SPAIN: NEO-LIBERALISM UNDER RAJOY

I am very puzzled about the focus on the part of some on Prime Minister Rajoy's choice of ministers and their geographical base. Equally surprised, I cannot explain the absence of discussion on policy that has an impact on peoples' lives. Let us assume that Rajoy chose everyone of his ministers from Catalonia, but that the policies they pursued were detrimental to the interests of the middle class and workers across Spain, would this represent a triumph for regional hegemony? Unless there is something about Catalans that would have meant Spain's salvation from the crisis, I cannot follow the logic behind such thinking.

What is a greater problem for Spain today, neoliberalism under Rajoy, or centralism, nationalism and separatism that only serve to distract and divide people from the common threat of downward social mobility, slashing of labor rights, and the imposition of finance capitalism's dictatorship?

If the issue is about the country's 17 autonomous regions that have very high deficits and are expected to ask the central government for funds that do not exists and are not expected to be forthcoming, then I understand the thinking behind regionalist politics on the part of some Spaniards who believe in regional loyalty as a romantic notion. However, is this not a case of all EU governments placing pressure on regional/local government to balance their budgets amid a struggle to satisfy the markets by bringing annual public debt deficit below 3% of GDP? How would a more diversified cabinet of minister save Spain from its current crisis?

Political responsibility for Spain's current public debt crisis rests as much with the Socialists more than it does with the current conservative (Popular Party) government. In fact, Spain, Portugal and Greece were all under Socialist leadership when the debt crisis erupted, and all governments went along with the EU and IMF, instead of putting the issue (stay with the euro or exit) to a referendum. 

In the case of Spain in particular, the Rajoy government has been straight forward with the citizens even before the November 20, 2011 election that he won (185 seats of 350), asserting that the country needs austerity and that it will mean hardship for the nation. In a recent statement, the prime minister noted that:  "What's ahead for Spain is going to be difficult ... exiting the crisis is not just the government's task but that of every Spaniard... It's complicated at the moment ... There are over 5 million people in Spain without a job, who are having a bad time, and this requires implementing another economic policy and explaining it properly."

Although very few if any analysts who have followed developments in Spain expect the unemployment rate currently at 23% to fall instead of rising even higher, the PP's economic plans are hardly a surprise, given that the EU under German hegemony decides monetary and fiscal policy for the bloc. The German-dominated EU demands fiscal consolidation, tight monetary policy, much leaner public sector, much stronger private sector, and a general trend toward neoliberal measures that will help strengthen the strongest economies within the EU, namely Germany.

Rajoy and his team of neoliberal private and public sector ministers will try to satisfy first and foremost the markets, the rating agencies the EU and IMF, and only lastly the needs of the unemployed. As the eurozone's fourth largest economy and third largest budget deficit, Spain is looking to lower its borrowing costs (6.78% on the 10-year bond) and at the same time restructure the costly public sector, especially the deficit-ridden regional governments that should not expect much help from the central government owing to pressure from the markets, IMF, EU on all eurozone members to reduce debt and create a much leaner public sector.

The people of Spain who elected Rajoy knew his position before they voted; they knew that he would likely introduce a wave of new austerity measures as debt markets drive Spanish debt yields to unsustainable levels, and that would mean downward pressure on living standards for the middle class and workers. But the majority voted for him, knowing that he would likely bring in government people like Luis de Guindos as economy minister, former head of the infamous Lehman Brothers in Spain, and an avowed neoliberal that markets and the IMF love. Luis de Guindos is an advocate of much leaner public sector, which means job losses and lower wages not just for the public sector that sets the pace, but across the board.

The new minister of the economy is also a well known anti-labor advocate who believes that Spain has rigid labor laws that prevent more favorable terms for foreign investment and private sector expansion. As Rajoy's connection to the world of finance capitalism, this former Lehman Brothers manager will be advising the prime minister to force the 17 autonomous regions to slash their spending and balance their budgets, translating into job losses in a country that leads Europe in unemployment.

The private sector, IMF, and Germany wanted a person like De Guindos to implement policy that is tailored made for Spain, including ending collective bargaining and untying wage raises to the inflation index, as it is for Portugal, Italy, Greece, Ireland, and the rest of the eurozone states, by Brussels whose chief concern is strengthening finance capitalism at any cost to the middle class and workers. Although responsible for the global recession of 2008-present, the wolves in Spain (and across much of EU) are now watching over the sheep, because the sheep have voted for wolves to watch over them.

My prediction is that the Rajoy government will satisfy the markets, the IMF and the German-led EU. However, the cost will be:
a) unemployment rate that may hit 30% in 2012;
b) living standards that will decline by at least 15% as indirect taxes rise, while wages and benefits decline - greater transition from social welfare to corporate welfare state;

c) contrary to IMF and neoliberal assumptions, fiscal consolidation and market-driven growth will come very slowly in Spain and across EU and it will only entail strengthening the strongest businesses in the private sector (vertical growth) at the expense of jobs-intensive (horizontal) growth. The beneficiaries will be the large domestic and foreign corporations; 

d) by early Spring 2012, Spain along with the rest of the eurozone may be seriously tested as Italy hits the market to borrow $200 billion, while Spain, Greece, Portugal, Belgium and Ireland are also waiting in the wings for greater borrowing. At that time, Germany will have to decide if it wants to let the printing presses roll so liquidity can be provided to the debtor nations, although at the cost of monetary inflation (euro value would drop by at least ten percent), or it could follow a different road - different options ranging from staying the course of relatively tight monetary and fiscal policy to leaving the euro.

e) the political cost for Spain's austerity, and this applies across to southern Europe, will be that people will have lost faith in the discredited two-party-dominated system with conservatives and Socialists taking turns in governing. Social unrest will hit new levels as much in Spain as across much of Europe. People will be looking to the smaller parties of the left, green, right wing, as well as an emerging new trend of anti-establishment parties that are based on greater honesty, transparency, democracy, accountability to the people instead of banks, and grassroots oriented instead of tied to political party machinery.

