Getting away with murder

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Robber banking baron: Ricardo Salgado, former chief executive of collapsed Banco Espirito Santo. The poster in Lisbon, Portugal, says: ‘It’s hard to be a banker these days.’ © Francisco Seco/AP/Press Association Images

Hope springing eternal, I didn’t believe that the banks could emerge from the 2007-08 crisis far stronger than before, especially in political terms. Yes, some have paid staggering fines to governments – a total of $178 billion for the US and European banks – but they now consider such outlays as mere ‘costs of doing business’. None of the industry hotshots has spent so much as a night in prison or been fined personally.

Although we have not yet fully escaped from the aftershocks of 2007-08, a scenario for the next crisis is already being written both by politicians and the bankers themselves. Mathematicians have demonstrated the dense, interconnected web of world financial actors in which the failure of one could trigger the collapse of all. They have put us on a knife-edge and we have good reasons to be pessimistic:

  • Governments and international institutions have shown no serious intention of regulating the banks, thus placing us in considerable danger of a repeat performance. Banks and bankers are not just too big to fail and too big to jail, but also too big to nail – they have become a law unto themselves.
  • Obvious safeguards to the financial system have been systematically dismissed. The all-important separation of commercial or retail banking from investment banking (which would prevent the industry from using depositors’ money to speculate) hasn’t occurred. For more than 60 years the US New Deal’s Glass-Steagall Act separated them and protected the country’s financial system. When it was abrogated in 1998 under President Bill Clinton – with a helpful shove from his Treasury Secretary, former Goldman-Sachs man Robert Rubin – it took less than a decade to produce the fall of Lehman Brothers and devastating market failure. Politicians listen not to reason but to the bankster lobby. Similarly, reserve (capital) requirements for banks are still far too low. No new financial transaction taxes have been passed. One planned by 11 European Union (EU) countries is still only under consideration.
  • Daily trade volumes of derivatives and currencies have grown by 25 to 30 per cent compared to pre-crisis levels and figure in the trillions every day. Total yearly trades of derivatives amount to about 100 times Gross World Product. Automated, algorithm-powered trading drives this growth – but even machines and maths geeks can make dangerous mistakes.
  • Masses of risky ‘securitized’ loans could once more flood the portfolios of institutional investors. This time they wouldn’t be based on subprime mortgages but on bundles of other debt categories, such as student or consumer loans.
  • In 2008, unbridled speculation on the commodities markets caused food prices to escalate dramatically and 150 million people to be added to the ranks of the hungry worldwide. These won’t recur this year or next: grain prices have plummeted and $150 billion of Wall Street money has been withdrawn from these markets in the past two years. However, other protective New Deal laws have also been struck down and unlimited bets could once more be placed on these markets as soon as climate change and lower food stocks make them profitable.
  • Bankers have learned how to organize international institutions so that they will be rewarded in good times and bad, for brilliant or stupid financial investments

  • Tax havens have triumphed. They help not just individuals from the richest one per cent but also specialize in corporate tax avoidance. Our largest corporations have stopped paying their fair share. France, for example, has a yearly corporate tax shortfall of $60-80 billion. Corporations benefit from public services such as police and fire protection, energy, water, sanitation, transport, healthcare, education and training for their personnel, and the rule of law – but don’t pay for them, so they deteriorate. Citizens and necessary infrastructure lose. The Luxleaks scandal (which exposed tax-dodging by more than 300 corporations) shows that an EU member state, using the big four accounting corporations as accomplices, has actively recruited companies to bypass the countries where they make their sales and profits and use Luxembourg’s tax avoidance services instead. The British island paradises are doing their bit as well. Probably 25 per cent or more of the turnover of the largest EU banks takes place in offshore havens; no-one knows for sure.
  • Surveys by the European Central Bank of the 130 largest EU banks show that they do not support the real economy, where people actually live, work, produce and consume. Small and medium EU businesses provide 80 to 90 per cent of all employment but they still have lots of problems securing loans. Since 2008, banks have consistently tightened their credit terms. Finance Watch, a progressive Brussels thinktank, says that only 28 per cent of all banking activity goes to the real economy – the rest swells the financial-products sector that makes money from money without passing through such boring phases as production and distribution.
  • The US has witnessed growth and job creation, yes, but more than 90 per cent of the value of that growth has gone to the top one per cent. European unemployment is still deepening and, rather than growing, the EU is sliding into deflation.
  • By 2011, profits at US banks were back to record, pre-crisis levels. By 2009, the nine largest US banks gave bonuses of $1 million or more to 5,000 traders and bankers, using public bailout money. Thus, at least $5 billion of US taxpayer money went to individuals in the finance industry. Their British counterparts got $20-billion worth of bonuses in 2010-11 and French bankers did nearly as well.
  • Hefty bonuses contribute to the great leap forward of inequality. Readers of this magazine have surely seen the dizzying comparisons of the billionaires’ share and what’s left over for the rest of the world. If not, check out Oxfam’s figures, or better still the annual World Wealth Reports that scale the golden heights where dwell not the one per cent – vulgar losers! – but the one in ten million.
  • The 2014 Forbes billionaire list names 1,542 earthlings who made the cut, with a total haul of $6.5 trillion. Inequality isn’t just obscene in monetary terms. In The Spirit Level, Richard Wilkinson and Kate Pickett have incontrovertibly proven that inequality is invariably correlated with every nasty, costly social phenomenon, from illness to violence to obesity and prison populations. But finance is now organized so that once you’ve reached billionaire status, it is pretty hard to lose it.

Rewards, rewards

Bankers have also learned how to organize international institutions so that they will be rewarded in good times and bad, for brilliant or stupid financial investments. Thus Eurozone governments such as Germany and France give money to the European Financial Stability Mechanism so it can give money to the Greek (Irish, Spanish…) government so that the government can hand over the money to the Greek (Irish, Spanish…) banks so that they can repay the loans received from French and German banks. Most people don’t realize that the huge ‘loans’ from the Troika (the European Commission, European Central Bank and International Monetary Fund) to Greece from 2010-12 were not intended to ‘help the Greeks’, but to reroute the money to banks that had bought Greek bonds. Why buy those? Good question: because they were labelled in euros, but paid slightly higher interest than, say, German bonds, also labelled in euros.

Pie in the sky: graffiti in Syntagma Square, Athens, during demonstrations against austerity.

Jess Hurd/reportdigital.co.uk

The Troika’s job is thus to make sure the banks get their money back, while attaching drastic austerity conditions to these indirect bailout schemes. The banks may still lose a little on their investments in southern or peripheral European countries, but not nearly as much as they would without the Troika-driven revolving door. The people, who had nothing to do with creating the crisis in the first place, must suffer. Whereas mounting hunger, hospital and school closures, violence, and the migration of young people are to some extent measurable, the real consequences for innumerable, blameless human beings cannot be quantified. When I said the banks have learned they can get away with murder, it was not just a rhetorical device…

And so arrives the moment when the reader says, ‘Yes, but what can we do?’ Most of the answers are known and many of them consist in doing the opposite of what is briefly recounted above. Separate the banks, tax financial transactions, outlaw the outlaw tax jurisdictions, tell Luxembourg to dismantle its Corporate Protectorate, refuse to sign the Transatlantic Trade and Investment Partnership (TTIP).

The continuing crisis isn’t a morality play. We need less breast-beating (of other people’s breasts) and more smart economics

Change the rules of the European Central Bank (ECB), which does not lend to countries, only to private banks. The latter borrow from the ECB at less than one per cent and can then lend to countries at whatever interest rate the traffic will bear, often more than six per cent – just another gift to the banking sector. The ECB should instead lend directly to countries at one per cent or less. We should have joint euro-bonds. Austerity policies must be thrown out because they don’t work, in human or in economic terms. Northern Europeans don’t understand this: the German for debt is Schuld, which also means sin, or fault – but the continuing crisis isn’t a morality play. We need less breast-beating (of other people’s breasts) and more smart economics. As one German economist writing in the Financial Times put it: ‘There are two kinds of German economists: those who haven’t read Keynes and those who haven’t understood Keynes.’

Remember first of all that sovereign debt isn’t at all like the debt of a family. Throughout history, in fact, most sovereign debt has been forgiven, but in any case, as US economist and academic Paul Krugman says, ‘keep your eye on the flows, not the stocks’. So long as countries continue to make their interest payments, they can stay indebted forever. Nations do not disappear. Greece, for example, has a budget surplus if interest payments are subtracted and interest at one per cent is payable. Greece should also slash its military budget, tax the Church – which is the largest land and property owner – and, as the governing Syriza Party says, ‘Go after the oligarchy.’

If the next crisis really comes to pass, it will be huge and deadly dangerous for ordinary people, who could lose their savings, insurance, pensions and more. I’m not suggesting 1950s-style bomb-shelters, hoarding and a revolver for every home, but it wouldn’t hurt to develop right now more resilient social systems and a far greater degree of self-reliance. People are good at working more co-operatively and do so instinctively – or out of necessity – when confronted with an economic meltdown, like the Argentinians 15 years ago or the Greeks today. They organize soup kitchens, community gardens, volunteer health clinics, childcare, alternative currency systems, housing arrangements and more.

