Wednesday, 30 November 2011

ARE GOVERNMENT WORKERS LAZY AND OVERPAID?

The posting by Brian Blodgett is indeed refreshingly honest and it does point to problems is the salary structure of the government. One issue is the value of labor in government, and within the public sector the different levels from local and state to federal as well as different fields from clerical services to top management in a science lab.

There are many studies on this issue, some conducted by universities, others by right wing think tanks, others by government agencies, none of them agreeing exactly on the results. Let us assume for the sake of argument that government employees are overpaid and lazy, because government is outside the realm of competition. Why is the value of a government employee, practically at any level and any branch, including DoD, worth less than the private sector counterpart with similar education and experience? If government were such a great deal, why is it that government workers use public service as resume meat to jump ship, go the the private sector, do the exact same thing and earn much more?

The second issue is comparing the merit-based system in government versus the private sector. Government has rationalized the entire process from hiring, promotion to firing, mostly based on a merit-based system, although it is far more important to be 'going along and getting along', and to stay as 'professionally cool' in order to survive and move ahead, than it is to make waves intended to improve the workplace. As for the private sector, the system is merit-based from hiring to firing, as management tries to make sure that there is safety net under its feet and looks to shift the burden and blame beneath its feet, while taking all credit at the top when good things happen to the company. Mechanisms of accountability are more stringent in federal government than in the private sector also because there is a sense of working for and serving the public, whereas the private sector only looks at quarterly reports, and only in terms of how can management survive and thrive, often regardless of the health of the company. 

There has been a long-standing prejudice against government workers in just about every sector, from elementary school teachers to DoD and intelligence workers. That prejudice comes mostly from conservative critics and the media that portray government workers as lazy under-producing drones, wasting taxpayer resources, committed to affirmative action that many in conservative and some in liberal circles view as license to bypass the merit system, lacking accountability because there is no 'boss' as in the private sector to crack the whip, and that a government job means the person is not good enough to take risks in the private sector. The anti-government prejudice also comes from ideologues that associate anything with a government bureaucracy as 'Socialist'. Blaming the bureaucracy has been fair game for decades, although the vast bureaucracy was set up during the Progressive Era (from Theodore Roosevelt and Taft to Wilson) in order to make the economy and private sector more efficient and help it expand.

Anti-government worker prejudices intensified with the Reagan administration, as did anti-unionism. I do not remember such intense disdain for government employees in the 1970s when I was in college - postal workers were the exception, and that was largely a racist issue given that minorities worked in the sector. The attack on government employees has been part of a political campaign, helped by the corporate-owned media and private sector, fueled by racists, all intending to attack the public sector as the focus of all evil as Reagan did, while arguing that salvation rests squarely with the private sector. This attack has been part of a campaign to attack labor unions, to cut wages and benefits for the most vulnerable public sector workers, to shift resources from government personnel and dish out contracts to private companies. 

Government surveys indicate that the average state and local government worker makes about a third more in wages and benefits packages. However, public sector workers are better educated, have greater experience and operate under a more austere system of accountability. Moreover, public sector workers of similar education and experience earn an average 11% less than their counterparts in the private sector. It is also worth noting that when figuring into the equation the compensation of top management in public sector versus private sector, and the private contractors that government frequently uses, the public sector is a bargain while the cost of doing business in the private sector is astronomical by comparison. Finally, the recent recession has taken a larger bite out of the private sector, and the goal of many in right wing camps is to bring down the public sector salary structure.

As to productivity of the public vs. private sector, studies conducted by right-wing think tanks indicate that government workers are less productive by 12%. University studies regarding productivity comparisons differ sharply with the results of right-wing think tanks whose studies have been used by Tea Party politicians to slash salaries and benefits and eliminate positions at the local and state levels. When breaking down the productivity work load, it is 'loaded' toward the bottom of the labor pyramid, that is toward the lowest paid, while in government work load is more evenly distributed.

Moreover, the motivation level in public sector management is as high as that of private sector, in spite of vast compensation differences favoring the private sector. The reality is that public opinion on this issue is shaped by the media and conservative politicians, invariably trying to secure tax breaks, subsidies, contracts and other perks for the private sector. The Tea Party has done a major PR job throughout the country to go after government workers at all levels, it has used the issue to rally support from those who have no jobs or who have seen their wages cut in the private sector, and above all to default all problems in society to lazy and overpaid government workers. This issue will remain a major one for the decade as the US is trying to lower its public debt at all levels, and right wingers will insist that the way to do it is slash salaries and benefits and lower the number of workers.

Tuesday, 29 November 2011

NEOLIBERALISM: Myths and Fallacies

There are many myths and fallacies of neo-liberalism, among them that it would create greater wealth for all the world and eradicate poverty, and that the private sector is above imperfections while the public sector is the root of all evil. In point of fact, this PR campaign that neo-liberalism is the panacea, one that former Communist bloc nations adopted blindly along with much of the world, has won over millions of unsuspecting people. The marketing and selling of the neo-liberal panacea was helped enormously by the downfall of Communism, by the US campaign on terrorism, and by the idea that there is no alternative to neo-liberalism anywhere in the world, considering that even China is part of the global marketplace.

For those that may not see any difference between classical liberalism that started with Adam Smith and neo-liberalism that has its roots in the Reagan-Thatcher conservative revolution (although the theoretical origins predate Reagan-Thatcher, and can be traced to Chile in 1973 when the CIA overthrew Salvador Allende and brought the 'Chicago School' (Milton Friedman - U of C) to implement economic policy).

1. MARKETS OVER STATES: Market hegemony, and within the market large capital imposed on the state is a primary goal of neo-liberalism. The role of the state is not to fulfill the social contract as conceived by liberal and democratically-minded political philosophers of the Enlightenment era, but to serve, protect, and strength finance capitalism in its current parasitic phase. This means that finance capital with the backing of the state as an instrument of absorbing capital through the fiscal structure has as its first priority to maintain the hegemony of the markets by allowing them to operate freely during the expansionary cycle of the economy, and providing capital to sustain them amid contracting cycles. Markets over states entails that social welfare must be sacrificed to preserve market hegemony, regardless if that entails rising poverty levels, downward social mobility, social unrest, and political instability that leads to the erosion of public confidence in democratic institutions.

2. CORPORATE WELFARE: Reducing social welfare and strengthening corporate welfare has been a major characteristic of neo-liberalism. This includes a sharp reduction in any spending that is related to social service, from health and education to the environment. Using the fiscal system as well as direct and indirect subsidies to transfer wealth from the middle class and workers to corporations, especially to the financial institutions. The fallacy of such a course of action is that it would lead to even greater growth and economic prosperity in which all people would partake.

3. PRIVATIZATION: Privatization of public assets and sub-contracting everything from paper supplies to sensitive government intelligence is intended to strengthen the private sector that cannot possibly survive on its own, largely owing to its parasitic nature and contradictions in the capitalist system that result in systemic cyclical crises.

Neo-liberal advocates insist that anything in the public sector entails inefficient, corrupt, uncompetitive, and unhealthy for society's welfare, therefore, any public enterprises that can be handed over to the private sector must, and any services, including military and intelligence, that can be contracted out must. The ultimate goal of all of this according to apologists of neo-liberalism is economic growth and greater prosperity for all, the panacea promised to all but delivered to very few who are the large owners of capital.

In 2005, economists from the WTO and the Institute for International Economics advocating neo-liberalism argued that more than half a billion people would be raised from the depths of poverty. They argued that poverty in the world would end within the first decades of this century, if only barriers to trade and capital transfers were removed. In 2011, poverty is higher not only in underdeveloped nations, but in the advanced ones as a result of the global recession of 2008-2011, with the US alone having more than 17% living below poverty standards, and EU about the same number and expected to rise both in US and Europe.

During the African Union summit in Ethiopia in February 2008, a number of African leaders linked the fallacies of neo-liberalism to the political violence in East Africa, something that would be repeated in 2011 across North Africa during the Arab Spring uprisings, and across Europe with the indignant mass protest movements, and in major US cities with the anti-Wall Street protests.

But let us argue that the grass roots movements from Africa and Europe to the US represent a small minority of disgruntled people, and that there is no myth or fallacy in the neo-liberal panacea. How do we then explain that in the last three decades there has been downward socioeconomic mobilization in the US and super-concentration of capital in the hands of the top 10% of the population, if neo-liberalism held the promise of eradicating poverty by increasing wealth and presumably allowing for its sharing across all social sectors?

How has American society benefited from neo-liberalism's privatization when 45 million have no health coverage and unofficial unemployment is at 15%, and underemployment is at around 18%? It is in fact a myth that there has been greater economic growth and prosperity for all, not just for the US but for any country operating under neo-liberal policies. How do we explain that in the advanced capitalist countries the most vulnerable population is not the unskilled workers, but college graduates facing the prospect of never working in their field and never enjoying the 'middle class dream' of material comforts that their parents enjoyed?

4. DEREGULATION: End as many government regulations on the market as possible and remove as many government obstacles to movement of goods, services and capital as possible, allowing the market as much freedom to play by its own rules uninterrupted by the state and acting on the laws of 'supply and demand'. On the one hand, this sounds great because who wants red tape interfering with wealth-creation mechanisms. But is it not businesses that invite the state's intervention in:
a) subsidies, b) tax breaks, c) bailouts, d) barriers on foreign goods that are competitively priced,
e) intervention against monetary policies of countries enjoying competitive advantages,
f) labor and environmental laws and regulations, and a host of other areas from research and development paid for by taxpayers to infrastructural development?

