Stop the TTIP – People’s Movement Read the above pamphlet to get a good understanding of how an EU-US trade and investment treaty threatens democracy, would attack workers’ rights, erode social standards and environmental regulations, dilute food safety rules, undermine regulations on the use of toxic chemicals, rubbish digital privacy laws, and strangle developing economies.
Costas Lapavitsas: Reversing privatisation and re-establishing public ownership over key areas of the economy would directly reduce the room for financialisation. It would also provide a broader basis for public investment and the systematic creation of employment. The structural problems within the UK and other mature economies were brought to the surface during and after
This is a great article on how capitalists have taken advantage of the crisis they helped create to make more money at our expense while also prolonging and deepening stagnation in the system. But more important than money is the power that they are accumulating throughout this crisis which maintains their position of dominance at all levels of
The crisis of 2007/08 has generated many anomalies for conventional economic theory, not the least that it happened in the first place. Though mainstream economic thought has many channels, the common belief before this crisis was that either crises cannot occur (Edward C. Prescott, 1999), or that the odds of such events had either been
By Ronan Burtenshaw Taken from http://concreteradicality.wordpress.com/2014/07/31/argentinas-default-finance-decides-the-population-abides/ Today a vulture fund based in the Cayman Islands representing a tiny, super-wealthy élite has thrown an economy serving 43 million people into chaos. In 2001, with the country in crisis, NML fund bought bonds from Argentina. Their strategy was to acquire defaulted sovereign debt issues at a very
Costas Lapavitsas: Reversing privatisation and re-establishing public ownership over key areas of the economy would directly reduce the room for financialisation. It would also provide a broader basis for public investment and the systematic creation of employment.
The structural problems within the UK and other mature economies were brought to the surface during and after the crisis of 2007-9. This paper argues that these problems are inherent to contemporary mature capitalism and have to do, primarily, with financialisation. The exceptional rise of finance in terms of size and penetration across society, the economy and the policy process, is apparent to all. The rise of finance is a sign of a fundamental transformation of mature capitalism within commercial and industrial enterprises, but also banks and perhaps most strikingly, within households.
The period of financialisation, lasting from the 1970s to the present day, has also wrought profound changes to the social structure of contemporary capitalism. It has been a period of extraordinary income inequality, wiping out all of the gains that came in the period following the Second World War. This paper notes that the ability of the rich to extract enormous incomes has been associated with the financial system. Inequality is a characteristic feature of financialisation.
Financialisation has been marked by the ideology of neoliberalism, promoted by universities, think-tanks and a variety of other institutions. Neoliberal ideology ostensibly treats state intervention in the economy with extreme suspicion, but the reality has been very different. The financialisation of mature economies would have been inconceivable without the facilitating and enabling role of the state.
The full paper can be read at http://www.researchonmoneyandfinance.org/images/uncategorized/Lapavitsas_state_finance.pdf
This is a great article on how capitalists have taken advantage of the crisis they helped create to make more money at our expense while also prolonging and deepening stagnation in the system. But more important than money is the power that they are accumulating throughout this crisis which maintains their position of dominance at all levels of society.
The ultimate goal of modern capitalists – and perhaps of all capitalists since the very beginning of their system – is not utility, but power. They are driven not to maximize hedonic pleasure, but to ‘beat the average’. This aim is not a subjective preference. It is a rigid rule, dictated and enforced by the conflictual nature of the capitalist mode of power. Capitalism pits capitalists against other groups in society, as well as against each other
Read the full paper at http://www.paecon.net/PAEReview/issue66/BichlerNitzan66.pdf
The crisis of 2007/08 has generated many anomalies for conventional economic theory, not the least that it happened in the first place. Though mainstream economic thought has many channels, the common belief before this crisis was that either crises cannot occur (Edward C. Prescott, 1999), or that the odds of such events had either been reduced (Ben Bernanke, 2002) or eliminated (Robert E. Lucas, Jr., 2003) courtesy of the scientific understanding of the economy that mainstream theory had developed.
Read the full article at http://www.paecon.net/PAEReview/issue66/Keen66.pdf
By Ronan Burtenshaw
Taken from http://concreteradicality.wordpress.com/2014/07/31/argentinas-default-finance-decides-the-population-abides/
Today a vulture fund based in the Cayman Islands representing a tiny, super-wealthy élite has thrown an economy serving 43 million people into chaos.
In 2001, with the country in crisis, NML fund bought bonds from Argentina. Their strategy was to acquire defaulted sovereign debt issues at a very low price, only to later demand the totality of the payment via a judicial process. Their mark-up today would be 1,608%.