Above all, we need to confront the deadly neoliberal ideology that has polluted thought and action while allowing the banks to get away with murder.

Susan George’s most recent book is How to Win the Class War: Lugano Report II, Transnational Institute, Amsterdam, 2013.

Debt, austerity, devastation: it’s Europe’s turn

Like plague in the 14th century, the scourge of debt has gradually migrated from South to North. Our 21st-century Yersinia pestis isn’t spread by flea-infested rats but by deadly, ideology-infested neoliberal fundamentalists. Once they had names like Thatcher or Reagan; now they sound more like Merkel or Barroso; but the message, the mentality and the medicine are basically the same. The devastation caused by the two plagues is also similar – no doubt fewer debt-related deaths in Europe today than in Africa three decades ago, but probably more permanent harm done to once-thriving European economies.

Faithful – and older – New Internationalist readers will recall the dread phrase ‘structural adjustment’. ‘Adjustment’ was the innocent-sounding term for the package of economic nostrums imposed by wealthy Northern creditor countries on the less-developed ones in what we then called the ‘Third World’. A great many of these countries had borrowed too much for too many unproductive purposes. Sometimes the leadership simply placed the loans in their private accounts (think Mobutu or Marcos) and put their countries in hock. Paying back in pesos, reals, cedis or other funny money was unacceptable: the creditors wanted dollars, pounds, deutschmarks...

ShotshvH/Alamy

Furthermore, the Southerners had contracted their loans at variable interest rates, initially low but astronomical from 1981 when the Federal Reserve declared an end to the era of cheap money. When countries such as Mexico threatened default, panicked creditor-country treasury ministers, top bankers and international bureaucrats spent some sleepless weekends eating take-out and cobbling together emergency plans.

Plus ça change, plus c’est la même chose.* Decades later, serial crisis meetings still take place, this time in Brussels and, with minor variations, the response is identical: you only get a bailout in exchange for committing to a set of stringent requirements. These once echoed the neoliberal ‘Washington Consensus’; now they are more truthfully labelled ‘austerity packages’ but demand the same measures. Sign here, please, in blood.

For the South, the contracts said: ‘Cut back food production and grow cash-earning crops. Privatize your State enterprises and open up profit-making activities to foreign transnational corporations, especially in raw materials and extractive industries, forestry and fisheries. Drastically limit credit, cancel subsidies and social benefits. Make health and education paying propositions. Economize and earn hard currency through trade. Your prime responsibility is to your creditors, not your people.’

Once they had names like Thatcher or Reagan; now they sound more like Merkel or Barroso but the message, the mentality and the medicine are the same

Now it’s Europe’s turn. The countries of southern Europe, plus Ireland, are relentlessly told: ‘You have been living beyond your means. Now pay.’ Governments meekly accept orders and their people often assume that their debt must be paid instantly because the debt of a sovereign State is just like the debt of a family. It’s not – a government accumulates debt by issuing bonds on financial markets. These bonds are bought mostly by institutional investors such as banks which receive an annual interest payment, low when the risk of default is low, higher when it isn’t. It’s absolutely normal, desirable and even necessary for a country to have a debt which will pose zero problems and generate many benefits if the money is prudently invested for the longer term in productive activities such as education, health, social benefits, solid infrastructure and the like.

Indeed, the higher the proportion of public spending in a government budget, the higher the standard of living and the more jobs are created – including private-sector jobs. This rule has been verified time and again since the correlation between public investment and national well-being was first noted in the late 19th century.

Obviously, borrowed money can also be wasted and spent stupidly and benefits can be distributed unfairly. The big family-State budget difference is that States don’t disappear like bankrupt companies. Productive, well-managed investment financed by government borrowing should be seen on the whole as A Good Thing.

The magic numbers

In 1992, European countries narrowly voted Yes to the Maastricht Treaty, which at the insistence of Germany contained two magic numbers, 3 and 60. Never allow a budget deficit greater than three per cent; never contract public debt greater than 60 per cent of your Gross Domestic Product (GDP).** Why not two or four per cent, 55 or 65 per cent? Nobody knows, except perhaps some ancient bureaucrats who were there, but these numbers have become the Law and the Prophets.

In 2010, two famous economists announced that beyond 90 per cent of GDP, debt would plunge a country into trouble and its GDP would contract. That sounds logical because interest payments would take a bigger chunk out of the budget. But in April 2013, a North American PhD candidate tried to replicate their results and found he couldn’t. Using their figures, he got a positive result for GDP which would still rise by more than two per cent per annum. The famous, if red-faced, twosome had to admit they were Excel victims and had misplaced a comma.

Merkel the puppeteer: a mural in Lisbon, Portugal, depicts the Portuguese Prime Minister and Foreign Minister as the German Chancellor’s playthings.

Rafael Marchante/Reuters

Even the International Monetary Fund has confessed to similar mistakes, this time on the austerity cuts issue. We now know, because the Fund was honest enough to tell us, that cuts would hurt the GDP by two to three times more than it initially foresaw. Europe should go easy, says the IMF, and not ‘drive the economy with the brakes on’. The magic 60 per cent of GDP debt limit is no more sacred than the three per cent deficit limit; yet policies remain the same, because the neoliberal hawks seize upon every scrap of dubious evidence that seems to promote their cause.

We are faced with two basic questions. The first is why did the debts of European countries rise so steeply after the crisis struck in 2007? In just four years, between 2006 and 2010, debts escalated by more than 75 per cent in Britain and Greece, by 59 per cent in Spain and by fully 276 per cent in all-time champion Ireland, where the government simply announced it would assume responsibility for all the debts of all the private Irish banks. The Irish people would henceforward be held responsible for the irresponsibility of Irish bankers. Britain did the same, though in lesser measure. Just as profits are privatized, losses are socialized.

So citizens pay through austerity, whereas bankers and other investors who bought the country’s bonds or toxic financial products contribute nothing. After the 2007 crisis, the GDP of European countries dropped by an average five per cent and governments had to compensate. Escalating business failures and mass unemployment also meant more expenditures for governments just when they were taking in less income from taxes.

The New Morality

Economic stagnation is expensive – higher expenditure and lower revenue add up to a single answer: borrow more. Saving the banks and taking the consequences of the crisis they created are the fundamental reason for the debt crisis – and consequently for harsh austerity today. People were not ‘living beyond their means’ but the New Morality is clearly ‘Punish the Innocent, Reward the Guilty’.

This is no defence of stupid or corrupt policies such as allowing the Spanish housing bubble to inflate or Greek politicians to hire masses of new civil servants after each election. The Greeks have a bloated military budget and inexcusably refuse to tax the great shipping magnates and the Church – the biggest property owner in the country. But if your bathtub leaks and the dining room paint is peeling, do you burn down your house? Or do you fix the plumbing and repaint?

Eminent economists like Paul Krugman or Joseph Stiglitz believe that the European leadership is brain-dead, ignorant of economics and needlessly committing economic suicide

The human consequences of austerity are inescapable and well known: pensioners search through rubbish bins at mid-month hoping to find a meal; talented, well-educated Italians, Portuguese and Spaniards flee their countries as unemployment for their age group approaches 50 per cent; unbearable stress is laid on families; violence against women increases as poverty and distress rise; hospitals lack essential medicines and personnel, schools decline, public services deteriorate or disappear. Nature takes the brunt as well: nothing is invested in reversing the climate crisis or halting environmental destruction – it’s too expensive. Like everything else, we can’t do it now.

We know these outcomes, the results of what Angela Merkel calls ‘expansionary austerity’ policies. This neoliberal theory claims that markets will be ‘reassured’ by tough policies and reinvest in the newly disciplined countries concerned. This hasn’t happened. Pictures of Merkel adorned with swastikas are appearing throughout southern Europe.

‘Hands up! It’s a robbery,’ chant students and teachers at the police during a march in Malaga against the Spanish government’s educational spending cuts.

Reuters/Jon Nazca

Many Germans think they are helping Greece – and they don’t want to anymore. In fact, virtually all the bailout money has taken a circuitous route: EU government contributions made through the European Stability Mechanism have been channelled via the Greek Central Banks and private banks right back to British, German and French banks that had bought up Greek Eurobonds to get a higher yield. It would be simpler to give European taxpayers’ money directly to the banks, except that said taxpayers might notice. Why make an ongoing psycho-drama over two per cent (Greece) or 0.4 per cent (Cyprus) of the European economy? A cynic might say: ‘Easy. To ensure Ms Merkel’s re-election in September.’