Deregulation under neo-liberalism also means de-unionization of the labor market, canceling workers' rights achieved since the 19th century, and imposing wages that are as close to subsistence as possible. The rationale is that the US, EU, Japan, etc. must become competitive because China is rapidly out-competing the advanced countries. How do developed countries become competitive? They bring wage levels down so that they can maintain high profits and keep market share.When they speak of 'competitive', they mean lowering wages and benefits and securing tax breaks and subsidies.

5. GLOBALIZATION: Under the integration model of markets over state, finance capitalism in its present parasitic phase has been substantially strengthened by the World Trade Organization (WTO), International Monetary Fund, North American Free Trade Agreement (NAFTA), Asia Pacific Economic Cooperation, and European Union that has been adopting neo-liberal policies in the last two years, and a host of regional trade blocs as well as the European Central Bank, World Bank, and other international financial institutions. The ultimate goal of globalization is a well-integrated and homogenized economy that makes it easier for the process of capital accumulation.

6. HOMOGENIZED POLITICAL PARTIES:  Neo-liberalism as a phase of contemporary capitalism projects the impression that political parties from center-left to right-wing represent options to the voters, when in fact their only policy option is to tinker within the larger framework of neo-liberalism; that is to say, cutting less from social security while raising consumption taxes. The idea that conservative parties have much policy difference with their centrist or Socialist counterparts is a myth that people now realize.

For example, Spain, Greece, and Portugal were all under Socialist political party rule when all of them decided to adopt neo-liberal policies more than a decade ago, long before they adopted the current IMF-EU neo-liberal-based austerity programs. It was of immense symbolic significance that the former head of the IMF was a French Socialist, Dominique Straus-Khan, who despite his full embrace of neo-liberal policies insisted that he was a Socialist. That Socialist parties have been so thoroughly absorbed by the neo-liberal tide is essential for they appeal to the centrist and leftist segment of voters that must be deradicalized into conformity.

European Socialists speak and write like a college-educated person would expect Socialists to speak and write, but they practice neo-liberalism with their votes when in government. Neo-liberalism has triumphed over most mainstream political parties, a development that has accounted for the grass roots movement owing to the realization of most people that political parties try to appease voters, but all of them practice similar policies intended to further big capital. The frustration of the indignant masses, whether in Madrid or New York, is the same and it is with the hypocrisy that democracy exists, when in reality neo-liberalism has co-opted the ruling parties. 

7. CORE-PERIPHERY GAP: From its formative phase until the present, the market economic system has been predicated on global integration and asymmetrical relationship between the strongest economies of the core and the weaker ones in the periphery. Under neo-liberalism, the he symmetrical relationship has intensified, although the myth of the neo-liberal apologists is that the gap between rich and poor countries will close rapidly. Not only is the gap wider now than it has ever been between the 20 richest nations and all the rest, but it is widening as the southern and eastern European nations are experiencing debt problems and they have been compelled to adopt austerity measures whose ultimate goal is to impose greater conformity to neo-liberal policies.

8. NEO-LIBERALISM AND VALUE SYSTEM : If human rights are the basis of the Western value system in pluralistic societies since the Enlightenment, then neo-liberalism has been undercutting the human rights values system. Neo-liebralism assumes there is an inherent wisdom of the market, just as Adam Smith assumed there was an invisible hand guiding it. Moreover, the neo-liberal value system assumes that the collective welfare must be subordinated to the marketplace and must not stand as an obstacle to its progress.

In society, the individual is defined in a utilitarian manner as a worker who must subordinate to the rules of the evolving marketplace and as a consumer who has the right to demand quality products and services. Under neo-liberalism, civic values and human rights as part of the collective community are only acceptable if they are not obstacles to the progress of the marketplace. Whereas the traditional Enlightenment exalted the cultivation of creativity as an expression of the person's intrinsic value, neo-liberalism reduces creativity and individual talent into a commodity, thus the value system fostered and rewarded has a cash value. Not just the educational system, but the entire institutional structure is shaped to cater to the neo-liberal value system that has reduced human beings into commodities serving the ultimate goal of marketplace hegemony.

Neo-liberalism has been winning the PR war from Reagan to Bush (the son), partly because it had convinced a segment of the middle class of the panacea myth. However, that is rapidly coming to an end, as existing social relations and the social contract on which pluralistic society is built are now unraveling. The reality of the current global recession and the deep structural problems confronting countries, including the G-7, have exposed the myths and fallacies of neo-liberalism. Increasingly, more and more people are demanding an end to the panacea myth that neo-liberalism had been promising to all but delivering it only to the rich.

Monday, 28 November 2011

US-PAKISTAN TENSIONS and CHINA'S ROLE

On 30 September 2011, I wrote a posting entitled US-PAKISTAN TENSIONS, arguing that the US-Pakistan relations were at a turning point, and that the US was unnecessarily alienating its ally in the war against Afghanistan. I wrote the posting after Senator Lindsey Graham publicly threatened that US military action against Pakistan was an option that cannot be off the table.

Of course, the US did not engage in military occupation of Pakistan, something that would be impossible and literally insane from a military, political, and economic perspective. However, NATO forces have become increasingly defiant of their host since September 2011, just as the people of Pakistan have become impatient with their government's tolerance of foreign troops violating national sovereignty.

At the time of Senator Graham's hyperbolic warning many in the US media argued that it did not necessarily reflect official US policy. Moreover, all the focus was on the lack of Pakistan's vigilance with border incidents and lack of cooperation that goes back for a number years, including in matters that has to do with intelligence. However, the reason the Senator's remarks caught public attention was because Pentagon officials reacted to it warmly, while Pakistan and China seemed very concerned that there was something behind the US threat.

The history of US-Pakistan relations from 1947 to the present has been one based on US military and economic aid in return for using Pakistan for geopolitical purposes. Because of the Cold War, Pakistan as a member of the Baghdad Pact (1955-1979), and because of India as a rival owing partly to the chronic Kashmir conflict, governments in Islamabad had to rely on the US, as it would have been very difficult for a Muslim nation to ally itself with a Communist regime during the Cold War.

Although Pakistan was part of SEATO and CENTO, both US-led military alliances intended to contain Communism and to keep as much of Asia integrated with the West,  US-Pakistan relations were held together not by what the two nations had in common, but what they opposed, especially during the 1980s when the USSR invaded Afghanistan. With the Taliban in power in Afghanistan, and with al-Qaeda having major operation in Afghanistan and inside Pakistan, the US changed its position toward Pakistan after 9/11, forcing it to either accept US-NATO military operations against Afghanistan from Pakistani soil, or face the consequences.

After 9/11, US-Pakistan relations began to deteriorate, as the US hired contractors to engage in targeted assassinations, often killing innocent people, and engaging in drone warfare that has also resulted in the deaths of innocent non-combatants. On 26 November 2011, NATO air strikes killed 24 Pakistani soldiers along the Afghan border, despite repeated warnings from Pakistani officers to NATO command to stop firing even two hours after repeated shootings. Secretaries of State and Defense offered apologies for the lost lives, but the Pakistani government has heard such apologies before.

This is not the first time that NATO has struck at the wrong target inside Pakistan, and US government officials know that the Pakistani government must adopt a very hard line against the US, at least publicly, because the US is about as popular in Pakistan as it is in Afghanistan. This is a case where US bombings have put Prime Minister Yousuf Raza Gilani in a corner, forcing him to lash out at the US for failing to respect the national sovereignty of Pakistan.

Although the government ordered the US to leave the air base from which it has been conducting drone bombings, and although all bilateral talks are now on hold, my assessment of the situation is that Pakistan has nowhere to go, except to remain in the US military orbit of influence; at least until the troops are out of Afghanistan and as long as the billions in foreign aid keeps pouring into this poor nation.

China is now Pakistan's largest defense supplier, it is increasing its trade ties with Pakistan, and its economic relationship is keeping this Muslim nation afloat. However, China is not at all at ease about becoming Pakistan's sole patron, not just because it is concerned about some of the militant Muslim tribes, but it would not serve its broader interests to be identified so closely with Pakistan, nor would it help its delicate relationship with the US, India, and Russia.

China's foreign minister Yang Jiechi assured Pakistan's foreign minister Hina Rabbani Khar that Beijing remains committed to supporting "Pakistan's efforts in safeguarding national independence, sovereignty and territorial integrity." The Chinese foreign minister used language that widely appeals Chinese nationalists and military, but even more to the broad masses of Pakistan's population.

In reassessing its long-term role in Afghanistan and Pakistan, that is after troop withdrawal in a couple of years, the US would have to determine if spending billions in China's backyard is a good investment just to fight "terrorism" half wayb around the world from US soil. In my view, the recent move that the US made in expanding its trade bloc in the Pacific region (Asia Pacific Economic Cooperation summit - 17 November 2011), including arriving at a new military agreement with Australia is an indication that Washington has already decided that the future is well south and east of Afghanistan.