TOP TEN STORIES - 2011

In 2011, there were thousands of stories that had an impact in people's lives. Some news stories were of national interest (to the US, Venezuela, etc.), but they did not have much significance beyond the nation or region. I have decided on ten stories that I believe either had a far reaching global impact in so far as they manifested something profound about institutions, or they signified a change in society and directly or indirectly impacted or may impact the lives of millions of people around the world.


1. Arab Spring:
'Arab Spring' or the 'Awakening' actually started in mid-December 2010 and continued throughout 2011, marking a turning point in the history of North Africa and Middle East. Tunisia, Egypt, Yemen, Libya, the Gulf states, Syria and even Israel were swept up by the momentum of grassroots movements against regimes that were blatantly corrupt, authoritarian, or at the very least unresponsive to the needs of the broader masses of people who demanded systemic institutional change, a new social contract that is truly democratic in essence not just in empty rhetoric.

Overwhelmingly driven by the chronic gap between rich and poor and the deteriorating socioeconomic conditions, Arab Spring caught the world's imagination. Many in the West believed that it meant 'democratization' Western style (free enterprise and multinationals corporations reigning supreme), although in essence Islamic supporters were among the most significant force behind the insurgency. Owing to US and Western rhetorical support for some of the movements, direct military intervention in Libya to remove the old regime led by colonel Gaddhafi, and covert support to rebels in Syria, Arab Spring was not without the aroma of Western imperialism concealed behind the veneer of promises of democracy.

Although the future of the countries engaged in uprisings appears to be helping the Islamic elements vying for power, no regime will be able to survive for very long without subjecting itself to an integration model that the wealthy countries, especially the West, would impose on Islamic nations. In short, Arab Spring is highly unlikely to result in the fulfillment of the rebels' goals of popular sovereignty, and very likely that regimes similar to those overthrown will emerge. To the degree that the local elites and the West fear that popular democracy constitutes an obstacle to economic and geopolitical influence, Arab Spring represented the most significant development since decolonization.

2. Scandals of Powerful Men:
2011 was no different than previous years in terms of mega scandals involving powerful men from around the world, men whose policies impacted millions of people, or who represented the decadence and corruption of concentrated power in otherwise democratic societies. One of the most fascinating cases involved Italy's Silvio Berlusconi. He started the year as relatively popular prime minister but ended up forced out in disgrace, not because of his indiscreet taste for young models and other teenagers but because he failed to adopt austerity measures that Germany and France demanded.

Under the watch of the infamous "Il Cavaliere" (Berlusconism), Italy followed the road of accumulating massive public debt, forced to accept unprecedented austerity, that eventually led to a technocrat government. As an oligarch who enjoyed both political and economic power, and whose lifestyle was tabloid material, Berlusconi along with French Socialist politicians and former International Monetary Fund (IMF) managing Director Dominique Strauss-Khan represented decadence, corruption and the excesses of today's political economy; decadence that is at least in part responsible for the gap between the oligarchs that rule democratic societies.

A symbol of global power and influence, Dominique Strauss-Khan was expected to be the French Socialist Party's candidate for president when the sex scandal erupted and he found himself entangled with the American justice system. One significant aspect of the scandal was the rumor mill about conspiracy theories, while another was that DSK represented the essence of the depth to which politics, including Socialist politics,  had sunk. Symbolic of wealth, political power and global influence, DSK and Berlusconi were the embodiment of contemporary culture of the rich. While the DSK scandal was a matter of a single person and his tastes, because that person was IMF chief and presumed candidate to head France's Socialist Party, the scandal had the aroma of the duplicity embedded in bourgeois politics and finance capitalism.

On 8 December 2011, John Corzine, former senator and Governor of New Jersey, and former Goldman Sachs and MF Global Holdings CEO, claimed that he had no idea of the whereabouts of $1.2 billion investor money that MF is 'missing'. Corzine told the House Agriculture Committee that he was surprised to learned that the money was missing, and owing to poor memory, he cannot recollect specifics of circumstances surrounding the missing money.

He admitted lobbying the US Commodities Futures Trading Commission (CFTC), headed by a Corzine colleague from Goldman Sachs, but in his defense, he noted that he was not the only one lobbying CFTC! While the US has seen many such cases, especially from the Reagan era forward, the Corzine case is one that clearly demonstrates that financial corruption in inexorably linked to political corruption, at a time that the US and European governments have been asking ordinary citizens to continue paying for the duration for the crisis that finance capitalism created.

3. Japan Earthquake-Tsunami and Fukushima disaster:
 In March, the natural disaster was a tragedy that could not be prevented, but it caused another even more serious crisis in Japan with the nuclear power plants that were old, loosely regulated and lacked the appropriate safeguards to protect the local population. Among the first to be blamed for the accident were the Japanese government and the IAEA for failing to do a good job at sounding the alarm for aging nuclear plants, and the companies that built and operated the nuclear plants.

While the earthquake-tsunami and Fukushima nuclear disaster sounded the alarm about nuclear power throughout the world, a number of governments declared that they would proceed with their plans for cheap and clean nuclear energy, while others like Germany and Switzerland, Sweden, Venezuela,  and Italy admitted that the time had come to rethink nuclear power.