In the period since, between 2005 and 2010, over 92% of bondholders with this debt restructured. But the vulture funds held out. As Argentine Economy Minister Axel Kicillof said, “the vulture funds don’t negotiate: that’s what makes them vultures.”
The case went to the US Supreme Court, with Argentina arguing that a pari passu clause meant that they could not advantage certain bondholders over others. Unsurprisingly, because it is a den of financial interests, the US Supreme Court ruled in favour of NML and ordered Argentina to repay the full $1.3billion. This created a precedent that opened Argentina up to a further $15billion in debt repayments, which would have wiped out most of the state’s dollar reserves.
As the European Nordic and Green Left statement this week said, “The recent decision of the Supreme Court of the US not only creates difficulties – or perhaps makes it impossible – for Argentina to continue servicing its restructured debt, it also strikes at the stability of the international financial system in as much as it constitutes a precedent that can hinder other sovereign debt restructuring processes in the future. Because, if during a voluntary negotiation such as the one Argentina carried out, in which more than 92% of its creditors agreed to swap their defaulted debt (for new bonds with a considerable haircut), any creditor can demand and charge the total owed on that debt, what are the incentives to enter into a similar restructuring in the future?”
This forms part of an international régime, from the US to Europe and beyond, where the interests of private finance are placed above all others in the economic sphere. The refusal to create any sensible mechanisms for resolution or negotiation at an international level – let alone a collective action clause that might force holdout minorities to accept widely negotiated terms – is a symptom of the dictatorship of the markets over our societies. As was the case when Ireland was warned that “a bomb would go off in Dublin” if senior Anglo-Irish bondholders were not repaid. We are living in an era of gunboat democracy – where finance decides and the population abides.
There may soon be a challenge to this régime in Greece, where Syriza are favourites to win the next general election and promise to fight for a renegotiation of the EU-IMF memorandum and a restructuring of sovereign debt. There had been hope that the risk of contagion from a Greek unilateral default would force European Union policymakers into accepting a deal – but this Argentine situation is a bad omen. International financial interests, with the connivance of complicit states and transnational bodies, have threatened an entire region with a lost decade. They have done this for the sake of a principle, that the interests of private finance must come first. And for a sum of $1.3billion. Greece’s sovereign debt is around $480billion.
After the US Supreme Court’s decision Argentine President Cristina Kirchner made a speech discussing the state’s history with debts imposed by international finance and enforced by the west – it could be translated to most Latin American states. She said that debt had been “without a doubt the most powerful trap we had been in keeping us from growth, the development of Argentina, it created poverty, backwardness, homelessness, a lack of infrastructural development, investment in education, in science.” She detailed the cycles of debt crises which have plagued the country since the 1970s, finishing each with an explanation of how it led to the next and the words, “but that wasn’t the end”.
The states of peripheral Europe are now in a similar cycle. As Oscar Guardiola-Rivera remarked in 2011, Europe has colonised itself. These same processes of debt penury, austerity, financial crisis and forced under-development that Europe once imposed on Latin America and South-East Asia have, since 2008, returned closer to the core – to Greece, to Italy, to Spain, to Portugal, to Ireland.
There are examples in states like Ecuador of how to break free from this cycle, but it requires negotiation. By forcing a default international finance is now delivering a message to Latin America through Argentina: sovereignty will not be allowed. With the Greek situation lurking around the corner, the states of the European periphery should take note.
The most recent IDA Annual Report 2013 provides a number of valuable insights into the nature of FDI in Ireland. Where is it from, in what sectors is it, how much tax does these companies contribute, how much does the State subsidies each job, how much do the companies contribute to the national economy and much more. Some highlight stats below but the report is worth checking out.
The CSO’s latest figures show GDP is up 2.7% for the first quarter in 2014, compared to the last quarter of 2013, while GNP is up a mere 0.5%. GNP, the more accurate reflection of the Irish economy, shows the continued stagnation that reflects personal expenditure being down 0.1% and capital investment down a whopping 8.1% and Government expenditure down 2.1%.
But the bigger news is that the CSO from June on will include illegal black market activity, like drugs money, in GDP figures. This follows changes elsewhere in Europe as countries desperately seek to create the impression of a recovery and meet their EU imposed targets.
Is this really the recovery working people need? And do the State think they can con their way into meaningful growth? Of more importance, however, is that while GDO slowly picks up reflecting the profits of MNC’s and capital transfers in and out of the country, GNP remains poor.
