What’s Left?

International Policy Digest

The public suicide of 77-year-old pharmacist Demitris Christoulas a short distance from the parliament building in Athens and the outpouring of grief and anger reveal the trauma and desperation in Greek society in the midst of an economic crisis. In a handwritten note before he shot himself in the head, Christoulas complained that the government had made it impossible for him to survive on the pension he had paid into for 35 years. The note on his body said, “I find no other solution than a dignified end before I start searching through the trash for food.”

To get a rescue package for its economy and to keep its place in the euro zone, the Greek government has slashed wages and retirement pensions by as much as 25 percent. With the unemployment rate exceeding 20 percent, Greece faces a national ordeal. Last year, the government admitted that suicides had risen by 40 percent over the previous two years.

A day before Christoulas ended his life, an Italian woman of 78 in Sicily had jumped from the balcony of her third-floor apartment. Her monthly pension had been cut from 800 to 600 euros and she could take no more. Her son said, “The government is making us all poor, apart from the wealthy, who they don’t touch, in contrast with us workers and small businessmen who are struggling with heavy debts.”

A week before, a businessman tried to commit suicide by setting himself alight outside a tax office. He had lost his appeal against a claim of unpaid tax. And a 27-year-old construction worker of Moroccan descent set himself on fire because he had not been paid wages for four months.

Thus an alarming trend, first seen among India’s debt-ridden farmers in the 1990s, has spread to the European Union, where citizens have begun to end their lives because of crushing poverty and utter hopelessness. There is a feeling that rich will become richer at the expense of poor, that governments will either side with the wealthy, or be impotent in the face of powerful institutions determined to force economic reengineering on nations that will bring the greatest pain to the greatest number of people.

The age-old social contract between the state and its citizens is in an unprecedented crisis. Philosopher Jean Jacques Rousseau implied in his eighteenth-century work A Discourse On Inequality that natural inequality, meaning disparity between human strength and weakness, is established by nature. But moral inequality is based on a kind of convention that is established, or at least authorized, by the consent of men. Today, the system of privileges, which some enjoy to the prejudice of others, is fighting for legitimacy. Those who are privileged are “more rich, more honored, more powerful and in a position to extract obedience.”

Human evolution has been an epic struggle against moral inequality, which inevitably leads to accumulation of wealth and power and abuse of both. That monumental struggle is at a crucial juncture. On one end are forces of unrestrained capitalism that have been in the ascendancy since the collapse of communism. On the other, expressions of mass opposition in the form of the Arab awakening and the occupy movements in the American and European continents.

People’s movements are usurped by the very forces they were supposed to fight. The prospect looks more bleak and bloody. To pessimists, the contest between the corporate interests, international institutions and ruling elites on one hand and the citizens on the other is increasingly one-sided.

The feeling of disenfranchisement has spread to the north. Modern capitalism has created conditions not unlike those found under communism, which allowed party bosses and bureaucrats to control the population. Democratic centralism, sanctified by Lenin as “freedom for discussion, unity of action” at the Tenth Party Congress in 1933 may look obsolete a quarter century after Soviet communism collapsed. But corporate businesses and international financial institutions, working in harmony with politicians and other members of the ruling elites using state instruments, have gained unprecedented control over vast numbers of citizens today.

The pyramid of power is intact. Social democrats once provided an alternative with a conscience to the extreme rightwing monetarism. But they have all but surrendered to the neo-capitalist theory based only on growth and the idea that the one and only social responsibility of business is to make profit. Political labels of Left and Right have become meaningless. And autocratic instincts of capitalism of today mirror those of communism of the days gone by.

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On Capitalism and Responsibility

Journal of Foreign Relations

A few days before the annual gathering of business and political elites at the World Economic Forum at Davos, the British prime minister David Cameron set out his vision of capitalism that is popular and responsible. At a time of acute crisis, Cameron put up a staunch defense of capitalism. He asserted his belief that open markets and free enterprise were the best imaginable force for improving human wealth and happiness. He described them as the engine of progress to lift people out of poverty and give them opportunity. “When open markets work properly,” he said, “they create morality, because there is something for something.”