Other governments from Australia and Taiwan to Holland, Canada, and Chile stated that they would need more safeguards and more rigid regulation for nuclear power plants. Like the Chernobyl disaster, Fukushima's legacy worked as a reminder to the world on the need for investment in safer energy sources of the future, energizing the 'green' and anti-nuclear advocates as well as those that have argued in favor of restructuring the IAEA so that it can do a better job as a watchdog, instead of having inordinate influences from the nuclear industry. 

4. Greece and the Eurozone debt crisis:
In 2010, Greece was the trigger that set off an explosion across Europe by the end of 2011. Never was Greece as much in world news headlines as it has been in the past year, largely because it represents everything gone wrong with finance capitalism and the corrupt and parasitic credit economic system that had been supported by a welfare state transitioning from social to corporate welfare.

Under IMF-EU austerity policies, Greece began sinking deeper into debt, requiring more massive bailout loans, enduring more socioeconomic hardships, and becoming a greater burden on European taxpayers, gradually dragging down international banks. A somewhat similar scenario exists in Portugal and Ireland. When it became apparent that Italy, one of the G-7 and Eurozone's third largest economy, was following the 'Greek path', and signs indicated even France was right behind Italy, it was apparent that the Greek crisis was in fact an EU crisis of confidence in the credit economy. 

Led by Germany, in November the EU decided that the road out of crisis is fiscal discipline, a recipe that will most definitely help strengthen the wavering euro and the strongest eurozone members with surpluses, while leaving behind the rest of Europe. In a desperate move to protect the large banks in the core countries and the euro's value, Germany prevailed on the rest of the eurozone members to accept a fiscal solution, namely centralization, to a problem that can be solved by a liberal monetary policy and Keynesian stimulative measures. The result of the German 'fiscal fix' was continued loss of the euro's value, continued alarms about EU members credit downgrading, and continued forecasts of a deepening recession in 2012, with the result of a much weaker and more rebellious  middle class.The evolution of the EU debt crisis and its handling by governments will determine the course of the world economy in 2012.
 
5. Grass roots mass movements: from US to Europe:
I think that TIME magazine chose "The Protester" appropriately as person of the year, but not an individual protester, not a Tunisian, not a Muslim, not an African, European, American or Russian; rather a protester from the neighborhood of any major European, American, Middle Eastern-North African, or Russia city. 2011 was the year of the protested from the neighborhood and from across the entire world.

Spain kicked off the mass grass roots protest movement in the spring, but it spread to the rest of Europe, to the US, Israel and Russia, after Vladimir Putin's narrow presidential victory that a segment of the population deemed fraudulent. Political, economic, and social conditions deteriorate for the majority in Spain, Portugal, Greece, Ireland, and Italy, and to a lesser extent the rest of Europe, US, Russia and Israel.

All of these movements are against concentrated economic and political power, and all aspire to some type of pro-democracy regime and institutions designed to serve all of the people and not merely the top ten percent. Given that the political parties (center, center-left and conservative) have not heeded the cries of the indignant middle classes and workers, how long will it be before the mass protest movement is converted into a mass uprising?

Rather than taper off, the grassroots protests movements gained strength in 2011, and they are likely to become much more significant when conditions deteriorate for the middle class and workers in 2012. In the last analysis, two decades after the fall of Communism grassroots movements represent that a segment of the population is apparently convinced that bourgeois democracy under neoliberal policies serves a very small segment of society.

6. Emerging Asian Global Hegemony and Regional Pacific Blocs
As China emerged the world's second largest economy, and India proved to have enormous economic growth  potential, 2011 was the year for regional bloc consolidation. In July, Russia introduced a regional integration plan, forming potentially the world's largest free trade zone that would extend from China to EU. Russia formed a customs union with Kazakhstan and Belarus and inviting Kyrgyzstan and Tajikistan to join among others. The latest regional bloc in the process of forming is the African Common Market and an African Economic Community, after Regional Economic Communities come together. The integration model will help the existing strong companies that are mostly foreign, although the goal is to emulate the EU and achieve economic, fiscal, social and sectoral policy uniformity across the entire continent.

In early December, 33 Latin American and Caribbean countries signed an agreement creating the Community of Latin American and Caribbean States, (Comunidad de Estados Latinoamericanos y Caribeños, CELAC. Intended as a regional economic bloc, the goal is to exclude the U.S. and Canada that have historically dominated Latin America. As champion of this new regional bloc, Venezuelan president Hugo Chavez argued that: “We’re laying the foundation stone for integration. Only unity will make us free.” While the dream of greater independence may bring romantic images of Simon Bolivar in the minds of Latin Americans, the reality is that Brazil is expected to continue its race toward economic stardom in 2012, leaving behind most of the republics, some of which can hardly afford to subsist without Canadian and US investment, thus without North American political influence as Chavez wishes.

Under Franco-German leadership, the EU became a much tighter regional bloc through fiscal centralization, while the US reached out to consolidate its position in the Asia-Pacific region. In November, President Obama took advantage of the Asia-Pacific Economic Cooperation summit, sending a strong signal to China that the US would not surrender the broader Asia Pacific region to China.  Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam joined the US, with Japanese Prime Minister Yoshihiko Noda expressing an interest, but unlikely to join under the terms that the US has imposed. America's future rests in the Asia Pacific region, 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.

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. 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. Regional blocs are reminiscent of pre-1945 world division of power; some analysts argue pre-1914, others interwar. Global competition is becoming so intense against the background of shifting economic balances of power from the West to Asia that we will continue to see the consolidation of blocs in the next ten years.