The second basic question is: why do we continue to apply policies that are harmful and don’t work? One can look at this self-created disaster in two ways. Eminent prize-winning economists like Paul Krugman or Joseph Stiglitz believe that the European leadership is brain-dead, ignorant of economics and needlessly committing economic suicide. Others note that the cuts conform exactly to the desires of such entities as the European Roundtable of Industrialists or BusinessEurope: cut wages and benefits, weaken unions, privatize everything in sight and so on. As inequalities have soared, those at the top have done nicely. There are now more ‘High Net Worth Individuals’ with a much greater collective fortune than in 2008 at the height of the crisis. Five years ago there were 8.6 million HNWIs worldwide with a pile of liquid assets of $39 trillion. Today, they are 11 million strong with assets of $42 trillion. Small businesses are failing in droves, but the largest companies are sitting on huge piles of cash and taking full advantage of tax havens. They see no reason to stop there.

This is not a crisis for everyone and the European leadership is no more stupid than its counterparts elsewhere. It is, however, entirely subservient to the desires of finance and the largest corporations. Certainly, neoliberal ideology plays a key role in its programme but serves especially to emit thick smokescreens and pseudo-explanations and justifications so that people will believe There Is No Alternative. Wrong: the banks could have been socialized and turned into public utilities, like other utilities that run on public money; tax havens closed down, taxes levied on financial transactions and many other remedies applied. But such thoughts are heretical to neoliberalism (although 11 Eurozone countries will start taxing financial transactions in 2014).

I am a fervent European and want Europe to thrive, but not this Europe. Against our will we have been plunged into class warfare. The only answer for citizens is knowledge and unity. What the one per cent has imposed, the 99 per cent can reverse. But we’d better be quick about it: time is running out.

Susan George is Board President of the Transnational Institute and author of 16 books, most recently Whose Crisis, Whose Future? and How to Win the Class War, on her website in June for electronic download and print on demand along with six ‘Susan George Classics’.

* ‘The more things change, the more they stay the same.’

** Public debt is money owed by a government in the form of loans obtained on the financial markets rather than other forms of lending.

Austerity hypocrisy

Military spending is spared the chop.

While bailout conditions impose austerity on debt-stricken southern European economies, demands to tighten the belt on military spending are not so vocal.

According to a recent report from the Transnational Institute (TNI), the German government, while demanding social cuts, has been lobbying behind the scenes against cuts to military spending in countries such as Greece, because of concerns for its own arms industry and the debts it’s owed. Where cuts to military spending are being made, it’s mostly to personnel and wages – not what the TNI calls ‘toys for the boys’.

An aide to former Greek Prime Minister, George Papandreou, has reportedly said: ‘No-one is saying “Buy our warships or we won’t bail you out”. But the clear implication is that they will be more supportive if we do.’

Arms manufacturers based in the large EU economies, although feeling increased competition, still see a boom in profits thanks to the continued spending. European leaders such as David Cameron and François Hollande have becoming travelling salespeople for their arms industries, promoting to countries with questionable human rights records.

Greece: One of a few European Union members to spend more than two per cent of its GDP on military. France and Germany have reportedly pressured the Greek government not to reduce defence spending. Greece sourced 25.3 per cent of its arms from Germany between 2002 and 2011 and 12.8 per cent from France.

Spain: Although it had a military spend of less than one per cent of its GDP in 2012, Spain has massive debts to the arms industry. In September 2012 the government arranged a special credit line to pay off €1.8 billion ($2.3 billion) outstanding.

Portugal: In 2004, Portugal signed its largest ever arms deal with the German Submarine Consortium, buying two submarines for one billion Euros ($1.29 billion). This transaction will account for 40 per cent of defence spending until 2023. In 2011, two former managers of German company Ferrostaal were convicted of paying €62 million ($80 million) in bribes to Portuguese and Greek officials.

Italy: In 2012, Italy came close to bankruptcy but still parted with an estimated 1.7 per cent of its GDP to spend on military expenditure the same year. Cuts have been made, but predictably the main target is personnel. Italy and Germany have set up armaments co-operation deals.

By Amy Hall

Sources: Frank Slijper, ‘Guns, debt and corruption: military spending and the EU crisis’, Transnational Institute, April 2013.
SIPRI military expenditure database, sipri.org/research/armaments/milex/milex_database
Andrew Rettman, ‘EU figures show crisis-busting arms sales to Greece’, euobserver.com, 7 March 2012; euobserver.com/defence/115513
Helena Smith, ‘German “hypocrisy” over Greek military spending has critics up in arms’, The Guardian, 19 April 2012.

Interview with Susan George

www.tni.org

In 50 years’ time, will the world be a better or a worse place?

We have a choice about that, but we have to make it right now. With social or political questions one can sometimes go back, start over and get things right, but with environmental questions we haven’t time. No-one knows for sure if we’ve gone over the edge already. I prefer to act as if we still have time to change our economy and our way of living. Our governments are usually well behind the people and won’t act unless there is a massive failure or a disaster, and often not even then – just look at the financial débâcle.

So you doubt that change can be achieved?

Not necessarily. In my new book* I recommend many practical measures to move things forward. It takes political persuasion, education, organizing and alliances to make people listen, but we have the means, knowledge, technology and policies to make the changes required. Collectively we even have the money. What we don’t have is the political power and organization that will force governments to act, and we have an additional difficulty because the struggle is no longer purely national. We need to co-operate across borders – this is an unprecedented time in human histrong. We’re fighting in France [where George lives] today to maintain our social protection. That’s also important internationally because a victory in one country can give others hope; but acting alone, nationally, is no longer enough.

Can global financial and political institutions ever be a force for good?

They could be and we need global institutions. Ours, however, are the proverbial oil tankers, steeped in neoliberal ideology, so turning them around demands massive effort. The people we elect simply govern for those I call the ‘Davos class’: the people who attend the Swiss ski resort ‘World Economic Forum’ every January to reinforce each others’ positions, decide how to run the world and make more money. Researchers from the Bank of England showed that the people of the world provided a total of $14,000 billion in bank bail-outs and guarantees. That’s what we as taxpayers have spent, but it’s not enough – in France retirement benefits have been reduced, in Greece it’s public services, elsewhere it’s cut this and cut that – but it’s never about closing down tax havens or taxing financial transactions or taking public control over the banks. This isn’t just a financial crisis: it’s also a moral crisis because the guilty are rewarded and the innocent punished.

If you could banish one person from the planet, who would it be?

‘Banish’? That’s a nice non-violent word! I don’t think banishing a person has much effect. We’re in a system run by the Davos class whose members are interchangeable. If I banish someone they come back as someone else – Robert Rubin [US Treasury Secretary under President Clinton] nurtured Larry Summers [US Treasury Secretary under Obama and former Chief Economist at the World Bank]. Both have done a lot of harm. But it’s not worth banishing them because they would be instantly replaced – the point is to get them under control and prevent them by law from doing harm.

Who do you irritate the most?

I certainly don’t irritate the people I would like to irritate because they tend not to pay any attention. Some friends tell me, ‘Don’t worry, they read your work’, but there’s never any reaction. Silence is the best way to treat a critic because it says, ‘I’m more powerful than you and I don’t have to debate this’. But that doesn’t mean you stop working. As long as good, honest people want to change things and are willing to listen to me, I’ll try to keep going.

*Susan George’s new book Whose Crisis, Whose Future? is out now. George explains that she much prefers her own title for the French and Spanish editions: Their Crises, Our Solutions, because ‘question marks in titles show a lack of political courage’, but her publishers didn’t agree.

A new, green, democratic deal

*Susan George:* We are in the midst of simultaneous crises. We have the social crisis of increasing poverty and inequalities. We have the financial crisis. And we have the ecological crisis, which in my view is the most serious of all. These different crises reinforce each other. As all three are structurally linked, their solution can also be structurally linked.

*Walden Bello:* The dynamics of both climate change and the financial crisis stems from the drive of the system to create tremendous wealth as well as tremendous inequality, especially over the last 25 years. We have to confront the fact that this goes to the heart of the system that is dominant globally, which is global capitalism. ‘Neoliberalism’ has spurned the type of regulation that would have achieved more equality among countries and within countries, as well as a greater and a more sane equilibrium between the environment and society. This unregulated mode of production and consumption has basically led to the dead-end that we’re in now.

The financial crisis is a huge challenge, but we can go back and fix it. You can’t do that with nature

*Susan George:* What I am proposing is that we use these crises to get the banks under control. Also, that we get something in return for the trillions of dollars that the banks are receiving, with commitments that they must devote a certain proportion of their loans to green projects. The object is to transform the economy, using a kind of green Keynesianism (see box overleaf). Use the banks as public services – to invest in research and development in clean energy; in construction which is energy neutral; in retrofitting homes… a whole range of ecological activities.

I believe that it’s also the moment to talk about international taxation of currency transactions and corporate profits, closing down tax havens; to get rid of the debt of the South once and for all. All of these things have been proposed for about a decade by the organization in France of which I’m honorary President – the Association for the Taxation of Financial Transactions to Aid Citizens (ATTAC). At least until a couple of months ago, about $3.2 trillion [in currency] was being traded every day. You could start by taxing just those transactions involving the Euro, for instance. Say you tax them at a tenth of one per cent – nobody is asking for the moon here. When I worked it out once the revenue came to about $700 billion a year. The idea then is to apply those funds to protecting countries from the climate-change catastrophes that they’re likely to face. These are large Keynesian redistribution programmes: exactly what was done in the Second World War and the New Deal, which pulled the United States out of the Depression.