Saturday, 26 November 2011

KEYNESIAN MIX OR NEO-LIBERALISM

Randy Black does a good job of presenting a version of neo-liberal views on the economy that are responsible for the lingering global recession and the debt-ridden US and EU economies, as well as for the imminent double-dip recession that awaits the world in 2012. What Randy fails to understand is that neo-liberal policies have consequences, and that was the central theme of my posting on the need of the state to  'absorb surplus capital' from the private sector. I stressed that governments will in fact go the route of neo-liberalism because that is what the lords of capital want, and politicians merely try to preserve the status quo which they faithfully serve, no matter the PR intended to engender social conformity. By so doing, however, one cannot complain, as Randy does and those of similar ideological disposition do, about the nation-wide grass movement protesting the decadent US political economy and its institutions.

If one supports the exact same policies that led the US to its current state of debt and recession, then one must accept the possibility of social disharmony, eventually social uprisings, that come with it. We cannot reinvent the wheel, but at least we can be realists and agree a) that most of the ideas we put on the table are recycled ones, b) depending on what kind of society one wishes to see then policies are followed accordingly, and c) social engineering by the state is inevitable no matter what policies one proposes, whether my radical Keynesian mix or Randy's neo-liberal mix.

I have argued in many postings in the last five years, before the global recession, that neo-liberalism has failed in the West, but the US government pursues the same failed policies to the detriment of society at large and it calls on the rest of the world, including Greece that has been in the toilet owing to neo-liberal policies as well as endemic government and private sector corruption, to adopt failed policies because they strengthen finance capital. Randy's comments indicate that he assumes each country is isolated on this planet, and if Greece and southern Europe have fiscal and economic problems, those are separate and distinct to them alone. This assumption is based on his idea that there is no global economy, no regional economic blocs, no IMF, no G-20 coordination, no World Trade Organization, no World Bank, and above all no multinational corporations and global finance capitalism on this planet.

As it has evolved in its current phase of parasitic welfare capitalism, the world economy is a giant cesspool. The periphery nations like Greece, Portugal, Ireland, Hungary, etc. are swimming for their survival, while at the core are the G-8, some of which are now in as much trouble as the periphery. Who would have guessed a year that Italy would be borrowing at 8% for its short-term bonds, that France is now under its own self-imposed austerity program and targeted by the Fitch, S and P and Moody's for a downgrade? Who would have guessed a year ago that there would be lack of interest for short-term German bonds at the recent auction. This is proof that no country has a private toilet in which it is doing its business and sinking, that all of them are swimming in the giant globalization cesspool which of course rots from the center out and takes down with it the entire world.

Countless people have written on the failure of neo-liberalism and the failure of government to change course despite the global recession, on the need to reconsider the existing policies that have caused the current global recession. Although ideas are the basic framework on which to proceed, they do not cause change if they are opposed to the status quo and are intended to upset the social order. Material conditions alone are the causes of change and it is very clear that objective material conditions in the US and in much of the Western World have changed considerably in the past four years. This is the driving force behind grass roots social movements that governments must take into account for they may become social uprisings in the future if objective material conditions deteriorate, a situation that will force otherwise 'democratic' societies to become increasingly authoritarian or quasi-police states.

Friday, 25 November 2011

FISCAL POLICY AND THE ECONOMIC CRISIS

Because of the global recession (2008-present), the fiscal issue is the most significant one of our time in the US as well as EU. Given that fiscal policy is a catalyst of how income is distributed from one group to the other, massive amounts of money is spent by lobbyists to influence fiscal policy. A key question today before politicians trying to decide on fiscal policy should be whether a fiscal structure in a democratic society must reflect a modicum of social justice, or simply take into account econometrics to the neglect and detriment of the social contract as workers and the middle class understand it.

There are countless experts on fiscal and monetary policy that have countless policy mixes of how to best deal with debt problems. The key is how to do it without precipitating sociopolitical disharmony, or at least lessening social disharmony as a result of socioeconomic inequality; this of course within the context of a pluralistic (democratic) society, and not an authoritarian or semi-authoritarian (quasi-police state) parading as 'democratic' merely because it holds elections every four years.

There is no such thing as a magic bullet, no ideal fiscal formula, no perfect tax plan. The fundamental question, as much for the US as for Europe in the past two years, is what kind of society do they (political and socioeconomic elites) want, and what consequences (sacrifices) are the political and socioeconomic elites willing to accept for defending fiscal policy mix A vs. B? The US is less complicated than EU because America manages its own reserve currency and it is not bound by treaties or accountable to any other country regarding monetary policy that is an integral part of fiscal policy.  


Robert Reich, who has written against the flat tax and in favor of heavier taxes on the wealthy, has a record of supporting the left-wing of the Democrat Party, moving more to the center when he worked for President Clinton, and then going back to the left once he was out of government; as he should have given that intellectuals can be more true to theory than policymakers. His views represent a segment of the Democrat party and of society more broadly. The question is whether the left Democrat position or a variety of Republican proposals will best serve the majority of the American people and at the same time put the country on the path toward lowering the debt.

My own perspective is that Reich does not go far enough, as I have already stated in a previous posting. In june 2011, I wrote a brief piece entitled "US Income Pyramid and the American Dream" in which I explained that the top 25% of the population earns 47% of income, while the bottom 25% of the people earn a mere 4% of income. 
So much capital has been absorbed and concentrated by the private sector and so much continues to flow from the public sector to the private that we have the very serious problem of sovereign debt in the US, EU and other countries. The state must adopt very radical measures to absorb capital from the private sector - this means the top 25% percent of the population that owns most of the wealth - in order to achieve fiscal equilibrium and regenerate the credit economy so that it can begin to expand again.

What I am proposing, and many others around the world have also proposed is a very radical Keynesian position. It will not happen in the US any more than it will in the EU, and neither will the US or EU adopt anything that Reich has proposed, which is a more more modest proposal. The reason is that the socioeconomic elites enjoying privileges of a society and political systems from the US to Russia that has elevated them to Medieval Lords (lords of capital) do not wish to surrender their privileges any more than the lords did when the French Revolution broke out.

Democratically-elected political elites will make sure that the 'lords of capital' retain their power, which by all indications is currently causing broad society disharmony and leading toward the twilight of democracy. The cost for pursuing policies that serve a small percentage of the population, namely, the lords of capital, will mean greater socioeconomic gap, greater poverty, downward socioeconomic mobilization, degrading of the democratic (representative) system, more frequent and more intense social unrest that will result in political polarization and the road toward quasi-authoritarian regimes. Such regimes will insist that they are 'democratic' because they have given people the choice of a bankrupt two-party system that represents the lords of capital. How long will people accept the myth of 'democracy' against the reality of authoritarianism under the lords of capital is already answered by mass protests across the US and EU.

Wednesday, 23 November 2011

EGYPT'S REVOLUTION in HISTORICAL PERSPECTIVE

On 28 November 2011, Egypt held elections for the People's Assembly and Shura Council (upper house). The results may have surprised some in the West, but they were predictable. The Muslim Brotherhood's Freedom and Justice Party won 37 percent of the vote, the radical Islamic Salafi movement's Al-Nour Party (severely persecuted by the previous regime) won 24 percent, while the secular Egyptian Bloc won a mere 13 percent.

What does this mean for Egypt, for the wider Arab region, and for Egyptian relations with the West? The Muslim Brotherhood has been around for about eight decades and it is experienced and practical, but it remains to be seen what it does once in power. In June 2011, the US had no choice but to open 'back-door' channels of communications with the Muslim Brotherhood, suspending its previous position that the group was terrorist. Much will depend on the Egyptian military's role in policy influence and on the ability of the West to permit Egypt under an Islamist regime to follow its own path and make accommodations accordingly without bending to demands that Egypt must remain an economic, political and military satellite.

To understand why Egyptians rebelled in the early months of 2011 and then continued their uprising in November 2011 after the Mubarak regime was overthrown, one must examine not just the short-term causes (poverty, political corruption, authoritarian rule, etc.) of Arab Spring, but the history of this North African country from the era of Mehmet Ali the reformer  (1801-1849) until Arab Spring 2011. Although a North Africa-Middle Eastern-wide mass movement, Arab Spring in Egypt is part of a historical process with very deep roots that date to the Ali era. 


As part of a regional mass movement against the old authoritarian regime that includes the military and police as sentinels of the status quo, the Arab Spring revolts of 2011 certainly qualify as Pan-Islamic only in so far as they have religion in common as a catalyst for change against authoritarian governments. Unlike the Arab Spring bottom-up uprising, Egypt's previous uprisings were nationalist, top-down that included the military as a catalyst to change.  


The similarities between past and present include nationalism and Islam as ideological catalysts, although it must be stressed that domestic, regional, and global conditions are constantly changing and revolutions reflect such changes. While 'Islamism' and nationalism may be constants in Egypt's revolts from the 19th century to the present, Islamism and nationalism have undergone changes to reflect domestic and global circumstances. Unlike, Europe that underwent a Renaissance, Commercial and Industrial Revolutions and Enlightenment, this is not the case in Egypt (nor Asia or Africa for that matter), thus religion plays a key role in revolution of a traditional society and shapes the anatomy of the revolution itself.  