7.  Massacre: January 2011, Tuscon, Arizona; July 2011, Utoya, Norway:
There were numerous mass killings in a number of countries in 2011. The most significant in terms of the mode of operation and political goals were those in Tuscon, Arizona in January, and Norway in July. Although in both cases the individuals were mentally disturbed, the motives were political and the influences on the murderers came from extreme right wing ideologies.

The attack on Arizona Rep. Gabrielle Giffords and six other victims falling to gunfire by a disturbed young man appeared like a 'TAXI-DRIVER' (motion picture) type episode. It is true that TEA PARTY Republicans raising extremist rhetoric to the level of encouraging half-crazed individuals to commit political crimes cannot be held responsible for the Tuscon massacre. On the other hand, the polarizing rhetoric by the Tea Party elements was a contributing element to the incident. Psychiatrists may conclude that Jared Lee Loughnern would have committed the exact same crime even if the Tea Party never existed. However, it does exist and its polarizing extremist rhetoric does have an affect on the minds of all kinds of people, from the average non-political person to the insane.

The tragedy in Norway took place on 22 July 2011. It left 69 people dead and 66 wounded, most of them young. Like the Tuscon massacre, the one in Norway was also politically-motivated, revealing a disturbing trend across Europe that is a sign of rising ultra right-wing activity according to authorities. Anders Behring Breivik, responsible for the mass murders, is deemed mentally disturbed as was expected. He had targeted the Labor Party government and was out to cleanse Noway of non-Viking elements. As early as 2002, Anders and other far-right individuals attended a London meeting where they discussed a xenophobic agenda, especially targeting Muslims. Breivik was apparently one of the founding members of the Knights Templar, a group named after a Medieval Christian crusading order that set out to conquer the Holy Land.

In Norway, the impact of the massacre on society was one of greater unity, sharp rise in youth political involvement and a number of stores removing from their shelves material that was related to martial arts and war games. By contrast, in the US the media tried its best to argue that the Tuscon massacre was the work of a disturbed individual, while the rest of society was fine and no action was needed. In short, Norway tried to heal the wounds of society by coming together, resorting to collectivist approach and taking measures to lessen the commercialization of martial arts and war games, while in the US nothing happened because there is an assumption that the polarizing political climate and culture of violence does not breed violence, but the individual does.

8. Famine in the Horn of Africa:
Famine in Africa, especially owing to drought in East Africa, is not a new story. However, beginning in July, a severe drought caused a major food crisis in Somalia, Ethiopia and Kenya. In July, the UN intervened when it was too late and people were starving of famine and disease, while the rest of the world watched,partly because East Africa is an area know for piracy, terrorist activity, civil strife, and political corruption.

Although climate change and lack of water conservation are the main culprits of the famine that is continuing and expected to subside at some point in 2012, the underlying problem and solution is political to the crisis that resulted in a refugee population of about one million people. The US is primarily interested in East Africa as an area to fight terrorism, while Europeans are interested in fighting piracy that is costing an estimate $22 billion to the global economy. Warlords in Somalia will fight for any side, including CIA, as long as the payment is sufficient, while hundreds of thousands are dying of disease and starvation.

The African Development Bank and IMF in cooperation with US and EU have been promoting water privatization in Africa. Water ownership by large foreign corporations means that 400 million Africans without access to drinking water are victims or potential victims in a continent that has large water availability, but lacks continental-wide coordination and management. Water development in Africa is a salient factor to chronic famine, but not as long as IMF, World Bank and Western governments impose privatization schemes intended to enrich multinational corporations that own water supply and distribution. In the absence of cooperation between African governments on water development issues, and in the absence of foreign aid for water development projects designed to sustain the growing population, water-related conflict is inevitable.

9. ARTS - The Social Failure curated by Bjarne Melgaard.
Of the countless glamor stories about movie stars, singers, models and celebrity rich people, the most intriguing art story that caught my attention is one about an art exhibit that has a very important social message. In the past two decades or so, there has been global awareness of AIDS, especially in the domain of prevention, and in that respect artists from singers and actors to painters and writers have helped to deliver the message.

While there are organizations such as "Art for AIDS", "Queer Arts Resource", "Make Art Stop AIDS", and others, in 2011 the Office for Contemporary Art Norway organized a program entitled "Beyond Death: Viral Discontents and Contemporary Notions about AIDS". As part of the 54th International Art Exhibition at La Biennale di Venezia, the course by curator Bjarne Melgaard included a showing depicting pleasure, plain, and “the failures of heterosexuality”. Melgaard's work has attracted a great deal of international attention in various art circles around the world, as it stands to remind people in conventional mode of thinking about this disease that the manner that mainstream society reacted to it has been a failure of humanity.


10. Science - Cloning and Stem Cells:
In 2011, the discovery of distant planets that could sustain human life is very exciting indeed to remind geocentrically conditioned humans of the endless possibilities in the universe. It is equally equally exciting to learn that CERN's search for the "God particle" (Higgs boson) may change physics as we know it, but not people's daily lives. However, a more practical development with enormous benefit to human beings in the future is the Somatic Cell Nuclear Transfer (SCNT).

A process responsible for cloning animals, SCNT could be used for therapeutic purposes - curing Parkinson's disease for example. While SCNT has and will raise ethical controversy similar to stem cell research, everything from creating a human egg market to cloning humans, for now the hope is that SCNT holds the promise for more practical therapeutic applications. In 2022, the Bush administration cut off all funding for SCNT research, and a year later the UN adopted Costa Rica's proposal to have all member states prohibit human cloning. The potential for enormous benefit to society because of CSNT 'therapeutic cloning', may not be enough for governments to support this new field, unless pharmaceutical companies are behind it because they see the potential for enormous profits.