*Walden Bello:* This is a time when we have to combine principle with pragmatism and go beyond the old ‘isms’. A variety of systems should come out of this, with government regulation backed up by pro-environment and pro-equity coalitions in power. A private sector that’s decorporatized and relies on small and medium industries instead of those gigantic transnational corporations (both financial and industrial) that I think need to be dismantled. And then you really need, at both the national and the global level, a very active civil society that monitors and impacts on both government and the private sector. This third actor – civil society – is really the key. It is the force for democratization, both for politics and for the economy. Now, what do we call this? Do we call this ‘economic democracy’?

*Susan George:* ‘Revolution’ has too many connotations. Everyone immediately thinks 1917. Please tell me who is the Tzar that we’d have to overthrow and I’ll go with you. But I don’t see it. I certainly don’t want some command economy.

*Walden Bello:* Basically, I don’t think the title or the name is important. What we’re going to need – in both the advanced industrial world and the South – is electoral coalitions that bring into power people-supported groups and coalitions that would undertake this new agenda. We would bring citizens in to very active day-to-day decision-making over not only politics but key decisions affecting the economy.

*Susan George:* Let me introduce a word of caution here. The last financial crisis in 1929 eventually led to fascism and to war. Unless the Left is bold, gets its act together and, as Walden says, forms broad alliances and coalitions, we don’t know what’s going to happen – it’s uncharted territory. That’s why I’m trying this idea of green Keynesianism. Now, purists who have ‘isms’ on their agenda will not like this. They will say that this is giving capitalism a new lease on life. I plead guilty. That’s what it would do.

John Maynard Keynes

The British economist was the intellectual force behind the Bretton Woods conference in 1944. This conference (dominated by the US) attempted to sort out the worldwide economic chaos of the Great Depression during the 1930s and the World War that followed. Keynes argued that governments have a ‘counter-cyclical’ responsibility to regulate the ‘business cycle’ of economic bubbles and slumps. This meant stimulating ‘demand’ in a slump by redistributing wealth. To some extent, President Roosevelt’s ‘New Deal’ in the US (together with its ‘war economy’) had put related principles into practice. After 1944, The International Monetary Fund (IMF) and World Bank were intended to apply them internationally. However, when ‘deregulation’ began in the 1970s, these institutions came to see their role as promoting rather than restraining ‘free markets’. By the time they were finally joined by the World Trade Organization in 1995, corporate globalization and trade liberalization were an established economic orthodoxy. Today, with the economic meltdown and the threat of climate change, there’s revived interest in ‘green Keynesianism’ and a ‘Green New Deal’.±

± To view the Green New Deal from the New Economics Foundation visit *www.neweconomics.org/gen/z_sys_publicationdetail.aspx?pid=258*

We have to think much more seriously about the market. The market can provide useful services. I don’t want to have an argument every time I go out and buy a loaf of bread as to what the price of it is. But there’s other things that it shouldn’t be asked to do – health, education, water and probably pharmaceutical research and a certain number of things which are now considered to be sources of profit for a very few individuals and major corporations. The market is unable to think about the future in any long-term way. But my main point is, let’s not have preconceived models but let’s have a lot of economic democracy, so that out of people’s interaction inside their own enterprises, in their towns, in their regions, we come up with a model which would probably be very different from one place to another. I’m not at all sure that in the Philippines you should have exactly the same models that you have in France.

*Walden Bello:* I agree. So, in this world that we’re moving into, there will be a great deal of diversity, and diversity is good. It’s precisely the kind of ‘one shoe fits all’ mentality that brought us both the centralized socialism that collapsed in the late 1980s and early 1990s, and the free-market model that has just collapsed after so many years of crisis.

*Susan George:* I was born before the Second World War. I remember very well a Sunday when I was with my father and we were going out to get an ice cream. And he heard on the radio about the the bombing of Pearl Harbor and he went absolutely white. This is my first historical memory. After that, kids like me were very much engaged in what was happening. They were buying war stamps to finance the military effort. The conversion of our economy took place in less than two years. It was absolutely astonishing. I lived in an industrial town which produced rubber goods and automobile tyres. Within a year it had completely converted to producing vehicles for the military at Detroit. The lipstick factory became a cartridge factory. It was done through a kind of social solidarity that the US hasn’t seen since and probably had never seen before. It was also the New Deal that contributed to this solidarity between people. I believe that to rein in climate change we need something on a similar scale.

*Walden Bello:* What we’re talking about is more and more popular control over many different aspects of the economy. Not only the public goods but also energy industries, aircraft industries, car industries – the kind of industries that are very central to the economy. As much as possible, bring into the arena of popular decision-making more and more areas of economic activity, and do not just leave them to the market.

*Susan George:* Let me point to one very tiny disagreement between us. I don’t know how far economic democracy can go; for instance, having ordinary people decide if we need a car industry and what it should produce. Oscar Wilde said: ‘Socialism is all very well but it takes too many evenings.’ Sometimes I wonder if people would really be prepared to go to all of the meetings that would be required of them if they were to take a serious interest in everything that they ought under this new system. Universal participation in everything? I don’t think so, because it would simply take too many evenings.

*Walden Bello:* My point is that people have been excluded from the whole economic sphere.

*Susan George:* I agree completely. And I would simply add that the financial crisis is a huge challenge, but we can go back and fix it. You can’t do that with nature. If nature is going off the track then it’s off the track, and humans have absolutely nothing to say about that. So I think that’s the most urgent thing we must address. That’s why I keep talking about using the financial crisis in order to get the ecological crisis under control. I don’t say it’s going to work. But I still have hope and I think that through publications like _New Internationalist_, little by little we can make this the obvious solution.

This is an edited version of an interview that *NI* co-editor *Chris Richards* recorded with *Susan George*, Chair of the Transnational Institute, and *Walden Bello*, a Senior Analyst with a Thai-based NGO Focus on the Global South – both prolific commentators on the negative impacts of globalization. Hear their fuller discussion in the _Cool Change_ series of interviews at *www.newint.org*

Whose Europe? Our Europe!

Like the famous Dickens opener in _A Tale of Two Cities_ – ‘It was the best of times, it was the worst of times’ – Europe has always excelled at both the best and the worst. In the 20th century alone, Europeans committed some of the most horrendous crimes ever conceived by a perverse humanity – fascism, concentration camps, the Shoah on one side; communism, sham trials, the Gulag on the other. Their quarrels also caused two hugely destructive World Wars, wreaking carnage on a hitherto unimaginable scale.

Although Europeans did not invent slavery, they long benefited from it; they caused untold deaths and suffering under colonialism and imperialism. Anyone who cares to delve further back into history will find pitiless religious wars, the Inquisition, the divine right of kings and _l’Etat c’est moi_ – one could go on and on. The continent will be a long time expiating its sins and the duties of remembrance will weigh for generations to come.

Yet Europe has also reached perhaps the best humans can attain. Tourists flock to its shores from all over the world to gaze reverently upon the remaining treasures of the age of faith and the Renaissance. They want a taste of the artistic exuberance of Italy, the grandeur of chateau life, the music, _in situ_, of Bach, Schubert and Mozart; the cuisine everywhere. They too want to feel, as the Germans say, ‘as happy as God in France’ – to describe the ultimate degree of felicity.

This is the continent that invented the opera, chamber music and the symphony orchestra, the classical ballet, easel painting, the museum, and although the printing press could also be credited to the Chinese, mass publishing. Europe displayed not just cultural inventiveness which, after all, began as an outgrowth of the Church or a pleasure for the aristocracy, but also excellence in political, scientific and technical innovation. For the first time since the Greeks, the Age of Reason and the Enlightenment brought with them a genuine spirit of free inquiry. The scientific method was born in Europe and set humankind on the road to discovering all manner of marvels – and all manner of dangers as well.

Revolutionary Europe

Even though the US got there first, political revolution is also the child of Europe. The French overthrew their absolute monarchs and their hereditary masters and mistresses, even going so far as to behead them – a move whose wisdom is still hotly debated. Many other revolutions and struggles for national unification followed. The ideals of democracy slowly gained ground; the amazingly contemporary Declaration of the Rights of Man and the Citizen of 1789 should be framed in gold on every law-maker’s desk. Europe invented parliaments, trial by jury, the right to a lawyer and guarantees for the defence – it even invented national Constitutions. Painfully, much later, it separated Church and State.

For over 200 years, Europeans have marched in the avant-garde of human emancipation. If workers are less exploited and women more free; if people can change jobs and enjoy paid holidays, if all children, rich and poor, are in school and virtually everyone knows how to read and write, that is Europe’s doing. So is universal healthcare, both preventive and curative, the eradication of hunger and the lowest rates ever of maternal deaths in childbirth and infant mortality.