In 1979 Margaret Thatcher was the first European prime minister to introduce the neo-liberal agenda. She was soon followed by Ronald Reagan in the United States, and the European Union formally adopted the neo-liberal ideology in the Maastricht Treaty in 1992.
The agenda emphasised the free-market monetarist policies espoused by right-wing think-tanks such as the Libertas in Ireland, the Cato Institute in America, the Adam Smith Institute in Britain, and the Copenhagen Institute in Denmark. These are all funded by millionaires to promote the interests of rich people. The Republican Party in the United States and the Tea Party (where the Taoiseach attended a fund-raising function during his visit for St Patrick’s Day) also support these policies.
Milton Friedman implemented these policies in Chile when the dictator Pinochet was in power, arguing that inflation is always linked with excessive monetary policies. To offset this he advocated cutting public expenditure and privatising public utilities.
These policies became known as the Washington Consensus in 1990, from the multilateral agencies based in Washington. Robert Gwynne, cited by Peadar Kirby in his book Introduction to Latin America(2003), described these objectives as follows:
|. . . trade liberalisation and easier foreign direct investment . . . Reduce direct government intervention in the economy through privatisation, introducing fiscal discipline, balanced budgets, and tax reform . . . Increase the significance of the market in the allocation of resources and make the private sector the main instrument of economic growth through deregulation, secure property rights and financial liberalisation.|
| The agenda advocates free trade, and the euro is an extension of free trade. But free trade, or the euro, gives access for transnationals from the larger states to the markets of the smaller states. For example, Lidl and Aldi are grabbing a growing share of the Irish grocery market, and they are doing the same throughout the euro area.
The underlying assumption of this economic ideology (an assertion that is more like a mantra than reality) is that the public sector is inefficient and the private sector (the market sector) is more efficient. It is argued by the proponents of these policies that the state sector should be reduced. Yet the state-controlled French railway system SNCF is far more efficient than the privatised British railway system.
With the reduction in the role of the state, more of the economy would be controlled by monopoly capital. Nowadays most branches of the economy are controlled by a small number of firms (oligopolies), which make excess profits for their rich shareholders by charging high prices. These firms do not compete on price, because it would reduce their profits and consumers would be the winner: they use advertising and other non-price competition to gain a larger share of the market. They act, to all intents and purposes, as monopolies.
This ideology was written into the Maastricht Treaty in the form of the “fiscal rules”:
1. The excessive government deficit (excess of government spending over revenue) should not exceed 3 per cent of gross domestic product (GDP).
2. Government debt should not exceed 60 per cent of GDP.
These rules were reinforced by a change in the German constitution that made it compulsory to balance the state budget. Germany got the other countries that use the euro to adopt the Fiscal Stability Treaty. Under these new rules
(1) the deficit has to be reduced to 0.5 per cent of structural GDP (i.e., the budget must be balanced);
(2) if the ratio of debt to GDP exceeds 60 per cent it must be reduced to 60 per cent over twenty years.
These rules were set up to protect the interests of investors who buy government bonds. These people are shareholders in banks that hold bonds—very wealthy people and hedge funds that manage the funds of wealthy people. The last thing the neo-liberals want is for a government in the euro zone to default.
Mario Draghi, president of the European Central Bank, formerly worked as an economist for Goldman Sachs. This is a bank that looks after the interests of wealthy people. Draghi is independent of national governments but is not independent of the ideology of his former employer.
Over time, these rules will reduce taxes and the role of government. The rich pay less tax so they will be better off, while the less well off, who use government services, will be worse off. This will cause a transfer from the poor to the rich.
The fiscal deficits, 2009–15
Following the worldwide recession that occurred in 2008, caused by the failure of an American bank, Lehman Brothers, all twelve countries that we are analysing had a fiscal deficit in 2009.
Fiscal deficits, 2009 and 2015 (forecast)
In a recession such as the one that began in 2008, output falls; then spending, incomes and employment fall. As a consequence, unemployment increases, so government spending on the unemployed increases, and tax revenue decreases. This increases the fiscal deficit.
Table 1: Debtor-countries
|Fiscal deficit as percentage of GDP, 2009||Forecast fiscal deficit as percentage of GDP, 2015||Change as percentage of GDP|
|Average population weights, 2012||–9%||–3.8%||5.2%|
|*The EU Commission has given Spain an extension to 2016 to meet its deficit target.
