers to freely organise without legal constraint or negative repercussion because true market competition and workers freedom of choice would improve overall economic (labour) market efficiency. After all, according to their own logic, the market works best when all have equality of opportunity, and it clears best when all actors enter into the market exchange exercising their full potential as free agents involved in the mutual supply and demand of goods and services. So if workers exercising their free choice want unions, then more the better from a market perspective. Why put constraints on that freedom?
Yet in practice NACT seeks to place constraints on working class collective choice and voice so as to better exercise owner/manager prerogatives in the workplace. They are, in other words, hypocrites who do not really believe in the power of the free market or closet authoritarians out of ignorance (unlikely) or by design. Or both. No amount of political spinning can disguise that fact.
What is more, NACT does not appear to comprehend, from a cynical perspective, that allowing for unionisation, including union workplace access, while reducing limitations on the right to strike and collectively bargain across economic sectors can actually serve very usefully as an alienation device in which workers are led to believe that they are real partners in production in a system in which the fruits (surplus value) of their labour are appropriated by others (in a variant of Lenin’s “democracy as capitalism’s best possible political shell” argument). Although unfettered collective action has the potential to open the door to worker challenges to control of production, the reality is that in democratic capitalism private ownership is reified from birth to grave and most workers live with the dream of being bourgeois in culture and consumption if not employment. So whether cynically or sincerely committed to workplace democracy, enlightened capitalists understand the long-term political utility of union representation in democratic society. NACT and its business supporters appear to be anything but enlightened.
As I mentioned in my previous post on the matter (“The Blues Go Black”), the proposed reforms owe their inspiration to the Pinochet Labour Code. The question is whether NACT have the same view of unions as Pinochet and “Pepe” Pinera did, and if so, why do they make any pretense as to being democratic? Could it be that what we are seeing in NZ is the first attempts to turn the economic bases of the democratic social contract into something akin to unchecked elite imposition under manipulated electoral conditions?
Posted on 23:37, May 28th, 2010 by Pablo
Little does it matter, apparently, that the bastion of Wahhabist extremism and medieval authoritarian gender/sexual weirdness has never fully repudiated the 9/11 attacks and offered nothing outside of its borders to combat that scourge even though most of the 9/11 perpetrators were Saudi (if anyone can name a Saudi combat deployment anywhere outside of Saudi Arabia or the US overflight zone in Yemen, you are welcome to correct me). Never mind that its pressure influences US policy vis a vis both Israel and Iran. Never mind that its human rights record is abysmal. Never mind that the Saudi as well as other oil-rich Arab children of the elite get to use NZ as a convenient educational stopping and gathering point on their way to arranged marriages and the material comforts borne of the exploitation of others.
The National government believes that it is all good.
For National, the issue here is that there is serious money to be made off of these Arab aristocrats, and NZ’s claims to moral authority in defense of universal human rights need to take a back seat to monetary self-interest even though the NZ’ers who will have to directly interact on a daily basis with the Saudi students have not been consulted as to the advisability of increasing their numbers. To say nothing of what other countries, even when considering the hypocrisy that is the mainstay of diplomatic rhetoric, will think of this abject bend-over act to a country that pretty much represents the antithesis of so-called NZ values.
Security vetting, anyone?
This talk of not being jealous about tax cuts, and the unstated supposition that the rich are just better reminded me about a couple of posts I wrote a year or so ago about the “money proxy”: the idea of wealth as an easy quantifier for a person’s value. I’ve rehashed the argument here because I think it’s particularly apposite given the forthcoming budget. Paraphrasing myself:
Previously, I had argued that while there’s considerable shared ground between National and Labour (both want economic growth, believe in the state’s role in providing some public services, etc.) the predominant difference between the two in economic terms is in the reflexive positions to which they repair when hard choices need to be made. National believes in supporting ambition, Labour in mitigating harm:
Emphasis added to identify the key symbolic points of the rhetoric around this budget, and highlight the fact that things are playing out exactly as you would expect. These battle lines were drawn long ago, and for all National’s “compassionate conservative” rebranding, there’s really nothing new in their focus here. They faced a clear choice between ambition and harm-mitigation, and chose according to their political identity. They simply don’t have a problem with the money proxy: it’s a measure as good as any other, and a nice clean “objective” one, because it’s determined by a market.
But I do. Following the first excerpt, I wrote:
It’s bad in principle that people are treated (to a greater or lesser extent) as non-people by virtue of their material circumstances. And furthermore, I think it’s a bad decision in plain pragmatic utilitarian terms to attempt to swim against the economic tide and support ambition at the cost of significant harm:
So what we have with the budget, judging by the pre-release hype, is simply a return to form for the National party, and it should be countered by a return to form by the Labour party as well. National are retreating from the middle ground which won them the election and repairing to their reflexive, reptilian-brain adherence to the money proxy as an iron law of society. Labour must reclaim this ground; not that it ever really ceded it, rather permitting an occupation which is now beginning to withdraw.