In the first half of the 19th century when northwest European were trying to expand their colonial empires after the Napoleonic Wars, Mehmet Ali managed to prevent his country from external dependence. This was at a time that the Ottoman Empire was divided into European spheres of influence. Ali carried out a nationalist revolution (the term 'revolution' means radical or systemic change) at a time that political revolutions were confined to Europe. However, his successor Abbas I (1848-1854 and Muhammad Said Pasha (1854-1863) prepared Egypt for colonization under England, thus undermining Ali's reforms intended to achieve a modicum of national sovereignty. 


The catalyst to colonization was the unraveling of the strong state structure that Mehmet Ali had built and the extraordinary foreign borrowing to the point that foreign creditors, especially British, paved the way for financial control over Egypt. By controlling Egypt and its precious canal, Britain enjoyed commercial and military control  of much of Africa and the Middle East. Egyptian anti-colonial resistance from the late 19th century to the revolt of 1919 did not result in the elimination of British imperial rule.


In July 1952, Gamal Abdel Nasser and the Free Officers Movement took a page out of Mehmet Ali's reformist nationalist movement in the 19th century and established a strong sovereign state for the next two decades. Nasser's top-down revolution took place with the military as key player. The most significant achievement of Nasser was to eliminate British imperial rule and to provide Egypt with a sense of independence that it lacked since Ali. 


Just as in the case of Ali, Nasser made mistakes of costly projects that did not yield the best results, exorbitant military spending made necessary owing to regional hostilities and the old War, and wasteful public enterprises. At the very least, the Nasser era afforded the people of Egypt a sense of pride that imperialism had denied them for more than a century. 


The US and the West tried to isolate Nasser and portray him as a Communist sympathizer, merely because he opposed surrendering national sovereignty to the US and tried to strengthen Egypt and the Arab and pan-African movement. Nasser and Ali brought to Egypt a sense of respect by asserting national sovereignty and rejecting external dependence, but neither of them succeeded largely owing to pressures from the Great Powers. 


Many in the West do not grasp the meaning of 'national sovereignty', because it appears as vague as the concept of 'freedom' to those who enjoy it and do not have to think about it. A Westerner thinks that 'sovereignty' is nebulous and meaningless because s/he lives in a country that enjoys national sovereignty. Why would Egyptians be fighting for this nebulous concept and not be content with a Wall Mart, a fast food restaurant, and a branch of an American or European bank in their city? Why aren't Egyptians happy to have internet as a shopping mechanism, instead of using it to stir up a grass roots rebel movement?


The Arab Spring revolt is the third in the history of Egypt since Mehmet Ali to assert national sovereignty, not merely a struggle for jobs, higher income, less official corruption, a more efficient public sector and a modern private economy, one not based on the primary sector and tourism so heavily. Arab Spring for Egypt has deep historical roots and there are parallels between what took place in the 19th century before the building of the Suez Canal; what took place in the revolution (Egypt and Sudan) of 1919 official independence in 1922, while Britain remained hegemonic in essence; the successful revolution of 1952 when Nasser took the country to the non-aligned bloc; and what took place in 2011.


There are different interpretations on the causes of the original Arab Spring revolt in Egypt specifically, among them endemic poverty, corruption and external dependence, stronger commitment to Islam, etc. Many Western analysts, journalists and politicians insist that the revolt had absolutely nothing to do with the West, or any other external factors, and that the causes are purely domestic, factional rivalries of varying sorts. This argument assumes that Egypt exists on planet earth completely alone, cut off from the its Arab neighbors, from Israel, from sub-Sahara Africa, from Europe and from its long-time patron the US. 


Those who have studied the history of colonial revolts dating back to the 1
9th century know that colonizers always attributed the causes of revolts to internal factors, rarely placing much weight on external ones. A closer examination of the influence of the US on Egypt in the last four decades reveals that the Arab Spring of 2011 is rooted in semi-colonial and extremely corrupt conditions under Sadat and Mubarak, as much as it is on domestic causes related to Islam that has always played a role in political rebellions.

In the 1980s, the public sector accounted for roughly half of industrial production and 90 percent of  banking and insurance, occupying about 20 percent of the labor force; not at all unusual for an undeveloped or even a semi-developed economy. In the 1990s Egypt experienced a financial crisis when international banks refused to extend credit, largely because the state finances depended heavily on state enterprises; a position with which Western governments and IMF agreed. In the wave of neo-liberal policies that the US and IMF were promoting, Egypt agreed to go along the route of privatization.

In the early 1990s, the US government through the Agency of International Development funded to the tune of $10 million the Egyptian Center for Economic Studies, a think tank that included the son of former president Mubarak intended to bring about structural change in the country. The US-funded think tank that was intended to reform Egypt in reality looted the country and its members are now in prison, others fled the country. Interested in privatizing as many public companies as possible, the think tank was to bring US-style neo-liberalism in Egypt. 


The publicly-stated promise of the US and the West was that Egypt would be lifted from poverty, it would become democratic, it would modernize rapidly, and it would join the modern community of nations - a package called the "Washington Consensus". That was two decades before Arab Spring, a promise never materialized, a promise that entailed greater poverty, less democracy, more external dependence, greater corruption, and a return to pre-1952 conditions. Working with a US law firm, Mubarak's son undertook to implement the Washington Consensus in  the name of progress. Specifically, the goal was to privatize 350 public companies worth more than $104 billion so that Egypt can join the 21st century. 


The USAID-funded think tank, which Mubarak's son and the US law firm headed, sold public assets worth $100 billion for a mere $10 billion, or $2 billion more than the foreign aid that the US provided between 1991 and 2011, on condition that Egypt must privatize as much of its public sector as possible. The members of the think tank and others linked to the former regime pocketed a great deal of money not only from the sale of public assets, but also from US aid. 


After Mubarak fell, U.S. officials began asking questions about $70 billion of US taxpayer money going to Egypt for aid in past six decades and about a handful of people pocketing the money. However, because the US was itself behind the schemes to 'privatize and reform', it could not go public with what had taken place in Egypt under Mubarak, especially given that the regime was making just aboput every political and military concession to the US and to a lesser degree to Israel.

Some of the details of these scandalous exchanges were made public by Wikileaks on which the Washington Post then pursued its own investigation. Internal State Department memos (2006) indicate that the US was well aware that its own privatization program was the cause for even greater corruption in Egypt, but USAID continued the program without pause.

The fall of Mubarak was a celebrated event, even by the US, at least publicly, while privately, the US was demanding that the military must guarantee all treaties and obligations. In essence this entailed that Egypt can change faces but not policies, it can have elections but it cannot permit any change in the status quo ante. The military remained behind after Mubarak to make sure that the country stayed a dependency of the West, a nation of poor people with a hand full of millionaires linked to the state, a Muslim country with cordial relations to Israel and US.

Arab Spring for Egypt was not merely part of a regional - North Africa-Middle East - awakening, but it had its own historical causes, and it was more a continuation of the two-century long struggle of Egypt to achieve national sovereignty among nations.Whereas Ali and Nasser used the military to carry out their reforms and strengthen the state structure against foreign intervention, the rebels of Arab Spring are fighting against the military that has evolved into status quo guardian of domestic elites and foreign interests.

As we approach the end of 2011, unless a new regime takes power that genuinely represents the spirit of national sovereignty in the manner of Mehmet Ali and Gamal Abdel Nasser, Egypt will not have lasting social harmony. Trying to forge alliances with the various interest groups in Egypt, groups that have disparate interests will not be easy, but the catalyst to unity will be a strong commitment to national sovereignty and social justice.

Tuesday, 22 November 2011

US COVERT OPERATIONS IN THE MIDDLE EAST

1. CIA-IRAN-HEZBOLLAH 
Regarding the CIA operatives caught by Iran and Hezbollah, as announced on 21 November 2011, my view is that some of them, probably those over which Hezbollah (Shi'ite Lebanese militia) has control, will not be returned to the US - Hezbollah has a dogmatic position on this matter. However, the same may not be the case for the operatives that Iran is holding. My guess is that these agents are very useful to Iran for propaganda purposes and for bargaining on any number of issues, including nuclear program and the alleged Iran-Mexico plot to assassinate the Saudi prince in the US. Iran may also convince Hezbollah to bargain, but that will be difficult.

The Christian Science Monitor is reporting that the CIA operatives, perhaps Iranians working for the West, are part of a US covert war against Iran. This is understandable and logical given that the US wants to make sure that Iran's nuclear program never materializes, even though the program has wide applications from medical science to energy, with potential uses for weapons at some future point. It seems almost certain that it was Hezbollah that uncovered the US spy ring and that Hezbollah is apparently much better at counterintelligence than Iran, which provides funding to the tune of $150 million annually to Hezbollah - US DoD claims. If indeed US sources are accurate, Iran has been using Hezbollah for counterintelligence to prevent the US, Israel and other Western countries from undermining its nuclear program.

I have no way of knowing if the US is working with a number of governments and independent groups to secure the release of its operatives, but I do know that in the past the US has used both Greece and Turkey as intermediaries with Iran. Iran is the only oil producer in the world that provides crude oil to bankrupt Greece without asking for an advance cash deposit. This is amazing given that Greece is very close to Israel and a semi-respectable satellite of the West. Iran will be very busy negotiating with other intermediaries and the only way that it will not return the CIA operatives is if the US flatly refuses to negotiate, because it has a policy of not negotiating with 'terrorists'. Iran may also prevail over Hezbollah this time, depending on terms the US puts on the table. The ball is on the US side, because for Iran the operatives have greater value alive than dead.