US, IRAN AND THE MEDIA

In the past three decades, but especially in the past three years, the US media has devoted more news stories on Iran than on any other Muslim country. The focus has been mostly on Iran's nuclear program that has the potential of becoming a nuclear weapons program. For about every one hundred articles published on Iran's nuclear program, the US media, including the New York Times, runs just one article on Israel existing nuclear weapons arsenal. 

Both the US and UN have asked Israel to sign the Nuclear Non-Proliferation Treaty, but Israel has refused, a story that has received very little coverage in the media. Whereas Iran has permitted International Atomic Energy Agency inspections, Israel has refused, but there has been very little coverage of the latter and a great deal of the former.  Whereas the US has pledged to help Iraq build a nuclear program, that story has received almost no media attention, while the focus is how to destroy Iran's nuclear program that poses a potential threat to Israel's security and would make Iran the dominant regional nation, something that many Arab countries do not want.

The US media adopts the position that Iran's nuclear program is 'polarizing', neglecting to point out that is the position of the US and its close allies, not a position that the rest of the world shares. In short, the US media, as Edward Hermann and many other critics have repeatedly pointed out, is reflecting the official US government position on Iran. Yet, it presents its position as 'objective journalism', instead of disinformation or propaganda. While it is understandable that the large media outlets use varieties of government agencies, from CIA to Justice Department, to make sure that they have their facts and interpretation right, what is blurry is the degree to which the story is news as it occurred or news manufactured to serve a policy objective.

Let us take the latest issue of the CIA drone (RQ 170 Sentinel) that was spying over Iranian air space and which Iran shot down. When the government in Tehran announced that it had shot down the CIA drone, the US immediately denied that was the case. On 8 November 2011, when Iranian TV actually showed the plane, the US declined to comment, while some media outlets doubted the plane was real, arguing it was a model. 

The most that some US officials would admit is that a plane may have drifted off from Afghanistan to Iran, a story that no one who knows about precision-guided drones takes seriously. For the CIA and Pentagon to admit that they had sent a spy plane inside Iran would mean that US had violated Iranian air space, a charge that Iran has made. Naturally, the Russians and the Chinese immediately asked Iran's permission to examine the plane, prompting fears by US experts that US technology was now in the hands of rivals. On the one hand, the US does not admit that Iran brought down the plane, and on the other, it is concerned that Iran and its allies will find out secrets about the non-existent plane.

To counter the embarrassing episode of the drone, the US government and media pointed to a UN report on Iran's nuclear program, a report released on the exact day as Iranian TV showed off the CIA drone. That Iran has a nuclear program and that it may be used for nuclear weapons is an issue that the UN has debated and considered, as it has done so under immense US pressure, but it has nothing to do with the CIA spy plane violating Iranian air space. However, the US government and media had to pull out all stops, after the recent announcement by Iran and Hezbollah caught a number of agents spying on behalf of the US. American intelligence experts have admitted that RQ 170 drone operations in Iran are the most secret CIA surveillance.

The pattern of disinformation extends to the bizarre Iran-Mexico plot, about which we have heard practically nothing since mid-October from the US government or the media. In October 2011, the US Justice Department announced that it had foiled an Iranian plot, with the complicity of Mexican drug lords, to kill the Saudi ambassador in the US. 

The media took this story exactly as the US dished it out and ran with it, presenting it as indisputable fact. That much can be forgiven if the media had made an effort to rectify its shortcomings. On 23 November 2011, the New York Times published an article questioning the credibility of Mansour J. Arbabsiar, who was arrested charged, and allegedly confessed. Nevertheless, the newspaper still leaves the impression that the plot was probably real. One must wait for the trial, but if the US government had hard evidence of an Iranian assassination plot, why has it not produced the hard evidence to embarrass Iran at the very least. It will be interesting to see if anything results from this story and if the media will look into again and try to get to the bottom of it.

The US pattern of disinformation regarding Iran is understandable because the US had openly declared itself an enemy of Iran, a nation that must abide by eliminating its ongoing nuclear program, accepting integration with the West under the patron-client terms that the West offers, forging a pro-West government that makes its peace with Israel, and following pro-West policies. Given that is the goal, the US government has to follow a certain policy pattern and then try to implement measures, such as intelligence gathering by any means including violating Iranian air space, as well as massive disinformation that the mainstream media carries out, which in turn is fed to the rest of the world's media and passed on as 'objective journalism'. 

Does Iran engage in propaganda and media disinformation? Of course it does, and like the media in all countries that tend to be on the side of their nation, Iran is no different. As a society that does not claim to be 'open', and under a three-decade long 'Cold War' that the US has launched, one would expect Iran to behave as it does in propagating through the media. There is a private and publicly-owned media in Iran, but subject to government oversight by a special court. Iran spends a great deal of resources on propaganda, but it lacks the kind of credibility that the US has around the world. 

Because Iranian propaganda is much more crude and ideologically-driven, the Western and non-Muslim reader immediately tends to doubt stories that may have some degree of truth to them. That Iran is an "Islamic Republic" entails that its media would be heavily tilted in that direction and stories would lose appeal with non-Muslims and especially with Westerners not used to direct or abrupt type of reporting. Therefore, one does not expect from Iran 'journalistic objectivity' that the US media claims and tries to sell to the world. On the contrary, the expectation is that the Iranian media would be at similar journalistic standards as in the rest of the Middle East, including Israel. Given its limited resources, lack of expertise, and global networking, it is simply impossible for the Iranian media to rise to the level of US media effectiveness. In the final analysis, however, countries are judged by their actions, and not propaganda. US actions toward Iran speak for themselves, as do Iranian actions against the West.