†Programme (1) Includes interest (about €2.7 billion) on the €64 billion bank debt foisted on Ireland by the Troika.
| The EU Commission forced these governments to reduce their deficit towards 3 per cent of GDP (output) by 2015, causing austerity. Ireland, Portugal and Greece were put into “bail-out” schemes, and the Troika (ECB, EU Commission and IMF) took over their budgets and cut the deficit year by year to reach 3 per cent. The other countries operated under country-specific recommendations made by the EU Commission.
The achievement of the 3 per cent ratio took precedence over any services provided by governments. This forced them to increase taxes. Expenditure on health, education and social welfare was cut. This reduced spending in the economies, reduced growth, and increased unemployment.
In Ireland’s case, tax increases and cuts in expenditure of $31 billion were taken out of the economy in budget cuts between July 2008 and 2014. The cuts in expenditure hit low and middle-income earners most, and the increases in taxes were regressive, again hitting those on low and middle incomes. The rich got away unscathed.
Each of the countries had a massive increase in unemployment and a substantial fall in their standard of living. All this was to keep the “markets”—the seriously rich people—happy.
Table 2: France
|Deficit as percentage of GDP, 2009||Forecast deficit as percentage of GDP, 2015||Change as percentage of GDP|
|*Revised according to information from EU Commission, March 2014.|
| France will have reduced its deficit by 4½ per cent of GDP by 2015. It will have to reduce government spending or increase taxes. Its deficit will have fallen nearly as much as the debtor-countries: 4.5 per cent, compared with 5.2 per cent between 2009 and 2015. This has a major effect (reduction) on growth and on unemployment (increase) over the period.
Half the creditor-countries—the Netherlands, Belgium, and Austria—had a deficit of more than 3 per cent in 2009; the rest were at or below 3 per cent. (Germany was at 3.1 per cent.) Yet the governments in most of these countries introduced “austerity” under the neo-liberal agenda of the EU Commission. The average drop in the deficit would be 2.6 per cent of GDP if the forecasts are correct. These governments, especially Germany, either cut spending or increased taxes when there was no need to do so; and Germany went so far as to amend its constitution to make it compulsory that it balance the state budget.
Table 3: Creditor-countries
|Deficit as percentage of GDP, 2009||Forecast deficit as percentage of GDP, 2015||Change|
|Average population weights, 2012||–3.6%||–1%||2.6%|
| The debtor-countries suffered twice as much austerity as the creditor-countries, because 5.2 per cent on average is being taken out of their economies, compared with 2.6 per cent in the creditor-countries. So Draghi intended that his medicine was mainly for the peripheral (debtor) countries; but it also affected the core (creditor) countries, because they had right-wing governments.
Growth in the euro area
The twelve countries of the euro area had two periods of recession between 2008 and 2013. The first was caused by the collapse of Lehman Brothers in 2008, when output in these countries fell by 4.4 per cent (Eurostat calculation).
The debtor-countries experienced a fall in output in most of the years between 2008 and 2013. Italy had a drop in output in four of the six years. Spain’s and Portugal’s experiences were similar.
Table 4: Annual change in output (GDP), debtor-countries
|Average population weights, 2012||0.6%||–4.4%||0.4%||–0.4%||–5.5%||–1.7%||–8.0%|
|Falls in GDP are highlighted.
*Growth in Ireland is measured in terms of gross domestic product (GDP), which includes the profits of transnational corporations. The size of GDP goes up and down as profits are moved into and through Ireland for tax purposes. This makes the GDP figures unreliable as a measure of Ireland’s output.
The French economy experienced only two years of falls in GDP and grew by 1.6 per cent over the period 2008–13. France’s experience was more like that of the creditor-countries, but there was slow growth in the years in which it had growth.
Table 5: Annual change in output (GDP), France
The creditor-countries only experienced on average a fall in GDP in one year,:2009. Germany and Austria had a fall only in 2009. Belgium and Luxembourg had a fall in two years: 2009 and 2012. The Netherlands and Finland had a fall in three years: 2009, 2012, and 2013.
Growth in output (percentage of GDP), creditor-countries
|Table 6: Annual change in output (GDP), creditor-countries|
|Average population weights, 2012||1.0%||–4.8%||3.3%||2.8%||0.3%||0.2%||2.7%|
|Average growth for debtor-countries||0.6%||–4.4%||0.4%||–0.4%||–5.5%||–1.7%||–8.0%|
Unemployment rate, debtor-countries
In table 7 the unemployment rates of the debtor-countries are shown. The average unemployment rate increased from 7.2 per cent to 18.9 per cent between 2007 and 2013.