2. AUTHORITARIANISM and US POLICY
a) ) The business of espionage notwithstanding, does the US have a policy of picking and choosing with what authoritarian regimes it will cooperate since the Spanish-American War, or has it followed, even once, the 'democratic' criteria for ideological reasons? Even Woodrow Wilson's missionary diplomacy, had a motive that was related to expanding US power and interests, and nothing to do with democracy as he understood it, given the policies that he pursued toward minorities, immigrants, women, especially radical women like Emma Goldman, and syndicalists and anarchists.

b) US foreign policy has not changed in the last 100 years, because the US remains an imperial power and it plays by the rules of empire. This means that the US and its junior partners in Europe are not in the least interested about a democratic regime (one that follows the will of the majority of the people) anywhere in the world. On the contrary, such a regime would be an anathema to US economic and military interests, for it would pursue an independent policy. If the issue before the US is replacing an anti-Western authoritarian regime with a pro-Western one, then what the US and its allies have been doing in the Islamic countries is the way to go. If the issue is as the US and its allies claim, namely, "freedom and democracy", and if that is the issue on which people are fighting, then the West is deceiving the rebels into believing that it is on their side and wishes to further their interests.

c) That the deceased Libyan leader was authoritarian and that he was not very popular is not in dispute, and it is something that history will show with greater accuracy than I am able at this juncture. That there are Islamic leaders enjoying US and EU support even less popular than Gaddhafi is a reality that I have no doubt even US officials will admit; not officially, of course, but at least over a good glass of scotch and casual conversation about US foreign policy. Is the issue for the US and EU to rid the world of authoritarianism, or is the issue to pick and choose which authoritarian regimes best serve Western interests, and to remove from power those that are in the way? 

In case there is any doubt about the US commitment to democracy across the entire Middle East, consider that the US reaction to the mass uprising in Bahrain where protesters' property has been under attack by officials and where prisoners have been tortured; US reaction to Yemen where finally after months of a bloody uprising the pro-US dictator Ali Abdullah Saleh seems to be stepping down; and US reaction the entire Gulf area where kingdoms remain in power ruling with an iron hand, Saudi Arabian and US backing intended to maintain authoritarianism for as long as possible.

Monday, 21 November 2011

"ARAB SPRING AND WESTERN-ISLAM RELATIONS"

In several postings throughout spring and summer 2011 (see the postings entitled: Western co-optation of Arab Revolts - April 2011; Middle East: mid-2011 Assessment of Arab Revolts, June 2011), I emphasized that the Arab revolts would not necessarily result in regimes that are accountable to their own people, but more likely to Western governments and business interests.

On 19 November 2011, violence erupted in Egypt and the rebels are claiming that in essence the Arab Spring revolt did not result in a new regime that represents the people, but new faces that represent the old policies. As guarantor of the old institutional structure and policies, the Egyptian military remains a major obstacle to free and open elections similar to those that took place in Tunisia and returned a parliamentary system.

But even in Tunisia where the two leftist political parties won almost as many seats in the Chamber as the Islamist Ennahda party, the government remains very committed to close economic and political ties to France and EU. Unlike Egypt and Algeria where the military historically has played a role in both politics and business - protecting their interests - the Tunisian military does not have such inordinate influence in politics and business, so the transition to a semblance of political power sharing under parliamentary rule was smooth so far.

This does not mean however, that even Tunisia with its relatively smooth transition will not suffer social unrest like Egypt. High ranking Tunisian military officers have been cooperating with the US and NATO; Tunisia has taken part in a number of US-NATO operations, and it has provided NATO ships to use its port facilities. If a segment of the population is convinced that the new regime is a Western puppet and serves a small segment of the political and business elites, and that the country is as much a Western satellite after deposed dictator Ben Ali as during his regime, there will be problems in Tunisia.

Yemen, which is more like Egypt and Algeria in terms of the military's role in the political and business arena, remains extremely volatile, with the dictator-for-life Ali Abdullah Saleh insisting that he will only hand power to the military. This signals that there will be no real change in the political arena, and that Yemen will remain under the aegis of the US and Saudi Arabia, thus the revolution in Yemen is likely to continue.

Meanwhile, the US and EU hardly make any noise about Yemen, Kuwait, or any of the Gulf states, especially Bahrain, a major US satellite, where grass roots movements demand democratization; a concept that means the countries become as free of Western imperialism as their power leverage permits. The only focus of the US is on Iran and Syria, two countries that the US and EU want to see regime changes so that both come under pro-Western influence and become more closely integrated economically, militarily and politically with the West. One-time ally Turkey would love for the rebel movement in Syria to succeed, for it would make Ankara even stronger in the region to compete with Iran for regional hegemony.

Can we conclude that the US and EU are interested in 'freedom and democracy' in the Islamic countries, given what has taken place so far?  Of course, there are those who argue that the real struggle is not between pro-democracy elements and authoritarian in the dress of the military in Egypt, but between the military and Islamists, a term that in the West is not equated with democracy because it is not secular and pro-West.

Maybe the EU countries and US are indeed interested in democratizing the Islamic countries for no other reason than to see democracy thrive. Does Libya now have a democracy, or is it about to be reduced into a much more dependent Western satellite than it has ever been since independence? If only the Libyan rebels fighting in the streets knew that their country's future rests as a Western semi-colony, with lower living standards and lack of sovereignty? Maybe there has been no covert operational activity involving CIA and other intelligence agencies, no political, military or economic agenda, no geopolitics or balance of power issues at all on the part of the US and its EU partners. (see my posting entitled: CIA and the Arab Revolts - February 2011).

Maybe governments in the West just love to spread freedom and democracy around the world, just as they did during the Cold War. Thus far, all evidence shows that the West has its own agenda that includes plans of how to exert political, military and economic hegemony in the Middle East. This is exactly what the West has been doing for the last 100 years, from WWI when the Allies promised Arabs freedom if they fought against the Ottoman Empire and its German allies, to the formation of the Mandate system, to the creation of the state of Israel at the expense of Palestinians, and to the numerous wars in the post-WWII era where the West ardently defended Israel against the Arabs, to the current wars in Iraq and Afghanistan, and the recent NATO bombing of Libya. is there a single instance of evidence, just one piece of evidence that the West has ever acted to fulfill the pledge that it stated publicly, namely, to deliver freedom and democracy to the Islamic countries?

 Freedom and Democracy are not cell phones or weapons that they can be handed over to a country. The people in the countries where revolts have taken place and are currently unfolding have a very different sense of what they want for themselves and what the US and EU want for their countries. Kipling's "White Man's Burden" notwithstanding, in the history of Arab-Western relations dating back to the Treaty of Kuchuk-Kainarji of 1774, is there even a single instance where any Western nation has acted in any manner other than self-interest to the detriment of the Islamic country that the Western nation claimed it wished to help democratize?

Do Islamic countries need Lawrence of Arabia-style PR, only to discover that in the end they must surrender sovereignty to the West? Why would there be a change in Western policies today when Western nations are on the economic warpath against their own citizens with detrimental fiscal and social policies? Should any rebel die or be injured in the Middle East and North Africa under the illusion that the new regime that will replace the existing authoritarian one will not be but a puppet of the West?

Friday, 18 November 2011

US-CHINA-JAPAN RIVALRY FOR ASIAN HEGEMONY

During the week of November 13th, President Obama endeavored to reassert US hegemony in Asia. Taking advantage of the Asia Pacific Economic Cooperation summit, he sent a strong signal to China that the US would not surrender the broader Asia Pacific region to China that is gearing up to replace the US as the historic hegemonic power.  Joining the US in a new trade bloc were Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam, with Japanese Prime Minister Yoshihiko Noda expressing an interest at this juncture, but very unlikely to join under the terms that the US has imposed. 

In an address before the Australian parliament on 17 November 2011, Obama maintained that America's future rests in the Asia Pacific region, perhaps a point well taken given the troubles of Europe and its limited growth prospects, as well as the problems in the Middle East that has been providing the US with oil for almost a century. Does this mean that the US is trading its trans-Atlantic future for a brighter trans-Pacific one?

The US is trying to make sure that it retains a solid trade bloc from which both China and EU would have less competitive advantage. However, the US is interested in using the trade bloc for geopolitical considerations, given that it plan to station troops in Australia, and to put pressure on China that continues to keep its currency undervalued and continues to violate intellectual property rights. 

At this stage, the Trans-Pacific Partnership may appear to be more symbolic than real, given that it represents a mere 6% of US total trade. However, the new bloc has enormous potential as a free trade zone that could eventually integrate up to two dozen countries of the Asia-Pacific Economic Cooperation group. But the potential of the Trans-Pacific Partnership is immense.

One goal of the US is to place new limits on China's economic nationalism and to strengthen private enterprises, especially US corporations trying to gain more favorable terms in China. As the US tries to play a larger role in determining the Trans-Pacific economic balance of power and to impose upon China rules of Wall Street, it finds that China sees its future with existing policies of quasi-statism, rather than neo-liberalism. 