Can today’s capitalism be responsible? Can it be popular in the sense that people in great numbers embrace it and benefit in a fair way? Distinguished British Marxist historian Eric Hobsbawm does not think so. In a sharp critique, Hobsbawm made the point that capitalism as practiced in the last 40 years was all about growth and profit and not much else.

The “trickle-down theory” associated with free enterprise and open markets has failed. We have again entered an era of mass unemployment, poverty, malnutrition and disease, and wars. The root cause of inequalities lies in the fact that the powerful in society have engineered systems that suck most of the wealth up rather than allow it to trickle down. Capitalism has become a distorted and twisted version of Adam Smith’s original idea.

Technological advances, particularly since the 1970s, have massively and rapidly altered the capitalist system in one crucial respect. As Hobsbawm suggested, computers and robots have created a large surplus of people around the globe. And capitalism, which is about growth, profit and speed of production, is unable and unwilling to deal with the surplus of humans.

Agriculture, automobile and shipbuilding industries once employed workers in their millions or more. Today, they employ a tiny proportion of the population. Feudalism, which preceded modern capitalism, and communism, which competed with it, engaged many more people. Communism failed because, despite all its idealism, it was conservative, nationalistic and coercive. The capitalist system suffers from the same type of orthodoxy today. It is polluted by narrow individualism and nationalism.

In Britain, with business closures and job cuts in the private and public sectors, three million unemployed and many more under-employed or simply staying home, Prime Minister David Cameron’s message to people is, “Don’t complain about welfare cuts, go and find work.”

Profit-driven manufacturing practices and outsourcing have brought about a collapse of the job market. To tell vulnerable people to “go and find work” is a contradiction in itself. It is a serious dereliction of responsibility by politicians who are viewed by many to have contributed to the present crisis.

Once fertile landscape of capitalism, the United States and Europe, is barren. The race for control of energy resources is increasingly desperate, affecting foes and friends alike. The new cold war around Iran and the Persian Gulf has escalated to a point where China, India and Russia, three main Eastern powers, are drawn into open confrontation with America and the European Union.

The Eastern powers are refusing to obey the Western sanctions regime against Iran, driven by U.S. law and outside the United Nations. Washington’s offer to compensate the Iranian supplies lost with extra crude from Saudi Arabia and other U.S. allies will inevitably give the United States more leverage on energy supplies to China and India. These countries find it unacceptable.

The world’s only superpower is no longer credible if it cannot force others to follow its writ. But that scenario is before us, because capitalism has become irrational and sick. It is looking to transfer the cost of securing its own interests to others who are not prepared to accept that cost. In a candid admission, the Chinese ambassador in Britain, Liu Xiaoming, said that his government had to think of nearly half of China’s 1.3 billion population living in the countryside, and more than 150 million people earning as little as a dollar a day.

Like China’s overall growth in percentage terms, India’s growth, too, is impressive. The proportion of Indians living below the poverty line has dropped from about 60 to 40 percent in two decades. But the story it tells is partial. The latest available World Bank data shows nearly half a billion Indians living below the international poverty line of 1.25 dollars per day, and their number is not falling. Half of the children are underweight and 45 percent under the age of three suffer from malnutrition.

Inequalities have worsened alarmingly while corporate predators like Wal-Mart make an aggressive push into China and India. The gap between India’s richest and poorest states is nearly three-and-a-half times. As a result of government policies, there have been dramatic rises in the prices of hybrid seeds and fertilizers. In a country where 60 percent of the population is directly or indirectly dependent on agriculture, more than 200000 farmers in debt have committed suicide in the last 15 years. And the number continues to rise.

The India government’s recent move that would have given unprecedented access to mega retail houses like Wal-Mart to the middle-class market, amid widely feared consequences for small farmers and merchants, had to be put off, at least temporarily, following a huge national outcry.

In their anxiety to move India from the Soviet-style economic model to the U.S. model, and haste to transform the country into a superpower, successive governments in Delhi have been tempted to go to very significant lengths. But the capitalist model has become distorted and twisted. Having wreaked havoc at home, free-market capitalism seeks to penetrate societies where many more vulnerable people need greater protection. Only governments acting responsibly can provide that safeguard.