None of these advances happened by chance. They came about because people could either elect officials prepared to fight for them or, when necessary, fight for them themselves, sometimes in the streets, often giving their lives. Moreover, the continent known for its age-old propensity to war has been, with the exception of former Yugoslavia, at peace for 60 years.

I beg the reader’s indulgence here because I want to bring personal testimony to this court of opinion. As someone born in the United States, allow me to draw attention to the unravelling of that country’s social system: the 40 million Americans without health insurance, the collapsing schools in poor neighbourhoods, the plight of millions of poor people destined to remain forever at the bottom of society. When Hurricane Katrina struck, people in Europe couldn’t believe the pictures they were seeing on television of an America suddenly part of the Third World.

I have had the good fortune to live in France, where, at ten-year intervals, I completed two higher degrees, including a PhD –about six years of post-graduate study in all. This cost our family about $100 a year. With three children to educate, seizing such an opportunity would have been unthinkable had I lived in the United States. Although some European universities now do charge for tuition, the sums required bear no comparison to the astronomic expenditure demanded for a college education at, say, Harvard or Smith, where I went, now of the order of $40,000 a year.

Similarly, when my husband became gravely ill, he received admirable care in the French public health and hospital system which went to enormous lengths to save, then to prolong his life over a year and a half and, finally, allowed him to spend his last days at home surrounded by his family but with a full home-hospital system in place. All this cost our family zero.

I provide these examples in order to argue that Europe has a social system worth safeguarding and fighting for. It is under grave threat from neoliberal ideology and politicians in our individual European countries and from the European Commission in Brussels, the most neoliberal in history, who are doing their best to dismantle this system in favour of an American-style, class-based, privatized social model which betrays all the ideals Europeans have upheld over centuries. Public services, which were not ‘too expensive’ when Europe had a GDP half the size it is now, have suddenly become so – doubtless because they provide huge benefits to citizens but no profits to private investors.

Welfare not warfare

Sceptics who claim there is no such thing as the ‘European Social Model’ should be directed to a huge 450-page report from the International Labour Organization called Economic Security for a Better World. This tome, based on vast databases, 48,000 interviews and the labours of platoons of statisticians, sets out to measure various components of economic security in some 100 countries containing over 85 per cent of the world’s population. The premise of the report is that the quality of security in your daily economic activity will have an overwhelming influence on the quality of your life. The International Labour Organization further believes, with considerable justification, it has come up with an ‘objective measure of individual happiness and wellbeing’. Seven different categories of economic security – income, job, job markets, workplace, skills and training, control over work content, individual and collective ‘voice’ – are measured against universal criteria, then combined in a weighted average. This average shows that, objectively measured, Europe’s systems take top marks; that Europeans can be said to enjoy greater personal wellbeing than other people.

This is in no way to say that the European model is perfect: neoliberalism has made many breaches in the walls of the welfare state; floorboards are missing here and there, people can and do slip through the cracks. Nor are public services always blameless, flawlessly efficient and free of corruption. But as one trade unionist, Mike Waghorne of Public Services International, points out: ‘If your sink leaks or your paint is peeling, you don’t burn down or sell the house – you fix the sink and repaint.’ The propaganda we have lived with in Europe and elsewhere for the past two decades has told us, instead, to sell or destroy the house. Too many governments have been happy to take the one-off, windfall privatization money and run.

...the quality of security in your daily economic activity will have an overwhelming influence on the quality of your life

Preserving the European system should not, however, be seen as of interest only to Europeans. At the most basic, even tautological level, the existence of this model, here and now, proves that it is possible. It holds up to the world the fact that a decent life for everyone can be imagined and largely put into practice; that politics must remain dominant over the marketplace, that the system of taxation and redistribution can result in universal social protection, that people are not only less stressed and depressed when they benefit from economic security but also more productive and creative; that this system generates positive, measurable economic benefits as well as social ones.

This is an extremely inconvenient political fact for those, including a large part of the European managerial class and the European Commission, who would much rather prove that huge inequalities, mass privatizations, worker ‘flexibility’ and a State that governs on behalf of large corporations and financial markets are A Good Thing.

Geopolitically, the existence of the European model furthermore provides the ‘threat of a good example’. We know we can expect little from the US in the foreseeable future. The Warfare State will not morph into the Welfare State and the environment can go straight to the Hot Place, as it shows every sign of doing, before Texans give up their SUVs. China, another contender for the Top World Model prize, seems bent on applying the worst aspects of both the capitalist and the communist systems. Many quite fascinating and positive developments are taking place in Latin America, but that continent lacks the unity, the high GDP, the population and the educational and technological levels of Europe. So if anyone is interested in proposing a universal, perfectible social and ecological model of benefit to all citizens, Europe would seem the only candidate for the post – at least right now.

A democratic Europe

Should we expect this to happen through natural evolution? Not at all. It won’t unless European citizens pull up their collective socks and make it happen. Europe as now conceived needs a complete economic and political overhaul. The EU-25 have a ridiculous common budget; a Central Bank independent of any political oversight and prepared to quash expansion and more employment opportunities at the merest tremor; a Parliament that can’t initiate legislation or levy taxes and therefore no Europewide taxes; an incapacity to borrow and launch treasury bonds on international markets; no solidarity funds to bring the 10 newcomer countries up to speed; huge obstacles to closer co-operation between states that want to advance faster...

But all is not lost. The French and Dutch votes against the proposed Constitution – perhaps the most complete neoliberal compendium ever drafted – were not anti-European _per se_ but against the betrayal of the social model it would have instituted. The Commission is still busily trying, illegally as it happens, to resuscitate this defunct Constitution. As the Vice-President of this body, Gunter Verheugen remarked after the French and Dutch votes: ‘We must not give in to blackmail’. So much for popular sovereignty and universal suffrage. Many politicians would indeed, like Verheugen, be delighted to consign democracy to the dustbin as a 200-year aberration in human affairs and let the technocrats and the élites get on with it.

But Europeans have been there before. It is unlikely this time that they will cry ‘Off with their heads’ or parade around their capitals with pikestaffs, but as soon as they understand the stakes, they will not give up on Europe because they will not betray their own history. Or so we must all hope – whether Europeans or not.

The top 20 countries on the Economic Security Index [which goes from 1, perfect to zero, abysmal] are: Sweden at 0,977, Finland, Norway, Denmark, Holland, Belgium, France, Luxemburg, Germany, Canada, Ireland, Austria, Spain, Portugal, Britain, Switzerland, Australia, Japan, Israel and Italy. The United States is number 25, with an index of 0.612.

*Susan George* has written extensively on the politics and economics of globalization. She is an associate director of the Transnational Institute in Amsterdam and vice-president of ATTAC-France. Among her recent books is _Another World is Possible_, published by Verso in 2005.

    Europe vs US - in figures

    1. CIA Factbook 2005
    2. Robin Blackburn, _Banking on Death_, Verso 2002

The Lugano Report

THE INTENT OF OUR REPORT is not to shock or blaspheme: the fact remains that in earthly affairs, the market, at its broadest and most inclusive, is the closest we are likely to come to the wisdom of the Almighty.

Yes, the market creates suffering for some; its decisions may appear harsh and cruel, but let us not forget the theological parallel to the market according to which ‘God, supremely good, would never allow that there be evil in His works unless He were so powerful and so good that even from evil He could do good.’^1^

If capitalism can be said to possess an ontology, an essence, it is surely that the market, in its full sweep and scope, is harmonious and wise. Like God, it too can create good from apparent evil. From destruction it draws the betterment of humankind and the highest possible equilibrium of the whole.

The moment has come to put this ontology to the test. It is time to ask if the beneficiaries of the free market and the liberal system, including the Commissioning Parties, are prepared to accept the seemingly harsh consequences of their beliefs.

Can the environment and civilized society sustain present and future numbers? Should Western culture be represented by fifteen, then ten, then five per cent of humanity? Should the most productive individuals and nations sacrifice their well-being in the name of problematic gains for the least productive ones? Should now-powerful countries willingly relinquish their authority? Such are the questions our analysis obliges us to put to ourselves and to the Commissioning Parties; for our part, we answer ‘no’ to all of them.

We have dwelt at length on the likelihood of environmental collapse and social anarchy. We have spoken of the mirage of the universal welfare state and the illusion of universal human inclusion. We have warned against the folly of renouncing one’s own power and culture in the bargain. As Machiavelli pointed out to the Medici long ago, the choice is to remain Prince and to do whatever is necessary to that end, or to cease to be Prince. We have no doubt that the Commissioning Parties will choose to remain, as it were, Prince. The great question thus becomes: ‘What is necessary to that end?’

_If twenty-first century capitalism cannot continue to function optimally – or at all – under foreseeable demographic conditions, then those conditions must be altered._

Such a statement, should it be seized upon by self-appointed moralists, would doubtless be denounced as a declaration of intended ‘genocide’. Not only would this betray a careless use of language, it is not what we intend. To begin with, we are not ideologically motivated and we harbour no hatred for any ethnic group, religion or race.