China is slowly making concessions to foreign corporations and it has made some compromises on raising the value of its currency. It has been importing more, as the US demands, and it has made some progress on intellectual property rights. The most powerful leverage that the US has in forcing China to conform to its demands on monetary, trade and investment policy is a trade deficit with China of $273 billion for 2010. China's most significant leverage is that it purchases US bonds, a policy that help to keep the dollar at artificially high levels. 

The future of the US is indeed in the Asia-Pacific region, and not in the trans-Atlantic region where the EU dominates and seems to be having serious structural problems with the integration model on which it was founded. The question is whether the US can work with China to carve out spheres of influence - in every respect from political, military and economic - so that China-US coexistence can evolve harmoniously in the course of the 21st century. 

Conflict may become inevitable, not necessarily from China as many analysts assume at this point, but from Japan that China has pushed into the world's third economy and losing ground, and whose prospects are not very good moving forward. Instead of watching the obvious US-China rivalry, it is of greater interest to see how the US-Japan and China-Japan rivalry will evolve during this decade. Japan's security guaranteed by the US makes Japan vulnerable and weak in trying to challenge US for hegemony in the Asia-Pacific region. 

Japan's historic and highly structured relationship with the US is both a guarantee for stability and a limitation upon Japan's ambitions if they conflict with US expansion goals as they now do over the US-led Trans-Pacific trade bloc. If the US is to challenge China's supremacy in Asia Pacific, Japan would have to play 'junior partner' role, or at the very least stay of America's way. 

This means that the US would set limits on Japan's growth, a prospect that would be very difficult given the degree to which Japan is firmly entrenched throughout the Asia-Pacific region. In order to limit China's regional influence, the US must necessarily relegate Japan to a regional power that subordinates its interests to American global power as in the Cold War. 

Analysts see Japan cooperating to a degree with the US, but also fighting back against the game of regionalism that the US is playing. Unlike Europe that has been looking back to its history, Japan looks forward to the future as it has been engaged in an intense competition in the fields of science and technology that is the backbone of industrial research and the key to competitiveness. US-Japan economic rivalry is hardly new, but it seems that the Obama administration may be laying the groundwork for a new era of underlying conflict that has China as the ultimate target.

Of course, Japan may decide to join the US in its quest to limit China's Asian influence selectively on a case-by-case basis. It is also possible that Japan will accept the regional supporting role that the US wants it to play and accept that its position is not much different than during the Cold War. No matter what Japan does, the US will have to pay a price of the politics  of regionalism in the Pacific, but the question is whether it discovers along the way that Japan will be an even greater challenge than China, and whether Japan moves toward realignment to strengthen itself against Western imperial hegemony.

Wednesday, 16 November 2011

ANACHRONISTIC US POLICY TOWARD IRAN

It appears that Iran is not cooperating with US demands to be further isolated and punished for pursuing a nuclear energy program, which has the potential of becoming a nuclear weapons program. Is Russia cooperating, and if not, why not? Is it not the case that without Russia, as US press reports indicate (assuming such reports are not plants by the US government), Iran could not possibly have made progress in the nuclear energy area? So why is the IAEA and US not going after Russia as the source of Iran's nuclear energy and/or weapons program?

If Iran is not cooperating, is it not the case that it knows both Russia and China are behind it, trying to protect their own broader geopolitical interests, especially after the US pulls out of Iraq and Afghanistan?  Iraq's Chief of Staff General Babaker Zebari favors cordial relations at many levels with Iran. Once the US pulls out of Afghanistan Iran will play a comparable role in that war-torn nation as well. So what has the US achieved, ask many who actually believe that the US went into the two Islamic nations in order to 'liberate' and 'democratize'? How does the US explain a decade of treasure and lives lost, all so that Iran can become more powerful?

The reality is that the US is dancing a delicate dance around Russia and China, and for more than a decade it has been unable to convince either of them on how to proceed so that their interests are not harmed. In this case, the Metternichian approach by the US has failed, no doubt to the surprise of Kissinger and others who think that such an approach works.

Two centuries after Austrian Prince Klemens Wenzel von Metternich tried to manage the European/Eurasian balance of power and sociopolitical order, is it not time to abandon that futile approach? Is it not time to re-examine the inane and dangerous policy of 'war on terrorism' that is at the source of all this? Is it not time to see how the world order and power structures have changed so greatly just in the last decade alone and to steer toward a course that reflects those changes, instead of living in the past?

Tuesday, 15 November 2011

IS THE END OF THE EUROZONE INEVITABLE?

It is very possible that the eurozone may have to dissolve if there is no solution to the public debt crisis that may widen and deepen. The principal reason for this is that the German government, followed by France and a few others, insist on keeping a tight monetary policy and containing the debt crisis by imposing fiscal and credit discipline on debtor members, but without bothering to address the structural inequalities in the tax systems that account for increased socioeconomic polarization. The road map out of this crisis is not more austerity that includes bailouts adding to existing public debt, policies that have failed across Europe in the last two years, but a policy mix of:

a) MONETARY EXPANSION by at least one-third from current levels in the course of the next three years. This move that would entail a thirty percent drop in the currency's current value, putting it at par with the dollar - on-to-one - depending on how the US and eurozone economies perform in the next three years.

b) PROGRESSIVE INCOME TAX system across the eurozone designed to raise taxes on the upper 20% of income earners. This should be accompanied by strict laws and enforcement intended to seek out tax evaders, end tax shelters and bank accounts overseas intended to evade taxation.

c) CURTAIL PARASITIC INVESTMENT by introducing new laws that punish parasitic investment activity and reward productive investment. Using money to make money on the back of productive investment that someone else has made only absorbs much needed capital and dries up credit for both the public and private sectors. One of the major reasons for the crisis of the credit system is related to parasitic activity that absorbed capital away from productive activity and left the Western economies much weaker. Using capital for mergers and acquisitions, for 'hedge fund activity', for SAWPS (derivatives), for massive corporate executive bonuses and perks, for worthless consultants to validate what the corporate board has already decided, etc. must be discouraged, and the only way to do it is to impose very heavy tax levies on such activities.

d) EUROZONE EXPANSION geographically must proceed to include both Russia and Israel, and toward full membership of associate members, including Turkey that has made remarkable economic progress in the past ten years.While geographic expansion will take some time, as it should, just the announcement of such a move will send a strong optimistic signal to the eurozone and world markets.

e) RESTORE LABOR VALUES by raising minimum wage across the eurozone, and restoring weakened social programs, especially education and health care, while cutting waste - surplus or unproductive elements - in the public sector that are related to political clientism. While the argument is that China, India, Brazil, and Russia have dumped a cheap commodity in the world market, namely a labor force that accounts about on-third of the world's labor force, cheap labor in the BRIC countries does not mean that the way for the eurozone to become competitive is to lower wage values - wages, benefits, etc. On the contrary, the goal is to raise the BRIC countries labor values to eurozone levels.

As stated above, the combination of a fiscal policy that rewards productivity and punishes parasitic activity, combined with an expanding monetary policy and broadening the eurozone market is a very plausible solution. That such a mix would entail monetary and price inflation is inevitable, but the current contracting cycle in the eurozone and global economy need a stimulus of this type. Besides, there cannot be economic growth in the absence of inflation accompanying it.

The end of the eurozone is not inevitable, because it is up to governments, mainly Germany and France, to decide what kind of future it wants. I believe there is only a very slight chance that the eurozone will adopt any of the above suggestions, largely because the parasitic finance capitalism's hold on the political class make such Keynesian policies almost impossible. I am equally convinced that politicians act at the last minute when it is too late to adopt desperate measures, owing to pressure from large segments of the population expressed in various methods from social protests to revolts. The EU's disintegration may not be inevitable or take place any time soon, but all the signs indicate that the parasitic nature of finance capitalism are slowly pushing it over the cliff.

POLICE REPRESSION of the WALL STREET PROTEST MOVEMENT

 For the past nine months or so, the US has been urging people engaged in 'the Arab Spring' protest movement to take to the streets and bring down their authoritarian regimes and restore democracy. No even a word, however, on the part of the US government and most of the media about the grass roots movement in Israel or the repressive states in the Gulf.
Even more hypocritical, while castigating countries that prevent the free expression of political protest, the US has moved with police-state methods against its own protesters at home. On the morning of 15 November 2011, several hundred New York city police moved to arrest several dozen protesters at Zuccotti park. US city governments have cracked down on protesters with the same vigor that the US government condemns when taken by governments it criticizes.

The latest round of police repression is hardly isolated. Similar cases have unfolded from California to the southern states - from San Francisco to Philadelphia, from Phoenix to Orlando, the same story. An Organization for Economic Cooperation and Development (OECD) survey has found that the US is near the bottom of 31 member countries in terms of equality, with alarming levels of poverty and lack of upward mobility ranking comparable to those of Chile and Mexico.

That the US is no longer the land where the American Dream can be realized is made very clear by unemployment, poverty, and living standard statistics. A historical comparison of income distribution in the last three decades clearly shows that the only beneficiaries of the American Dream have been those in the top ten percent of the pyramid. Few analysts are optimistic that the next ten years will mark an improvement in socioeconomic equality or upward social mobility for Americans. On the contrary, the trend is downward as much in the US as it is in Europe, accompanied by watering down of freedom and democracy as many have understood it to function historically.