The underlying calculation is a tradeoff of societal harm against economic growth. Another way of putting it, in more resonant terms, is: how much of society are we prepared to cannibalise, and for what gains, accruing to whom? This is the question around which Labour should orient its response. The words “many” and “few” will fit neatly into it.
There is a political rhythm to the Greek economic crisis. We spent a long weekend on Santorini dodging strikes–Tuesday was the transport workers, Wednesday was the wharfies, Saturday was the May Day demonstrations. Next Wednesday there is a general strike. Our timing has so far been impeccable. We took a ferry last Thursday, so missed the wharfie action that paralyzed Pireus and left a bunch of cruise ship passengers stranded. We returned on Sunday evening so missed the May Day demonstrations that disrupted the Metro rail. We fly to Samos this upcoming Thursday, so will miss the general strike as well. Fingers crossed that nothing happens next Monday, when we fly back. Given recent strike patterns, Monday is due for one so our luck may run out (not that getting stuck on Samos is a bad thing). But we are getting the hang of the flow of things and look forward to seeing how the general strike goes. Although the foreign press has focused on some violence, the reality is that it is only small groups of anarchists who are clashing with the police, and most of them are teenage students. The unions and other civil associations are led by grey haired folk who may have been prone to street action two or three decades ago, but who now are just trying to protect their collective livelihoods (although two banks were attacked by petrol bombs last night, the usual anarchist and Marxist-Leninist suspects are being blamed).
What is interesting about the unfolding of the Greek economic crisis is how ignorant most foreign observers are about its root causes. Most focus on inefficiency and waste in the public sector and the supposedly indolent Greek way of life, which even if true has its causes in something other than the Greek psyche (as some allege). Let me explain.
In the 1950s a strain of developmentalist thought emerged called modernisation theory that claimed that the problem of Latin America and the Mediterranean Rim was a lack of Anglo-Saxon Protestant values resultant from the mix of rigidly hierarchical religious cultures (Catholic, Muslim or Orthodox) and warm climates. The general drift of this “theory” was encapsulated in the so-called Iberian or Mediterranean Ethos: a culture of indulgence, indolence, patronage, clientalism and fatalism structurally rooted in a benign climate that allowed for easy shelter and food production. If only the Greeks, Italians, Spaniards and Portuguese (which actually is not on the Med) had to live in cold climates where survival depended on industry and resourcefulness–then they would have developed the “proper” entrepreneurial values that would have allowed them to develop along the “proper” lines of the Anglo-Saxon world. In other words, backwardness is a function of culture and climate.
Leaving aside the fact that there are plenty of temperate climate locations where entrepreneurial spirits have flourished, and plenty of cold climates where it has not, or the fact that lumping together whole regions in a culturalist explanation is ignorant at best and racist at worst, or that the notion of one universally ‘proper” form of development is both, this discredited canard ignored the structures of economic and political power (many overtly shaped by foreign intervention) that emerged in these regions and which were not reducible to either climate, religion, or civic culture.
By the 1970s modernisation theory was shown to be profoundly flawed. On a scale of over-determinism (when not cultural supremecism), it is up there along with the “warm water port” theory of imperialism. Yet, in recent years, and specifically with relation to the Greek crisis, it has been resurrected in revamped fashion as an explanation for developmental failure. Inspired by neo-liberal thought, the neo-modernisation thesis is that countries with “too much” state involvement in the economy are prone to political nepotism, rent-seeking, corruption and inefficiency. That makes for a lazy, supplicant, and favour-seeking society. The key to development lies in reducing the role of the public sector so that private enterpise can flourish. The private sector is seen as THE panacea for developmental retardation, and elites in places like Germany believe that the Greeks need to accept this.
While there may be some truth to the need for private sector leadership, the root causes of the current Greek crisis are, again, not as simple as the overbearing role of the state, nor is the solution simply a matter of reducing it.
As I mentioned in the previous post, Greece has an underdeveloped private sector. But–and this is a very big but– the weakness of the Greek private sector preceded rather than followed the advent of the modern Greek state, and the private sector never attempted to become the motor force for the entire society. If one considers the nature of internecine conflict in Greece dating back two milenia (for the historically disinclined, please think about Athens and Sparta, or better yet, the Peloponnesian Wars), one realises how parochial local, sectoral and island interests can be. That worldview continues today. Greek private industry, such as it is, has little concern about contributing to the public good.
In light of Greek capitalist myopia and parochialism, the recipe for social peace has rested on the public sector being used as a means of absorbing excess labour (along with emigration). The labour market and welfare systems are two-tiered: there are few protections for workers in the private sector outside of employer generosity or union strength, while the public sector adheres to ILO standards. Tax-evasion is a national sport, but the problem is not with individuals but with politically-connected corporations and agricultural interests as well as religious organisations who do not pay anywhere close to their due share of the tax burden but who do put serious money into the main political parties and individual politicians in order to protect their profits (since the money spent on politics is infinitesimal when compared to the valuated tax assessment of their worth). In order to conceal the results of this long-standing practice, successive governments, be they centre-right or centre-left, cook the Treasury books and leave it for their successors to sort out, in what has become an elaborate wink and nod shell game played between themselves and their foreign creditors.