Such sentiments are puerile and unworthy. Secondly, we are not speaking here about some lunatic utopia (‘the world will be perfect when all Jews/class enemies have been eliminated and the people/party purified’). Our goals are rather to:

• create an economic environment which will maximize individual chances for success and the pursuit of happiness • safeguard a liveable habitat for humans and other species • perpetuate civilized society and Western culture

The first goal – to create a favourable economic environment – requires that we determine under what conditions it is possible to ensure not some ultimate, ideal system but the greatest possible welfare for the greatest possible number. If the free market does not provide for ‘pursuing happiness’ more readily than some other alternative system, it deserves to lose its pre-eminent place. A system based upon competition should not fear it.

The liberal, market-based system does not now provide happiness, comfort and a measure of security for the majority of humanity; nor will it do so for projected populations in future: these are givens and must be recognized. We doubt that any other system could do so either, but in the context of this Report that is irrelevant. Even in the best-off countries, not everyone can possess and accumulate capital or succeed as a risk-taking entrepreneur; whereas the labour market is just that: a market, obeying market rules.

According to the founding principle of competition, the global market takes the best and leaves the rest. Today, although no-one knows for sure, the ‘rest’ are almost certainly more numerous than those whose talents, skills, education, moral qualities, birth, luck and so on have placed them inside the system. Even the International Labour Organization puts the numbers of those ‘unincorporated’ in the labour force at over a billion: add their dependants, and the enormous size of this category becomes apparent.

Our second goal – safeguarding a liveable habitat – is curiously akin to the views expressed by the so-called Deep Ecology movement. Although we are far from subscribing to all its premises, we note with interest the following statements from its Platform:

_The flourishing of human life and cultures is compatible with a substantial decrease of the human population. The flourishing of non-human life requires such a decrease. Policies must therefore be changed._^2^

The Deep Ecologists do not say how or by whom the ‘substantial decrease’ might be achieved, nor which policies would have to be changed to achieve it. They simply state the obvious. To our knowledge, Deep Ecologists are not being held in custody for advocating ‘genocide’.

Our third goal – perpetuating civilized society and Western culture – cannot be attained today in the same ways as it has been during most of recorded history. From the time of the Greeks and the Romans to that of the nineteenth-century colonists, sophisticated conquerors always sought to incorporate the land, resources, wealth and people of the conquered territory because they represented significant assets. The labour of the conquered population, often under the watchful eye and the heavy rod of a collaborating local oligarchy, was another source of riches and power. Today, the idea of holding colonies is faintly ludicrous: their assets can be better extracted through other methods; their populations are, for the most part, not merely useless but burdensome as well.

The Enclosure Movement in Britain was a harbinger of things to come, dispossessing thousands of small farmers and creating a floating population. However, until the machines of the Industrial Revolution put masses of traditional craftsmen out of work, the problem of excess populations never arose.

Until our own day, society could also count on various safety valves, first among them the celebrated Malthusian ‘checks ’ like famines. Surplus labour and social misfits could also emigrate to the new lands opening in North America and Australia. Fifty million Europeans did so in the nineteenth century. Colonies elsewhere, particularly in Africa and the Indian subcontinent, helped to take up the slack as well.

Armies conscripted and disciplined many otherwise antisocial youths. Families were expected to care for indigent members. Organized charity developed at the same time as the Industrial Revolution itself and dealt with many of its unsavoury consequences.

We no longer enjoy these luxuries. The world is full and there are no empty spaces left to settle or colonize. The notion that private charity or even public aid can deal with the full range of present social ills is absurd.

Just as physical rubbish and waste litter the landscape and threaten to overwhelm many cities and their services, so social rubbish and waste endanger liberal ideals and the market, though few dare to say so in public. Proper management and social control are impossible when all efforts to ameliorate the situation are immediately neutralized, indeed swamped by proliferating, poorly integrated populations.

The question for us is therefore not whether but how to achieve the goal of drastic population reduction. In this regard, we wish to state firstly some general principles:

• Although not entirely cost-free, modern population-reduction strategies must be cheap, requiring no special equipment and virtually no manpower. The ‘Auschwitz model’ is the opposite of what is required to attain the objective. It is also far more important to redirect spending than to raise new funds. • ‘Victim’ selection should not be undertaken by anyone but the ‘victims’ themselves. They will self-select on criteria of incompetence, inaptitude, poverty, ignorance, laziness, criminality and the like; in a word, ‘loser-hood’. • The state should have relatively few duties to perform with regard to population management and in any case far fewer tasks than those connected with vast prison administrations, unemployment compensation, overall ‘welfare’ administration and the like. We advocate downgrading the present size and scope of the state and reducing significantly its role in people’s affairs. We are thus consistent in recommending that the state take its cue from the private sector in the area of population control as well. • In the matter of visibility and public perceptions, we recommend two categories of strategies. ‘Preventive’ population control will centre on birth prevention, it will be visible and part of normal policy; whereas ‘curative ’strategies will deal with those already born but will not appear to have any particular agency behind them. There are no villains in this scenario. • As a consequence, the question of opprobrium should not arise.

Properly thought through, with sufficient moral energy and financial commitment behind them, these strategies, taken together, could succeed. The task of the Working Party is to think them through; the energy and commitment must be supplied by the Commissioning Parties and their allies.

The twenty-first century must choose between discipline and control or tumult and chaos. The only way to ensure the greatest welfare for the greatest number while still preserving capitalism is to make that number smaller. We have arrived at this conclusion after carefully weighing the alternatives. If no action is taken, some future Working Party may still debate whether social anarchy will precede, follow or accompany ecological collapse, but the basic questions will have been settled negatively for civilization. We ask the Commissioning Parties to appreciate that our message is not merely that ‘the ends justify the means’, though this may well be so. It is, rather, that Western culture and the liberal market system must, in the twenty-first century, choose between the ends and The End.

The author unveiled

_The Lugano Report_ is actually a fictional work by the noted author and critic of globalization, *Susan George*. She tells us here why she wrote the book.

*What was the genesis of a fictional ‘official’ report?*

I was convinced that another book of analysis and criticism was pointless. I’ve spent the last 25 years of my life describing hunger, famine, debt and structural adjustment and what they are doing to people, and virtually nothing has changed.

So, I thought, why not make things really clear by taking the logic of the global system to its conclusion? I wanted to put the case clinically to show the horrific consequences of continuing down the economic road we’re on.

*Why do you think the market model has such a hold on people?*

Backers of the global economic model are very clever at paying both hacks and legitimate scholars to spread their propaganda. If a decision were taken that there had to be two billion fewer humans in 2020 you’d soon see all sorts of people developing a new kind of ethics and a new kind of law, and you’d have them paid for. You would have a recasting of Malthus and it would be for everyone’s own good, of course.

Norman McBeath

*Why do you reveal yourself as the author at the end? Doesn’t that destroy the impact?*

When I first showed the book to a publisher in France they wanted to publish it anonymously but I thought that was too dangerous. Maybe I’m flattering myself, but I think if you published this without a confession of authorship at the end and people believed it was real and were convinced that organized genocide was on the cards... Well, I didn’t want to take on that big a responsibility. I insisted on an ‘afterword’ and an ‘annex’ which they didn’t want. So they rejected the book.

*Is there any hope for challenging the élite system of governance you outline in the book?*

Definitely. The big battle for me right now is the World Trade Organization. It’s a huge monolith and it’s going to be an epic battle. If you’re fatalistic you say that capitalism just rolls on like a juggernaut, crushing greater parts of humanity and the environment. But the system is fragile, with lots of cracks. We just have to get out there with our pick axes and work along the fault lines. I’ve sometimes been criticized for my pessimism, but I must say that I’m as optimistic as I have been in a very long time. I really think there are huge opportunities now.

  • *1.* Saint Augustine, quoted in Thomas Aquinas, _Summa Theologica_, question 2, article 3. *2.* Arne Naess and George Sessions, _The Deep Ecology Platform_, 1985, published as a broadsheet.
  • The Risk Shifters

    In the market system food must be produced where it costs the least and sent to where it can command the highest price. That is why, in a world increasingly dominated by Transnational Corporations (TNC's), poor countries are being used more and more as a source of those foods which fetch high prices in rich countries.

    The US Department of Agriculture places agricultural imports into two broad categories - 'complementary' and ,supplementary'. Complementary products are tropical crops that can't be grown in the West - such as cocoa, coffee and tea - and the market for these is generally stagnant or declining.

    Supplementary products are those which can also be grown in the US. And here the story is quite different. If imports for 1967 as a base year are indexed at 100, those for more recent years have been:

    1974 125
    1975 134
    1976 156
    1977 165

    This is a huge increase when one considers that the US population has grown very moderately in the last ten years. Americans have greatly improved the quality of their diet, if one measures it in monetary terms, by adding to it mostly luxury items - year-round fresh and frozen fruits and vegetables, nuts, oils and meats. But the central fact is that imports of food which can be grown in the US itself have increased by 65 per cent in a decade.