EUROPEAN BALANCE OF POWER: Markets over States

In a recent press conference, former German Chancellor Helmut Schmidt, chief architect of the European Monetary Union, argued that the conservative Angela Merkel government has a very thin understanding of international finance and economics. I would add that she has a good grasp of these areas, but she narrowly focuses on markets and finance capitalism as catalysts to determining her policies and the European balance of power.

Balance of power is not something Europeans have had to think about since WWII, but it is now time to revisit this idea that originated with the Concert of Europe that was responsible for avoiding a European-wide conflict from 1815 to 1914. Today, markets are threatening to upset the European balance of power along with the social contract and destabilize the entire continent.

The aging Helmut Schmidt maintained that the direction of the EU is headed for serious trouble, largely because the German political leadership and the German central bank are reactionary, looking at short-term issues of German financial/economic hegemony at the cost of long-term economic contraction and political harmony across Europe. Indeed, the larger issue is to what degree is Germany willing to sacrifice social peace, political stability, and the European balance of power for the sake of satisfying the demands for higher profits of a few large banks and corporations? All of this because the interdependent integration model on which the EU was founded under Schmidt has been converted into a patron-client model intended to best serve finance capital within the core EU countries, especially Germany.

During the EU meeting on 8-9 December 2011, the agenda involved restructuring the zone so that fiscal policy is centralized in a similar manner as monetary policy. The rift between the UK and the Franco-German bloc widened. The result is an alienated Britain, along with a European-wide austerity program intended to strengthen the private sector. Although it was French President Sarkozy who decided to be theatrical toward David Cameron, while Merkel stood her ground as the winner of summit meeting, the casualty is the European middle class and workers, as well as the balance of power that had kept the EU loosely together.

Financial markets reacted favorably to the restructuring, largely because it means fiscal policy for EU members will be under the rigid rules that Germany has imposed; for it would mean keeping the overall sovereign debt below 60% of GDP and the annual debt below 3%, with the goal of balancing it; for it entails that the public sector will limit its borrowing so that the private sector can have greater availability to capital. In essence, this means that no country would be able to engage in unchecked deficit financing policies in order to stimulate economic growth, and no country would be able to pursue economic and financial policies tailored to its own needs if that goal conflicts with the EU, namely with Germany.

For the past two years, I have argued that Germany, followed by France whose leadership operates under the illusion that it has more to gain than to lose by following Germany's lead, has been seeking to restructure the integration model on which the European Union was built. The reason that Germany seeks to do this is fear that it must protect its own national economy and maintain German hegemony in the Eurozone so that it can compete effectively with the rest of the world.

Behind imposing fiscal discipline on all EU members rests Germany's goal to strengthen its own national economy. Moreover, Germany has the most to lose from a weak euro and its powerful banks, which are behind the government's policy of restructuring the integration model, are only interested in protecting their assets, regardless of what may mean for the rest of Europe or for Germany long-term, as former Chancellor Schmidt argued. 

Markets are on Germany's side, because it means that the rest of EU will be operating under austerity measures that help transfer wealth from the public sector to the private, thus strengthening the credit system by demonstrating its credibility through tight fiscal measures.Although it is a fact that markets play the determining role in the balance of power, does this best serve the people of Europe and does it safeguard from future conflicts within and outside of Europe? This larger issue concerns many who think beyond the quarterly report of a multinational corporation.

Should the people of Europe be applauding, in the manner that markets did, especially Wall Street, the fact that Germany imposed austerity measures across the eurozone and in the process isolated the UK in a very reckless manner? Is this in the best interests of Germany and France, or are we witnessing a scenario similar to pre-1914 when the 'long fuse' (long-term causes of the Great War) was finally lit largely because of the Anglo-German conflict?

During the Age of Absolutism, the European balance power was based on the grandeur of monarchs and their ability to amass taxes in order to build up their armed forces. This was certainly the case from Henry VIII to Catherine the Great, until the Industrial Revolution began to change the dynamics of political power owing to the emerging capitalists demanding a strong if not hegemonic voice in government and institutions. Absolutism  never entailed that monarchs enjoyed 'absolute' power, as they had to cooperate with and consider the interests of the nobility, the upper clergy, and powerful merchants. Similarly, today's strong political leaders are only as strong as markets permit them.

Otto von Bismarck was the first to publicly acknowledge that Iron (industrial capitalism) was indispensable to military power, thus sending the message to his own country and the world that Industrial capitalism was the catalyst to determining the European and thus the global balance of power. With the advent of finance capitalism, banks became the primary force and catalyst in determining the balance of power in the early 20th century, and that has remained the case until today.  

The UK voted against the Franco-German restructuring of the EU, arguing that it needed special protection from financial services regulation imposed by Germany on all EU members. The UK also objected to a host of other issues that would undercut its trade owing to eurozone monetary and fiscal policies that may either create a currency that is too strong or too weak in relationship to the pound and would deprive London from fiscal and monetary independence, thus of economic sovereignty. A decade or so before WWI, Germany had opted to become the hegemonic power not just over the continent, but throughout Europe, thus undercutting Britain's sea-based power. 