Greeks are by and large a nation of small property owners. Owning a home is, like in NZ, their core objective. The private sector is dominated by small and micro-enterprises run by owner-operators (often familial in nature) who eek out small margins catering to immediate needs (think dairies, dry cleaners. locksmiths and the like). The state does not direct investment capital towards these people, not does it particularly focus investment in large corporations either. What large-scale investment exists comes from foreign-connected sectors such as shipping, and much of the profit generated by the handful of such firms goes off-shore.
To this can be added a large black market fueled by unchecked migration across Greece’s incredibly porous borders. One in ten inhabitants in Greece are foreign born and the majority are undocumented. This cash economy circulates outside the confines of the state (remember my anecdote about the gypsy street fair in the last post), yet is vital to filling the demand for basic necessities as well as for labour in the agricultural and service (including tourism) industries. Relatively little of the economic activity generated by these non-citizens provides revenue for the state, and with little immigration enforcement available (and largely impossible to regularise in the near term), that situation will only get worse as the official economy shrinks under the austerity regime now being imposed.
Thus the historical source of income stability (at least since the end of the colonel’s dictatorship in 1973) are public service jobs. But without an efficient tax system owing to the political cronyism of the major economic players, public budgets require external financing, which has led to more than two decades of deficit spending happily financed by foreign financial speculators trading in risk derivatives. The idea behind this play, which I accept, is that while firms may go bankrupt nations do not. Compounded interest ensures the investor’s profitability even if the principle is lost in a default (as Argentina showed in 2001-02). So the bottom line is that the system now under siege worked for everyone–the Greek elite enjoyed its privileges, the Greek population remained relatively content and peaceful even if economically underdeveloped by modernisation theory standards, and foreign financiers made money off Greek debt.
The trouble is that with the creation of the Eurozone currency system controlled by one central bank, countries such as Greece were placed in a financial straitjacket that eliminated the autonomy and cushion provided by independent national currencies. It cannot devalue or overvalue its currency based on market conditions (as for example, Singapore does regularly), and thus is locked into a monetary (supply and demand) framework over which it has not control. Hence, should it default on its debt to its European backers, one major option would be to defect from the Eurozone and re-establish its national currency. There will be pain involved but it would allow Greece to reorganise its finances in more independent, if austere terms. It has enough investment to ensure that even with defection it will not sink (consider that tourism constitutes 20 percent of the Greek economy and its limited niche export markets could actually be favoured by such a move). That in turn might encourage others, particularly the other members of the so-called “Club Med,” to follow suit, which could well spell the end of the Eurozone (especially when considering that a Tory victory in the UK will mean an end of talk of its ever joining and that Turkish incorporation into the EU could set the stage for an even bigger Greek-type scenario). Thus the Greek bail-out is not so much about Greece as it is about protecting the Eurozone as a currency market.
Which means that the strikes are going to continue, at an increased pace and on a potentially broader scale. In the face of elite indifference to their plight, it is the only means of defense for most Greeks. They have just been told that the public sector will take a 25 percent wage cut on top of a ten percent cut six months ago, then have wages frozen for three years. Imagine if that happened in NZ. Do you think that even the placid Kiwi public worker would take that lying down when s/he had no part in the deficit debacle? The retirement age will also rise while pension benefits will be cut. Although most people appear to accept the former, the latter is a major source of aggravation because as I mentioned before, there is little to no private sector pension plans. Prices of public utilities are set to rise and there is talk of privatising the bulk of the health system (which already is a two-tier system in which private health providers are used by the wealthy). All of which is to say that the burden of sacrifice will be shouldered by those who had nothing to do with creating the crisis in the first place. In fact, although improvements in tax enforcement are mentioned, that remains to be seen, and nowhere has it been mentioned that politicians will take a wage cut or corporations will be required to offer non-wage employment benefits in order to off-set cutbacks in public benefit programs while encouraging labour migration to the private sector.
Which makes me think that the recently announced IMF/ECB Greek rescue package is more cosmetic than substantive and could well provoke a public backlash that could provoke renewed military interest in internal security. That, indeed, would be a disaster.
Note: As always, my observations on Greece are indebted to the insight of my partner as much as my own. I will take blame for any errors.
PS: I have been thinking of writing a post about our brushes with petty crime and come curious Greek mores, but do not want to turn this into a travelogue. I shall try to integrate any such thoughts into a larger discussion of more serious subjects.
I was reluctant to post while I had the chance on ANZAC day, since there was such a good debate going on, and now I’ve (temporarily) run out of time again. So just a few quick observations.
Ok, so not so brief after all. Discuss. I’ll dive back in as I can. You can treat this as an open thread as well: post what you want to talk about.