    Most striking of all is that 52 per cent of these supplementary imports now come from the Third World. In other words, the part of the world where the greatest numbers of hungry people live is supplying the largest and wealthiest country in the world with its supplementary diet.

    Certain regions are, of course, more integrated than others into this new international division of labour: Latin America, for example, supplies about 78 per cent of all the US animal product imports from developing countries. But for vegetable products, Latin America is very closely followed by Asia. Africa, because of its particular colonial history Susan George is a fellow of the Transnational Institute and author of How the Other Half Dies (Penguin Books). Her latest publication is Feeding the Few - Corporate Control of Food (see p.31) and its connection with European markets, is a very minor US supplier. Imports to the US are indicated in Table 1.

    Countries like Mexico, the Dominican Republic, Taiwan, the Philippines, Thailand and a handful of others stand out. But smaller countries are actually exporting more to the US in terms of their total production and the-needs of their own populations.

    For example, five small Central American countries (Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica) between them export over $125 million worth of animal products to the US. This can only be accomplished by rationing the local population - as the World Bank's nutrition expert has pointed out - and by using huge amounts of land for cattle raising which could better be used for food production.

    Central American meat is not of top quality and mostly goes to fast-food hamburger restaurants. But it can be cheaply produced in countries whose people are deprived in order to supply just 5 per cent of US animal product import needs.

    Data is scanty on which company controls what proportion of a given country's production. One can, however, cite the case of Mexico for a group of TNC's. The 'Church Report' - an investigation of TNCs carried out for the US Senate Foreign Relations Committee - discovered that,for the food firms answering its request for data, 77 per cent of all trade took place between the Mexican affiliate and the parent TNC. Trade inside firms is probably the rule, at least for the large, integrated companies. Del Monte (recently acquired by R.J. Reynolds) has its own transport and shipping fleet as does Booker-McConnell in the UK.

    Tracing the role of particular food companies in the more 'complementary' product area of tropical crops is also difficult, but possible in some cases. Unilever, for example, is estimated to buy between 50 and 70 per cent of all the fats and oils commercialised in the world.

    And, by comparing the tonnage of soluble coffee which Nestle said (in a PR document) it had bought in the Ivory Coast with the UN trade statistics on this item, one could determine that Nestle controlled 89 per cent of all the Ivory Coast's exports. It was also possible to establish that the company had grossly underpaid when compared to world prices. But' companies are rarely so obliging with basic data that leads to real information.

    Some estimates have been made of the portion of trade in primary commodities 'commercialised' by TNCs. The Secretariat of the UN Conference on Trade and Development (UNCTAD) for example, has published the following speculative figures.

    Cocoa 85%
    Bananas 70-75%
    Tobacco 85-90%
    Tea 85%
    Coffee 85-90%
    Sugar 60%
    Natural rubber 70-75%
    Cotton 85-90%
    Jute 85-90%
    Forest products 90%

    Top three suppliers of supplementary foods to the USA

    The corporations are therefore deeply involved in the transactions of Third World commodities, both supplementary and complementary. But it is important to note that they are involved in ways which minimise the risks to them and correspondingly increase the risks to developing countries.

    This 'risk-shifting' entails both ensuring a list of alternative suppliers and developing synthetic substitutes for Third World products. The result is that, even if a particular farmer or country manages to bargain for a higher price, the company is able to move away either to a different place or to a different product.

    Risk-shifting may mean, for example, pulling out of corporate plantations. Outside of the huge ranching operations in Brazilian Amazonia (and there only because the government insists on it) one would be at pains to find a single example in the world where agribusiness corporations are investing in land-based assets. Companies like United Brands are getting rid of plantations, often by re-ceding them to the government, as in Ecuador and Panama. One obvious reason for this is the fear of nationalisation. But the main reason seems rather to be the companies' desire to eliminate risk - both physical and commerical.

    They no longer want to be involved in the physical processes of production - which does not of course, mean that they no longer control them. But farming is inherently risky.

    One new production strategy is to have a small central estate as the centre of a satellite system of farmers tied to the company by contract. The President of Unilever described this system in 1978:

    'Such an arrangement would benefit local farmers by channelling new technology to them, improving their productivity and providing a ready market for their produce. It would benefit the food processors by providing an assured supply of raw materials.' In spite of this idyllic description, all is not necessarily well for the small grower, especially in poor, low-wage countries. The House of Bud in Senegal began with a plantation leased from the government but soon realised that an effective small farmer scheme would provide cheaper produce. This was because labour was, in effect, provided at a rate below the wages paid on the plantation. The family farm structure is preserved, with all its advantages to the dominant firm, including the willingness of all family members to work long hours for a low return. Farmers, in such schemes, are tied to the company by credit; the firm supplies inputs or other technology; sometimes as in the case of Nestle it also insists the farmer must pay for these.

    Reimbursement of company-supplied credit comes out of produce; with Nestle it is deducted from milk payments before the farmer ever sees his cash. The company, however, is not obliged, under the terms of the contract, to accept any produce of less than top quality. Such satellite schemes tend to make the producer a prisoner of the corporation on his own land.

    But just as companies can switch from one farm to another, they can also switch country when a commodity is cheaper elsewhere. TNC information networks allow them to judge such situations instantly. Such price comparisons are especially evident in the case of fats and oils - US soya oil has been progressively replacing tropical oils ever since World War II, because it is essentially a by-product of feedcake for animals. Oil gluts frequently develop as feed production increases.

    But perhaps the major and least recognised new TNC strategy of risk shifting is the one involving the use of substitutes. When raw material prices increase to the point that companies fear they can no longer maintain and improve profits by passing the cost along to the consumer, they seek cheaper substitutes. Most of these replacement purchases turn out to be of advantage to industrialised, not Third World, countries.

    We need hardly mention plastic as a replacement for jute in bags and carpet backings, or chemical fibres as a substitute for cotton. But there are many other items.

    High Fructose Corn Syrup (HFCS) whose development was prompted by high sugar prices in 1973-74, has already taken over part of the sugar market, particularly in the bakery, confectionery and soft-drink industries. Even conservative Coca-Cola is now using it in one of its drinks.

    The rubber companies are experimenting with a desert shrub that grows wild in the Southwestern US. Called guayule, it has a high latex content and the labour problems in cultivating and harvesting it would not be complicated because there are so many Native American (Indian) unemployed people in the area.

    Coffee is more amenable than previously thought to the inclusion of substitute products. Flavour chemists have already isolated over 400 substances that contribute to coffee's complex flavour profile. And substitutes for up to 80 per cent of the beverage may be based on corn, wheat, barley, oats, soy-beans, molasses, peanuts and other foods plentiful in the US.

    *Cocoa substitute*

    Other extenders have been developed for cocoa and chocolate products. The SuCrest Corp. appears to be front-runner here with a molasses-based product that reportedly even improves the flavour of cocoa, chocolate desserts and toppings etc.

    Back to Unilever. Nearly fifteen years ago, the Chairman told the Financial Times that:

    'The aim (of Unilever's Research and Development) is always to enable us to switch from one oil or fat to another without any loss of quality . . . we are trying at all times to put ourselves in a position to use less of the oils and fats which are in short supply and more of those which are easier to get . . . Our research has, therefore, been directed for years to making us more flexible, more able to use as many different fats and oils as possible for as many purposes as possible.'

    Since tea keeps me going, I am pleased to report that I have not yet learned of any feasible substitution plans. Tea is, however, the only major agricultural raw material exported by the Third World for which this is still the case.

    These examples suggest that a Third World strategy for development based largely on 'fairer and more stable' prices for primary products will fail. This is because the multinationals control not only the purchases but the processing; if their costs for natural raw materials increase too much, they will have recourse to substitutes.

    There seems to be relatively little awareness among underdeveloped country negotiators of such facts; nor do they seem to have seriously examined the issue of TNC control over the total production process in which their own countries are relatively minor components.

    While the Third World exports its agricultural produce to the US and other rich countries, what is happening to its own nutritional status? As one might guess, it is deteriorating.

    And as some corporations import more cheaply produced strawberries others also profit by supplying the developing countries with a greater and greater proportion of their basic staple foods.

    While big customers like Germany and Japan remain vital to the US, the Third World is now absorbing 30 per cent of all US agricultural exports. And there is every reason to believe that prices for these food exports, particularly grains, should rise substantially as we move into the 1980s.

    Certain developing countries are front runners as markets for US exports, as Table 11 shows.

    The list of Third World countries now buying at least one hundred million dollars worth of US agricultural products includes the Dominican Republic, Colombia, Venezuela, Peru, Brazil, Iran, India, Bangladesh, Indonesia, Thailand, the Philippines, Korea, Hong Kong, Taiwan, Algeria, Egypt and Nigeria.