That the US has been moving toward a quasi-police state in the last ten years - after the Patriot Act - is an undeniable reality to which people have conformed. Terrorism has been used a smokescreen to violate human rights and to slash any semblance of social justice that was left over as a legacy of the FDR era.
 
A new public opinion poll indicates that only 49 percent of Americans agree that their country is special, superior to others around the world. This figure is the lowest in the postwar era and represents a drop of 11 points in the last ten years and indicative of a broader trend that the country is headed in the wrong direction. There is something seriously wrong with 'American democracy' when a protester is holding up a sign that reads "I can lose my job for having a voice". That percentage of Europeans responding to the same question is even less satisfied with their countries than Americans is indicative of a wider Western dissatisfaction with pluralistic societies delivering on the social contract.

More than anything, people around the world are amazed at the arrogance and hypocrisy of the US government that has the audacity to preach human rights and social justice to other countries, while violating them on its own soil. More than anything. people at home wonder how long will the corporate-owned media and government at all levels will continue to preach about a dream against the background of a reality closer to a nightmare for such a large segment of the population.

Monday, 14 November 2011

BLAMING AMERICA: EUROCRATS AND GOLDMAN SACHS

The Goldman-Sachs connection with Italian and Greek Eurocrats IS front page news in a number of European print and electronic media. While there is no doubt about M. Monti and M. Draghi, the same does not hold true for Lucas Papademos who was actually a senior economist for both ECB and the FED, before he became ECB vice-chair. But is the problem with the EU economy Eurocrats and Goldman, or is it structural?
At the core of this Goldman Sachs story that the EU media is pushing is the simple fact that Europeans continue to see the US as the culprit behind the global recession that started with Lehman Brothers and continues. This is justified to some degree. Moreover, instead of engaging in self-criticism, they prefer to blame the US for the current Eurocrat trend, just as they blamed the US for the global recession in 2008, without acknowledging that their problems were just as serious, if not more so and interconnected with those of the US.

Many EU politicians and analysts remain tied down by iron-link chains to nationalism and Eurocentrism that either they refuse to see the larger picture or they place less emphasis on it. After all, it is cheap populism to blame the other rather than fixing your own problem. The larger picture is to see the world economy as a single integrated unit in which monetary and trade blocs operate, and within those nation-states exist within constrictive conditions imposed from external mechanisms. To the degree that economic structure and social order limits national autonomy and sovereignty, that is a reality of how finance capitalism amasses power at the few core nations while those in the periphery are necessarily weaker and thus surrender their sovereignty to a large degree.

It is true that critics from the right and the left of the political spectrum are correct to see Goldman Sachs as the symbol of decadent capitalism operating under cover of the US government. Goldman Sachs, however, is not out to undermine the EU, for it also has its tentacles deep inside the US government. If it were not Goldman it would be JPM, or some other financial institution. For that matter, is Deutsche Bank, EU's symbol of finance capitalism's decadence, any different than Goldman, given the massive scandals in which the German bank has been involved? 
Is it not true that the EU leadership as well as the European Central Bank and major banks knew that governments were providing false figure of their balance of payments and debt, not just for Greece, but for most governments? The only thing that Goldman Sachs did is to enter the picture - for a hefty fee of course - to make it all appear legal through SWAPS (derivatives), until the EU demanded an end to it, until it was too late.

Why the massive hypocrisy on the part of the EU media with regard to 'bad US financial institutions controlling EU's fate through Eurocrats' versus the great financial institutions that Europe has? What is the difference that Eurocrats are in charge of carrying out policy, given that the political class is breaking down and the parliamentary system undermined by finance capitalism and questioned by most people? 

Would the economy and society be any different if in the place of Eurocrats we had bourgeois elected politicians? Was Berlusconi, the ultimate in decadent billionaire politician, so wonderful that Italy will do worse with Monti, or anyone at all in charge? Is the political class in charge anyway, or is it simply carrying out orders by the financial elites? And are things that much better in the US or Japan that does not have the burden of Eurocrats?

Is all of the noise about Goldman Sachs taking place in the British, Italian and French press because the three houses (Moody's, Standard and Poor's and Fitch)  that dish out ratings for government bonds are all in the US? What of it? Would things be any different if they were located in Japan, Germany or France that is now under fire and on the verge of following in Italy's footsteps? Are some analysts concerned that technocrats tied to Goldman represents the hegemony of the US and the lessening of national sovereignty, while others see this affair as people surrendering their political rights to unelected officials who do the bidding of large transnational institutions like IMF and European Central Bank, both guardians of finance capital?
 

To a certain degree, the EU media blame of the US as the culprit behind the economic contraction and related  public debt problems stems from the fact that the US has been pressuring EU to move fast on fixing its problems that are causing global instability. Another factor is that the US is moving aggressively to strengthen existing trade blocs and create news one in the Asia Pacific zone (US, Latin America, and Asia), while it calls on the rest of the world to deregulate and remove obstacles to trade and movement of capital across borders. Another issue is that the US remains the center of world finance capitalism on a discredited credit system backed by China and others buying the paper that the US government prints. In short, American exceptionalism in monetary, fiscal, and trade policies angers Europeans as much as it does the Chinese and others around the globe.

People's commitment to nations and political parties blind them to the reality that capital transcends all borders and prevents them from seeing that even Socialist parties that once claimed to pursue social justice now pursue neo-liberalism and globalization in order to strengthen finance capital. That society's biggest criminals are those who deliver social injustice on a massive scale, but do so legally under the protection of the law and they are rewarded in the process, is a structural problem and a manifestation of an unjust social contract driven by an unjust economic system, and not particular to the US or any other country.

Sunday, 13 November 2011

IRAN and the FORGING OF A US-RUSSIA-CHINA CONCESUS

There is a very interesting article in Voice of America about how Obama has tried to pressure China and Russia to go along with US-led punitive measures (everything from sanctions to diplomatic pressure and not taking off the table the military option) against Iran. Even more intriguing is that Moscow and Beijing are keeping their cards close to the vest, demanding instead that the US and EU get their houses in order with regard to public deficits that are causing global economic instability.

Officially, China and Russia are saying that they do not want Iran to join the 'nuclear club', but they are unwilling, so far, to use the US-Israel-IAEA argument that Iran is preparing to develop nuclear weapons. Is is indeed sad to see that Obama, getting ready for the 2012 campaign season, has few options and not much leverage, given that the Republicans are foaming at the mouth about Iran and its links to Syria, terrorism, etc.

If Russia and China signal that they are neutral on US unilateral action (including Israel engaging in surgical hits), Obama may have an issue to brag about during the campaign when he tries to win conservative Democrats. The US-Russia-China consensus can only be made possible, as I stated in a previous posting, if the US makes substantial concessions to Moscow and Beijing. That Iran may in the future possess nuclear weapons is hardly a threat to China or Russia that have Iran encircled.
http://www.voanews.com/english/news/Obama-Urges-Medvedev-Hu-to-Support-US-Pressure-on-Iran-133762703.html

Friday, 11 November 2011

IRAN AND the GLOBAL BALANCE OF POWER

What would the world order look like if the US decided on rapprochement with Iran, and what would be achieved if the US decided to continue to escalate the existing confrontation? Many well-paid analysts and propagandists in the West have a stake in having the confrontation continue, just as many who made careers during the Cold War had a stake in the Cold War.

For a while, the US and many in the West were hoping that the 'Arab Spring' would spread to Iran, but instead it caught fire in Israel and US. Given that internal turmoil has not shaken the Islamic Republic, what does the US do now? More sanctions, let Israel engage in surgical strikes against Iran's nuclear facilities, continue with the policy of encirclement, try to convince the Russians and the Chinese to go along with US containment policy? How would the global balance of power change if the US ended its cold war with Iran?

The US spends almost as much on its defense as the rest of world combine. With the world's largest military arsenal, nuclear and conventional weapons, with the ability to blow up the planet several times, the US, which is the only country in the world that has used nuclear weapons. The US has a long history of military interventions in Islamic countries, and a long record of a bogus war on terror that singles out Muslims.

Despite this reality, the US government wants the world to believe that Iran is the real threat to global security. While China, India and North Korea have agreed to a no-first use strike, the US refuses to take the same pledge, resorting instead to the doctrine of "Nuclear Posture Review" (April 2010) intended as a deterrent against all nations. Moreover, the US is not at all bothered that Israel is a nuclear power, but it is bothered that Iran has been trying to develop a nuclear energy program, one that could at some point in the future be converted for military uses.

On 9 November 2011, the UN International Atomic Energy Agency (IAEA) published a report alleging that Iran has taken new steps toward the development of a nuclear weapons program. The evidence that the agency provides is mostly old and about the only new element if how it synthesized them to draw conclusions tailored made for the US to use in order to call on the Europeans for new sanctions. Neither the Russians nor the Chinese accepted the IAEA report as evidence of anything new in Iran, while the US and Israel used the report to call on nations to punish Iran.

On 8 November 2011, I wrote that the Sarkozy-Obama off-the-record comments about Israel's Prime Minister, caaling him a liar and difficult to deal with, were intended to undermine his policies specially with regard to Iran that Tel Aviv had expressed an interest in hitting to set back its nuclear program. On 11 November 2011, US Defense Secreatry Leon Panetta stated that military action against Iran could have "unintended consequences" in the region, and it would only delay not stop its nuclear program. Panetta is concerned about US forces in the region, but also because Iran has the capability to disrupt oil traffic in the Straits of Hormuz, thus causing a major shock in the world economy.