No matter what Germany does with regard to restructuring the EU, the process of implementing the new structure will take more than a few months, possibly several years, during which period efforts can be made to accommodate the UK. Regardless of what Germany does with regard to the UK, it will not escape a downgrade by the rating agencies and regardless of the austerity measures that Germany has now imposed on the entire eurozone, the euro will not escape continued devaluation. Given that Standard and Poor's has placed the entire EU area and the major EU banks on the hit list for a downgrade, Germany cannot escape the inevitability of the wider crisis impacting its economy, even if every EU member goes along with its master plan for centralized control of fiscal policy intended to maintain the euro's inflated value.

The more serious question for European governments, and above all the people of Europe, is the degree to which they want markets, namely a small percentage of very rich people, determining the balance of power and threatening the continent's stability. The US does not have the same problems because it has been blessed with weak neighbors to the north and south, and two oceans to the east and west. Should the EU be trying to copy the US patron-client integration model used in the last 100 years with various trade treaties, including NAFTA, that it has signed?

If Europe is to remain economically strong for its people, can it afford to base its policies at all levels on the markets at the risk of everything from lowering living standards for the middle class and labor to risking future conflict? Finally, did the EU meeting of 8-9 December 2011 represent a victory for Germany and a defeat for the UK, or a resounding victory for finance capital and a defeat for the rest of the Europeans and for the fragile European balance of power?

PEARL HARBOR CONTROVERSY AND CONTEMPORARY CONSPIRACY THEORIES

Throughout the history of the US, there have been many conspiracy theories, from presidential assassinations to why the hidden causes and ulterior motives for which the US has gone to war. Some of those theories have turned out to be nothing but idle speculation, others, like government testing drugs or infecting its own citizens and others overseas have proved to have some substance. Some of those theories may take decades to prove right or wrong, others may never lead to any conclusion. Pearl Harbor is one of those historical events that has fascinated people in the last seven decades and I suspect that 9/11 may be in the same category. 

Besides the countless pieces by amateur historians and enthusiasts devoted on the Pearl Harbor conspiracy, there are many serious scholarly works on the subject, works that have examined the role of military officers and politicians in the Pearl Harbor affair, that boils down to whether the US, and other countries including UK, had advance knowledge about the Japanese attack. I have not studied all of these works and various theories, nor have I looked at all of the evidence ranging from intelligence and military operations, to how politicians interpreted such intelligence, timing of the intelligence, military orders given and timing of such orders, etc.

While I am generally against conspiracy theories, in the case of Pearl Harbor, there is sufficient evidence for me to argue in favor of inconclusiveness on the matter of whether FDR and top administration officials knew about it. More intriguing is the historiography of interpretations on Pearl Harbor. In the early years, FDR centrist and leftist supporters defended the theory that the administration knew nothing about it. As time went on, they argued just the opposite. FDR-Cordell Hull conservative critics that wanted the US to remain isolationist have been more consistent on the issue.

If isolationism was the mood of the nation, combined with bitter memories from the first war and trying to deal with the ongoing economic depression, and if the FDR administration had to move the nation toward embracing a direct role in WWII, then at the very least Pearl Harbor helped the administration's goal, regardless of any prior knowledge that Washington may have had. 

We now know that when FDR went to Chicago in spring 1938 to speak before a labor convention, he issued a mild and implicit warning to the AXIS Powers, while secretly he had given the order for a massive military build up. This was after Japan's invasion of China and Anschluss. We also know that FDR, unlike Woodrow Wilson, did not wait to begin helping European allies against Germany, and it was a matter of time that the US would enter the war in order to secure the Axis defeat. 

What exactly is the truth about Pearl Harbor, and why are there people to this day who believe that the government lied in order to drag a reluctant nation into war? Because the Axis powers posed a threat to the global balance of power and to Western bourgeois democracies, and because the outcome of the war was positive for the US, the Pearl Harbor controversy is not nearly as much an issue as it would have been if things had turned out differently.

By contrast, the war on terror has not been going very well for the US, not in Iran, not in Afghanistan, not in Africa or Asia. While the homeland has been secure, and that is indeed the place on which to focus fighting terrorism, the price that citizens have paid for that type of security is one of surrendering many of their freedoms and in certain cases civil rights. 

For this reason, people question whether there is anything even remotely suspicious about 9/11, anything like the murky details of how Flight #93 was brought down. It is true that if al-Qaeda never existed there would be no issue, but the degree to which the US government has been forthcoming is an issue. In short, conspiracy theories have staying power when things go wrong, because people in open societies demand accountability from their government under such circumstances.Conspiracy theories reflect not only the irrational and cynical aspects of human nature, but a sense of fear that the individual cannot control her/his own fate because powerful forces like government, businesses, and other institutions determine everything including versions of what is true and what is not.

IRANIAN MOB ATTACK ON BRITISH EMBASSY

The Iranian mob attack on the British embassy represents a dreadful manner by which the government handled the entire affair. It made matters worse after the attack by its undiplomatic rhetoric - essentially blaming the victim - thus reveling a huge reality disconnect on the part of Iranian officials with reality of international politic. Even if it turns out that the Quds Force, a group loosely linked to the Revolutionary Guard, that does not excuse the government's failure to protect the embassy. 

 

In fact, the manner that Iran has handled the entire affair is contrary to its best interests and it affords an opportunity to the US to rally support behind its policy to further isolate and undermine Iran. All 100 US senators voted to cut Iran's central bank off from the global financial system, making it even more difficult fot the country to do business. Because Iran accounts for about 5.5% of the world's oil supply, exporting about half of that amount, mostly to EU and within Europe to the debt-ridden southern countries, the northwest European governments will have to assess how far they want to go with a ban on Iranian oil, especially since Iran is not demanding cash up front from Greece that receives no such treatment from any other exporter in the world. Because the US is in a difficult position of pushing the EU to do something about stimulating growth for 2012, it has to figure out hoe the EU can cope without half-a-million barrels of Iranian oil a day, if a ban is imposed.