Table 7: Unemployment rate, debtor-countries
|2007||2013||Youth unemployment rate,
fourth quarter 2012*
|Average rate population weights, 2012||7.2%||18.9%||44.9%|
Unemployment in France rose from 8.4 per cent in 2007 to 11 per cent in 2013, but youth unemployment in 2012 rose to 26.4 per cent in 2012. This increase in youth unemployment is a damning indictment of EU policies.
Table 8: unemployment rate, France
|2007||2013||Youth unemployment rate,
fourth quarter 2012
Average unemployment in the creditor-countries actually fell over the period. Average youth unemployment was 10 per cent; in Germany it was 7.9 per cent, and only Belgium, at 22 per cent, exceeded 20 per cent.
Table 9: Unemployment rate, creditor-countries
|Unemployment rate, 2007||Unemployment rate, 2013||Youth unemployment rate, fourth quarter 2012|
Table 10: Average rates of unemployment (using 2012 weights)
|Euro-area average weights (Eurostat)||7.6%||12.3%||27.2%|
Summary of unemployment data
Unemployment rates were around 7½ per cent in the twelve countries of the euro zone in 2007, but there was a massive divergence by 2012 and 2013. The average total unemployment rate in the debtor-countries was three times the rate in the creditor-countries in 2013, while youth unemployment in the debtor-countries was more than four times the rate in the creditor-countries. This is a scandal.
This article shows that ordinary people in the peripheral countries had to endure massive hardship in recent years. In Ireland there were cuts to government services, such as education, health, and social welfare, and increased taxes, such as the universal social charge, property tax, and water tax. Workers’ wages were cut throughout the periphery.
Driving the getaway is a report by a number of NGO’s on Ireland, taxation and development. Below is an extract and the full report in pdf.
Taxation is about far more than revenue-raising: it concerns power and impacts taxpayer behaviour. It is pivotal in enhancing accountability and participation in young states through the bargaining process between a government and its citizens. Very significantly, it often has unexpected consequences, and the tax system of one country can easily have an impact on economic or social behaviour in another. Since business is now international, it is important that taxes are designed not only with a domestic agenda in mind, but with a view to their consequences internationally, particularly for vulnerable economies in the global South.
The ability to collect tax is particularly important for Southern countries, for which it represents a far more sustainable solution to poverty than international aid. But Southern countries face particular challenges in this area. On a domestic level, there is the problem of how to tax a vast informal economy with little financial infrastructure. Southern taxing authorities struggle to collect revenue in the face of post-colonial attitudes resulting in poor tax compliance, relative tax complexity and poor taxpayer education, major gaps in their capacity, shifting tax structures often driven by IMF or World Bank lending, trade liberalisation, corruption and a deficient rule of law.
On an international level, tax challenges for Southern countries include capital flight, a lack of relative power in negotiations around foreign direct investment (FDI), tax competition, transfer pricing abuse by multinational firms, secrecy in some tax haven jurisdictions, and isolation through a thin network of tax treaties.
Mozambique was chosen for particular examination in Section 5 of this report because it is an Irish Aid priority country. The country has been through IMF-led tax reform, and illustrates many of the classic problems encountered by the taxing authorities of Southern countries. Suggested solutions to some of Mozambique’s difficulties may be taken from the experience of other African countries.
Ireland may pose an inadvertent threat to the tax capacity of Southern countries if its tax system is used by multinational firms as part of capital flight, or international tax evasion schemes. Ireland has attracted considerable foreign direct investment (FDI) through tax competition using a low rate of corporation tax, a wide network of double tax treaties and incentives for intellectual property to encourage multinational firms to locate in the country. Although Ireland has recently introduced new rules to counter transfer pricing abuse, these have significant weaknesses. There is a clear risk that without closing these gaps, our tax system can become a vehicle for complex tax avoidance schemes used by multinational firms to reduce their global tax liability. This is neither in the interests of countries which lose revenue to these firms, or in the interest of Ireland as a legitimate destination for FDI.
Read the full report, Driving the getaway
Excellent report by John Hillary on the recent US EU trade agreement which he argues is a charter to end democracy.
The Transatlantic Trade and Investment Partnership (TTIP) is a comprehensive free trade and investment treaty currently being negotiated – in secret – between the European Union and the USA. The intention to launch TTIP negotiations was first announced by President Barack Obama in his State of the Union address in February 2013, and the first round of negotiations took place between European Commission and US officials in July of the same year. The aim is to rush through the talks as swiftly as possible with no details entering the public domain, in the hope that they can be concluded before the peoples of Europe and the USA find out the true scale of the TTIP threat. Read the full report below.