The US prefers to work with the European Union to impose new sanctions against Iran, although history has shown that sanctions have not worked. Beyond the question of sanctions that simply indicate that the US is only interested in pursuing the Cold War against Iran that it intends to keep encircled, there is also the question of whether the US can or should stop Iran from pursuing its nuclear program, a program that in the future can be converted to serve military purposes.

If the US is to continue to play the world's policeman because it is the world's preeminent military power, should it not at least concede that China and Russia, which enjoy balance of payments surpluses and have the ability to help debtor nations, including the US and EU members, should be the world's monetary policemen? If it does not agree with that suggestion, then why did the IMF chief go to Moscow and Beijing asking them to help the debtor nations so that the world economy can maintain its balance?

Is it not the case the nuclear weapons in the post-Cold War era are not nearly as significant as achieving global financial equilibrium? Why should China and Russia go along with the US in undermining Iran nuclear energy program so that the US and Israel maintain a hegemonic military role that determines the balance of power in the Middle East? Why should China and Russia go out their way to help with debtor problems in the West that has a history of using its economic power to subjugate the East in the post-Communist era, during the Cold War era, and in the pre-Communist (old Imperialism) era? Although it is entirely up to the US to take the initiative to ameliorate relations with Iran and to work toward rapprochement, there are corporate interests that include defense contractors, as well as right-wing ideologues, Israel, a number of Arab states that do not wish for the US to end the cold war with Iran.

Wednesday, 9 November 2011

THE POLITICS OF IMF-EU AUSTERITY: Greece and Beyond

IMF-style austerity programs in Europe have caused social upheaval and political instability, with the worst consequences to come in 2012 for debtor nations. Both Italy and France would be implementing various austerity measures bound to cause great sociopolitical instability, perhaps to the degree that democracy itself will be experiencing its greatest challenge since the Great Depression, as political polarization is inevitable.

The assumption on the part of some analysts is that preventing Greece from exiting the eurozone would somehow insulate Italy and the rest of the debtor nations. Other analysts maintain that the sooner Greece exists the sooner Europe would stabilize. The more pessimistic among analysts note that no matter what the EU does, the eurozone is doomed to fail.

Another assumption floated in media and political circles of northwest Europe and US is that the political cultures in southern Europe are at the root of the problem with the existing public debt crisis. The fact that Belgium and France are now entering the arena of deep structural reforms that are close to austerity measures dispels the myth about 'Southern European culture,' a myth that some analysts tried to advance, largely as a distraction from the systemic causes of capitalism's crisis.

On 4 November 2011, Greek Prime Minister George Papandreou indicated that he would step down from power to allow for a transitional technocratic government to take over until elections tentatively scheduled for 19 February 2012.  The interim prime minister is Lucas Papademos, former European Central Bank deputy, and a strong advocate of the IMF-EU austerity program.  Just to make sure that Greece complies with austerity, the IMF and EU demanded that the two major political parties in Greece sign the IMF-EU agreement of 27 October 2011 that locks in Greece into conditionality necessary to receive the next tranche as well as future IMF-EU loan installments.

The assumption on the part of the IMF, as well as Germany, France and US is that greater political consensus would lessen public resistance to the harsh austerity measures that would transfer hundreds of billions of euros from Greece to its creditors in the next three decades. But is the assumption correct that political consensus would lessen public opposition to austerity and to neo-liberal policies, or do many people in Greece and in most countries around the world know that the political agenda is driven by financial interests and that economic power takes precedence over political power? Will French citizens be convinced that an estimated 100 billion euro cut by their government for the next four years is intended to help the people or the financial system?

The causes for the fall of the Greek government is not the IMF, or Germany, but austerity that has been responsible for the fall of governments and regimes in many countries, especially in Latin America, Africa and Asia in the past fifty years. How did Greece go from ranking 27th richest country in the world just three years ago, to the poster child of debtor nation?

How did Greece, whose GDP is only 2% of the eurozone GDP, become the focus of world economic instability, a country that many government leaders and financial analysts equate with the Lehman Brothers disaster that the global recession of 2008? Is it because the international financial system is so intertwined, or is it a case that even a small debtor nation must be forced into neo-liberal conformity under austerity?

How did Greece become the first in a series of eurozone members to falter financially, and to threaten the very existence of the European Union and the common currency, the world's strongest in the world's largest bloc economy? A synoptic perspective may help the reader understand how and why we arrived at this point where now Greece has passed the baton to Italy for which there is not sufficient bailout money to save, and which country can mark the complete transformation or demise of the eurozone.

In November 2009, shortly after he was elected, Greek Prime Minister George Papandreou, (PASOK - Socialist party leader), began to sound the alarm about how previous governments had falsified public debt statistics, and how public finances were out of control owing to endemic corruption. Although Papandreou ran on a platform of 'money exists', he began changing the tune to there is a serious deficit problem and it must be fixed by combating official corruption, a goal with which many agreed as long as their role in corruption was not impacted.

At the time of the announcement, Greece was fighting to achieve positive GDP growth amid a global recession, and trying to survive a eurozone that was rapidly divided between the northern surplus creditor members that Germany led, and the south (Portugal, Italy, Greece and Spain - PIGS) that included Ireland and Belgium as peripheral anomalies.

Not just his own supporters, but even political opponents applauded his apparent candor and the desire to start a campaign to contain corruption in a country that operated on the basis of official and public sector corruption as various scandals demonstrated; scandals involving billions of euros, scandals involving multinational corporations like Siemens and Goldman Sachs, as well as smaller scandals involving tax collectors, tax-evading doctors and monasteries operating more like corporations than spiritual institutions. All of this exposed Greece to the entire world as a country where baksheesh capitalism reigned supreme and permeated both public and private sectors.

It soon became apparent, however, that the public debt problem was not a matter of cleaning up corruption and much larger than the government had estimated, and Papandreou began seeking EU and IMF assistance in order to deal with it, against the background of rising bond rates and repeated downgrades by Moody's, Fitch and Standard and Poor's. In May 2010, the IMF-EU extended 110 billion euros and formally imposed austerity measures on Greece, with the publicly-stated goal that this was a temporary affair intended to bring fiscal discipline and the road back to growth.

Despite the IMF-EU promises, the Greek economy sank deeper into recession as unemployment rose sharply along with the public debt that went from 130% of GDP to 165% in a year-and-a-half under austerity. Meanwhile, the markets signaled that Greece would formally default and exit the eurozone within a year or two, if not months. In July 2011, the IMF-EU carved another deal that included an additional 130 billion euros, more austerity measures, and longer period of time before the country recovers sufficiently to begin borrowing from the private sector.

In October 2011, the IMF-EU decided to trim half of the 209 billion euro public debt, although the total was 360 billion.The haircut deal that IMF-EU carved for Greece on 27 October 2011 entails massive cuts in public spending, substantial rise in indirect taxes that hits the middle class and workers, rapid privatization of public enterprises, labor laws that permit lowering of minimum wage and in essence end collective bargaining, and more attractive terms for foreign investment.

A few thousand people who own most of the wealth, owe an estimated 41 billion billion euros in taxes, while most of them have taken out of the country several hundred billions to avoid paying taxes. In calling for a referendum, he prime minister accused the wealthy and the mass media that they own of trying to undermine his efforts to clean corruption and end the culture of baksheesh capitalism

The New Democracy Party is now part of the transitional government, which entails that it will be weakened along with PASOK, thus strengthening the leftist parties that if they were united would probably receive between 30 and 40 percent of the vote, the highest in the country's history. Elections scheduled for 19 February 2012 would prove that neither of the two leading parties have a popular mandate to govern and would in all likelihood need to form a coalition.

True as well, Italy is a relatively wealthy country compared with Greece and Portugal. According to Eurostat figures, its GDP per capita is at 104% of the average for the whole of the EU, whereas Portugal is only at 78% of the average and Greece at 94%. Much of the north of Italy is as rich as anywhere in Europe — the North-West and North-East regions are at 126% and 124% of EU’s average GDP per capita, for example, which makes both of them richer than France or Germany as a whole, and richer than countries we think of as fairly successful, such as Denmark.

Even more dangerous is the fraud that the IMF and EU have perpetrated by arguing Greece must reach aggregate public debt at 120% of GDP by 2020. Given that Italy currently suffers public debt at 120% of GDP, but it had to adopt rigid austerity measures without having IMF-EU observers as of 9 November 2011, why would Greece be 'solvent' in 2020 by suffering the same debt to GDP ratio as Italy does today?

The question is how domestic and foreign economic interests - financial elites behind PASOK and New Democracy Party - would operate when the political climate becomes even more polarized in 2012 as social tensions manifest themselves in labor strikes and other forms of popular protests. Would the state rely increasingly on the police and military while watering down human and civil rights in the name of protecting the austerity measures? And would this also be the fate that waits other EU members, including Portugal, Spain, Italy, Ireland, Belgium and France?

Is Europe experiencing a crisis of 'democracy' as we have known it in the post-Cold War era, and all because the majority of the people no longer have faith in the ruling political parties - right and center - and in the parliamentary system serving the public interest, but instead serving financial elites at the expense of the vast majority of the people?