 

Iran for its part blames UK as a long-standing enemy, and that is certainly true. However, it is completely immaterial what the Iranian government believes is right and wrong in this case, what it believes were the lingering ideological and political causes responsible for the embassy attack by the crowd of people, what it believes is a measured response from the West as a result of what happened to the UK embassy, and all this for the simple reason that the government in Tehran has failed to carry out international obligations to which it is a signatory.

The reality is that perception in politics is the only reality, and the perception in this case is that the attack on the British embassy attack brings back memories of 1979 and the capture of the US embassy. The last thing Iran needed was for the US to have the entire EU behind its Iranian Cold War policy. To have the Arab states using the pretext of the British embassy to further isolate Iran, and to have both Russia and China cornered on this issue - all denouncing the event as they should have - comes at the worst possible time for Iran. In short, Iran is responsible and no one else for what may be coming ahead.

To blame Israel, to blame the US, to blame everyone except the dreadful mistakes that the government has made with regard to this specific issue is not selling with many people outside of Iran, and even within it I am sure there are those who dreaded the event. I hope that the government in Tehran takes this opportunity to reevaluate its approach to foreign policy, both in terms of substance and hyperbolic and monotone anti-Israel rhetoric. 

 

I am willing to bet that privately there are Iranian officials who believe the attack on the embassy and the official response to it were dreadfully handled. The question for Iran is whether it wants to become a great regional power and develop its nuclear energy technology along with the rest of the economy, or whether it is using that as leverage to sustain an Islamic regime in place that values dogma more than it does the overall progress and welfare of its people and nation.

PRODUCTIVITY, WAGES AND SCHUMPETER

The debate about capital or labor as the catalysts of creating productivity are as old as classical economics and ideologically based. Some of the classical economists believed that capital creates wealth and is the catalyst to productivity, while others argued that labor does, and that capital creates nothing in the absence of labor.  

Even Joseph Schumpeter changed his early position advocating endogenous growth owing to R and D investment (theory based on mathematical economics and influenced by the Vienna School), versus the later Schumpeter as analyzed in Capitalism, Socialism and Democracy (1942). Going through the Great Depression and New Deal and experiencing American-style capitalism, Schumpeter concluded that politics of labor was a matter of state policy and workplace hierarchies were to be deplored. 

Keynes' General Theory of Employment, Interest and Money (1936) revolutionized macroeconomic theory by questioning classical economists' assumptions about labor's role in the economy that operates with under-utilization of labor and low values, thus undercutting the demand and resulting in disequilibrium. Given that capital accumulation is an obstacle to economic growth, the state must necessarily interfere as a catalyst of economic growth at avoid disasters that the system innately creates. 

The idea that labor and its value is determined by the laws of supply and demand date back to classical economic theory of the early 19th century, and it is one that many economists have challenged in the last two centuries. Orthodox economists of the market system insist that labor is indeed subject to the "invisible hand", a theory that Keynes challenged. Classical and neo-classical theories of labor are based on Enlightenment era rationalist assumptions about the individual that in turn entail rational behavior by the marketplace, while Keynesian economics assumes the irrationality of markets.

In a post-Keynesian world, most economists, politicians and social scientists know that the laissez-faire theory of labor is hardly applicable in the age when the state determines fiscal and monetary policy, it decides minimum wage, engages in labor-intensive development works to stimulate the consumer economy, and provides incentives to the private sector to hire workers. Schumpeter was among those who recognized that the invisible hand was imaginary, not fully functional, and that the role of the 'free market' economy was not nearly as 'free' as orthodox economists wanted to believe.

Finally, no matter which side on comes down on the degree to which the economy is 'free' or state-determined, the reality is that downward socioeconomic mobilization in the Western World is a reality and it is projected to remain so for the decade. Labor values for the broader middle class and blue-collar workers will remain under downward pressure as the state tries to strengthen the credit system that finance capitalism has devastated with its parasitic practices resulting in super-concentration.

Even the pillars of finance capitalism, IMF and World Bank, have expressed concern about how the current global economic contraction and its slow recovery later in the decade will entail a jobless economic recovery with relatively low compensation. I am guessing that no respectable economist or politician on this earth has publicly stated that the surplus work force in the (public or private sector) market and/or labor high values are to blame for the contracting cycle of the economy - 2008-2011.

What they argue is that workers must accept lower wages and benefits and that the surplus labor force in the public sector must be eliminated so that national economies can be competitive with those that currently have lower wage values. In short, they are asking labor to sacrifice consumption, effectively lowering demand and thus slowing world economic recovery, for the sake of higher corporate profits. 

To make this argument convincing, they argue that the goal is to expand the economic pie through efficiency mechanisms - an idea that is as old as Adam Smith and just as bogus and intentionally distracting from the issue of labor values and lack of shared benefits and costs between labor and owners of capital and management regarding productivity. To his credit, Schumpter, having lived in the shadow of Keynes and lived during the Great Depression realized the fallacies and myths regarding the catalysts of productivity and labor's role.  

The following excerpt from his 1942 work is applicable today.
"All those who are unemployed or unsatisfactorily employed or unemployable drift into the vocations in which standards are least definite. … They swell the host of intellectuals … whose numbers hence increase disproportionately. They enter it in a thoroughly discontented frame of mind. Discontent breeds resentment … righteous indignation about the wrongs of capitalism … Capitalism inevitably … educates and subsidizes a vested interest in social unrest."