    What all this boils down to is that Third World nations are devoting their time and investment - not to mention their peasantries and agricultural workers - to producing not only traditional tropical crops but also new luxury foods for the North - at prices they do not control. Meanwhile, they import greater and greater quantities of basic foodstuffs at prices they do not control either. Inputs, growing, processing, marketing, imports and exports all take place under the auspices of the TNCs over which neither they, nor any national government, have any real control at all.

    Top three importers of US agricultural produce

    'These tough, hardened men - no word of ours could stop their sobbing and their tears'

    *ARSENIO JESENA*, a Jesuit lecturer at the Ateno de Manila University in the Philippines, recalls the experience of living for several months with the migrant workers of Negros Island - cutting sugar cane for export.

    There were 200 of us - men, women and children staying in two adjoining quartels. There was not a single toilet. There was only one source of water - an old pump. Here everyone did his or her washing, bathing, laundering. We had no blankets, no mosquito nets. For food, three times a day we were served rice - the cheapest, driest, coarsest, most unappetising I have ever tasted. Many of the grains were unhusked, and there were pieces of gravel to be found among the grains of rice. Rough rice and dry fish, that was all. No liquid, no vegetable, a diet which gave no delight and no strength. Yet strength is needed for the sacadas (migrant workers) work. At 3.30 a.m., the lights come on, and by 5.00 a.m. the sacadas have trudged, barefoot, through the one kilometre which separates the canefields from the quartels. The sacadas work is cutting and loading. This is easier said than done.

    The work of cutting is monotonous - the same endless bending of the entire body, the same strong cutting strokes of the espading with one hand, the same grasping and jerking and piling up of the sugarcane by the other hand. The work is also very exacting. It saps away one's strength in a very short time. Added to this is the discomfort of wearing thick, close-necked, long-sleeved denims (to protect oneself against cuts and rashes from the gilok and the leaves) under the heat of the burning sun. But the sacada must continually keep on working, since, if he is to eat, he is supposed to cut tons of sugar cane.

    The sacada must now load the sugar­cane. He bends down, grapples with his pile of 25 to 35 canes, and then, under this heavy burden, navigates his way through the field to the railroad tracks where he dumps his load into the bagon. Then the sacada goes through the whole process again and again until all the sugar cane he has cut is completely loaded into the railway cars.

    Sometimes, when I could no longer raise my arm for another cutting stroke of the espading, or when, after carrying a heavy load to the bagon I would, from sheer exhaustion, just sit down on the ground. I would look up and see the sacadas still at work - some of them younger than my students, some of them older than my father, carrying twice the load I could carry. I could not help but be struck by a terrible contrast - for I would think of the sacadas, who work so hard, and receive so little, and I would think of my students in the Ateneo, who do so little, and receive so much. I would think of how the sacadas slave for every centavo, and how easily the rich man and the rich man's son squander the money they have not earned - and I saw the injustice of it all, and I began to understand why the communists are communists.

    As the day ends, the sacadas slowly drag their way back through the canefields and the dusty roads to the quartels where they know they will be met by the same unappetising food. As they walk on, a cloud of dust would be kicked up by an occasional Mercedes-Benz zooming past as the hacendero hurries to an appointment in Bacolod. As the sacadas near the quartels they see the children they love - dirty and tattered clothing, children who like them would inevitably fit into the perpetual cycle of ignorance and hard work. Some of those who have gone home earlier would be sitting about doing nothing, one of them perhaps strumming a guitar, but giving forth that music peculiar to the sacadas which always has a plaintive note of melancholy and despair.

    No, the sacadas are not happy as they trudge back from their back-breaking work. And to think - for most of them, life would be like this for 30, 40 years - until they are too old to swing an espading. And so, to escape, if only for a moment, from a lifetime of much labour and little reward, some of them search out the tuba vendor, get drunk, and fall into the temporary peace that sleep can give.

    But not all the sacadas sleep at once. In the darkness of the night many of us would huddle around and listen to each one open his heart and recount his personal tragedy. And these tough, hardened men - I actually saw them cry! And some cried like little children. And no word of ours could stop their sobbing and their tears. One night I looked around at the faces that surrounded me, and I asked these downtrodden sacadas, "if the communists come, will you join them?" They said: "Yes." I asked further, "if they tell you to kill the hacenderos, will you do it?" And they said: "Yes."

    'Sometimes I think it is a miracle each year. I don't know how we survive'

    *PETER STALKER* talks to Thomas Japp, a banana farmer in Jamaica who struggles to produce high quality fruit for a low price - all to send overseas.

    Photo: Thomas Japp

    "It's nonsense," says Thomas, some ten yards ahead of me picking his way up the hillside at a pace surprising for his 60 years. "The price we get for bananas - six cents a pound."

    "Just foolishness," reiterates his wife, Icilda. We rest for a couple of minutes, more for my benefit than theirs, but also to gather together some of their grandchildren. Garfield, Everton and Cassandra have disappeared somewhere among the banana and coffee trees.

    Down at the bottom of the valley is the cluster of houses that make up the village of Coolshade. I can just make out the rickety bridge across the river from which naked youths are jumping noisily into the water.

    "Look," said Thomas, as Icilda wanders off in search of the kids. "We sell bananas for six cents a pound - then go to the shops and have to buy a pound of rice for 41 cents."

    He explains that the family grow most of their own food on a couple of widely separated plots of land, but there are still many things they have to buy.

    "And a medium sized box of soap powder is 59 cents," says Icilda, reappearing; "but still only six cents a pound for bananas."

    "Well, I am going to tell you," says Thomas, "sometimes I think it is a miracle each year. I don't know how we survive."

    The children, she says,are ahead of us. They have been to school this morning and are all coming up to join the rest of the family on the farm - about an hour's walk up the other side of the valley from their house.

    "Even the little children help," says Thomas. "When we plant peas they help plant them and pick them. We say 'right, we had better go up and get them and help carry them down to the valley."

    Indeed, all the way down the valley through the villages of Coolshade and Tranquility and the banana boxing­plant, you can see small boys trudging down the road bent almost double under what seem like small banana trees. Getting the fruit down the hillside without damage is a real problem.

    And Thomas's complaint is that trying to deliver the perfect fruit is making all the farmers very vulnerable.

    "At present, all that happens is that the best bananas go for export," he explains. "But it is difficult to carry these down to the boxing-plant. A lot of them get bruised and then rejected. Sometimes you take a box of bananas that has got perhaps ten hands and they only accept five."

    "And they only pay us for five," says Icilda, "even when we have had all those expenses."

    We appear now to have reached their plot. Three or four adults are clearing the land with another half-dozen children helping, more or less.

    Both of Thomas's daughters are there with one of their husbands. Family ties in Jamaica are important but imprecise. Taking an instant roll-call produces a list of nine grandchildren by various parents, all of whom are now Thomas's responsibility, right down to Beresford who just appeared on his doorstep one morning and is still there seven years later.

    Feeding them all is quite a task and Thomas is sure he and all the other farmers will stay in debt until something can be done about the price - and until they can get involved more in processing the fruit.

    "What we need," he says, "is a processing plant. We keep asking the Banana Board for one so we can use bruised bananas instead of throwing them away. You can use them to make vinegar or rum or banana chips. That way we could do a lot more things and everyone would get more to eat."

    But at least all the mouths he was having to feed seem to be helping on the farm - so they aren't all just a drain on the family budget.

    "No," says Icilda, "but they are all at school now." She points to Marlene, a bouncy 12-year-old hacking away at the undergrowth a little further up the hill. "She's going to the secondary school in September and she's told me she needs eight exercise books. She needs to lodge five dollars for books as soon as she is in school and then wants a pen and pencil, and her uniform is six dollars per yard.

    Given the hive of activity among the banana trees, it is difficult to picture the kids neatly back behind desks tomorrow morning. With all this education, do they want to stay working on the farm when they grow up? Opinions are mixed and varied from Marlene who thinks she will probably stay, to ten-year-old Desmond whose big ambition is to join the Air Force.

    It all depends, according to Thomas, on how much money is going to be invested in the countryside. Without that, he says, there isn't going to be any future at all.

    "Myself, I have always been of a farming family, and I love farming. But today people find it very difficult to save."

    "I think if there was a good farming programme with roads and trucks and a good price for the product, then we could persuade the boys and girls who are leaving school to come and work on the farm. At present there is not much for children growing up in farming."

    And talking to the children back at the house, it is clear that the older ones see very little point in staying. Beresford even asks me if I can help him get started in the capital Kingston.

    It is futile to explain that he will have little chance of a job there and that Coolshade is a much more attractive place than Kingston.

    The one argument that might just sway him - that he will earn more money in the countryside - is probably not true. People in England and the USA want their bananas from Jamaica - what they don't want to do is pay Beresford to stay in Coolshade to grow them.

    "And until there is more money," says Icilda, "Things will just get worse. Things are really bad in Jamaica right now because the American dollar has been devalued and the price of everything is going up. It is only through the mercy of God that we survive each passing year."