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How Capitalism Flopped

CounterPunch, November 7, 2011

In the struggle against global laissez faire capitalism that has brought the current economic collapse, protesters won an important victory last week in Britain, while stalemate continued in Greece. The alliance between the church, the main financial district called the City of London and Mayor Boris Johnson against the Occupy London protest crumbled. They had threatened legal action to remove peaceful demonstrators occupying an area near the London Stock Exchange for several weeks.

Legal moves against the protesters might lead to police action and violence. In particular, the readiness of St Paul’s Cathedral, the seat of the Bishop of London, to go to High Court split the church. Senior priests began to resign, signaling a crisis for the British establishment. Facing a growing sense of disquiet over possible use of force to remove peaceful demonstrators, the Corporation of London and St Paul’s Cathedral dropped the threat of immediate legal action.

In Greece, Prime Minister George Papandreou threw down the gauntlet to the two most powerful member-states of the European Union––Germany and France. To salvage the Greek economy and the European currency, they had agreed to finance a huge rescue plan, involving the International Monetary Fund and other sources, only days before. In the face of widespread demonstrations against draconian cuts in wages and public services, and rumors of a possible military coup, the Greek prime minister announced a referendum on the European Union rescue package.

Initially, the Greek cabinet gave its backing to the referendum plan, but the leaders of other EU member-states were furious. Deep political splits began to appear in Greece’s body politic. Germany and France have a lot to lose if Greece should default on its massive debt. Any government in Athens must have the people’s mandate to implement draconian austerity measures. Already, Greek people have started to take matters in own their hands.

Timing was of essence for Prime Minister Papandreou. First he agreed on a mega rescue deal with other European partners. When such a deal looked certain, he returned home and announced his referendum plan. European leaders, opposition politicians in Greece, even in his own Socialist Party, were surprised and angry. What might have been a straightforward move to secure a people’s mandate, if the timing was right, seemed to be an opportunistic attempt to save his government.

Chancellor Angela Merkel of Germany, leading paymaster of the euro bailout package, bluntly told Papandreou to accept the rescue deal with all conditions attached––or get out. Such warnings were bound to cause widespread offense in Greece, not least because the country had been under German occupation during the Second War. At the G20 summit in the French Mediterranean city of Cannes, European leaders waited to welcome the Chinese leader, Hu Jintao, hoping that China would contribute to the euro bailout.

Hu’s response: “To resolve the eurozone’s debt crisis, Europe still needs to rely on itself.” The Chinese are shrewd investors.

How did we get to this point? The question is posed frequently, though rarely answered truthfully.

The current globalization phase, beginning at the end of the Cold War around 1990, extended the markets across state boundaries. The movement of money, goods and services on a massive scale across national boundaries required regulations, but they also had to be relaxed in ways not seen before, to facilitate the ease of transfer. The Nobel Prize winning Columbia University economist Joseph Stiglitz points out that the ‘driver’ behind this phase of globalization is corporate interests.

Many transnational corporations are bigger than most national economies. Powerful corporations export not only goods and services, but also a certain culture of borrowing, cheap labor and money. Corporate interests are fundamentally linked to consumption, for profits are driven by consumption.

Corporate investments have flown to destinations of cheap labor and weak unions––China and Southeast Asia, India, Turkey, Southern European countries and South America. Factories in the United States and Western Europe have closed, new plants have spread in Asia and South America. Acceleration in this phenomenon in the last two decades has resulted in massive job losses in the industrialized world. Most products bought by Western consumers now come from the emerging economies.

Corporate profits have steadily grown, but the overall purchasing power of Western consumers has declined to alarming levels, caused by rising unemployment and shrinking incomes of those still in work. Government revenues, too, have been declining in the West, which has demonstrated a propensity to spend enormous sums of money on wars abroad and to cut public services at home.

For too long, consumers and governments tried to maintain the status quo by borrowing money at artificially low interest rates and cheap goods manufactured abroad. Loans secured on the real state to finance the lifestyle in the West sent property prices sky high. The crash had to come.

The case of the Greek tragedy is stark, but Greece is not alone. For a long time, its people have not been paying taxes they should have been paying. The country has been borrowing to maintain living standards, pay wages of government employees, to hold events like the Athens Olympics in 2004. The party had to be over one day–and that day has come. Less than a quarter century after long celebrations of victory over communism began in the West, capitalism has flopped.

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