Sunday, 28 June 2015

Greek Lessons


Here are some points to consider when sorting through the news stories about Greece.

The media coverage is naturally focused on day-to-day events. However, the key point to understand is that, long before the crisis broke in 2010-11, the Greek economy was unviable. It had for many years been dependent on grants from the EU, extensive credits and low interest rates. Before the 2008 worldwide financial implosion, these boosted Greek living standards. Post-2008, there was the reckoning, starting with much higher borrowing costs.

What had characterised Greece both before and after 2008 was a low level of tax revenues compared to state spending, but this was only another way in which its fundamental economic weakness was expressed. Greece had little to offer apart from shipping and tourism. But tourism had become more uncompetitive, while shipping was 'offshore', paying little tax. Along with other weak, usually southern European states, such as Portugal and Spain, but also Italy, Greece had found its competitive position undermined with the rise of cheap labour countries in Asia.

In 2010-11, the EU 'solution' was to lumber the Greek state with more debt so that it could pay off private bank creditors, mainly German and French banks. This was to avoid a reckoning in terms of writing off debts that could not be paid by adding to the debt pile which was now held to be held mainly by the Greek government. The political logic at that point was that the European banking system could not withstand taking more write offs when it was so weak, and the legions of policy-making geniuses had not yet managed to work out anything else.

A debt write off -  effectively 100bn euros or so - was then organised in 2012. Private creditors took a hit in a 'debt swap', being forced to restructure their 'assets' into loans at greatly subsidised interest rates. However, by that time, the Greek economy had collapsed under austerity measures imposed by creditors, so nothing improved and the ratio of debt to GDP continued to soar.

There followed a never-ending story of Greek-EU negotiations and subterfuge. By 2013, Syriza managed to convince itself, or at least had the political platform, that a much better deal was possible, both staying in the euro system and getting an end to austerity policies. After forming a government in January 2015, it did next to nothing to challenge the Greek oligarchs or deliver a reality check to the Greek middle class, its social base, and instead postured against Germany, the main creditor country, and annoyed all of its creditors. But, with their Ukraine policy falling apart, and with their policies in the Middle East and North Africa in a shambles, leading to many thousands of refugees trying to escape to Europe, the creditors had other things on their minds apart from endless meetings with recalcitrant Greek debtors.

So far, the Greek government has not yet defaulted on other official (government/IMF) creditors. But the European Central Bank (ECB) has extended many tens of billions of loans to the Greek government and given Greek banks another almost 100bn in emergency liquidity via the Greek central bank. On Tuesday there is also a Greek government payment due to the IMF, a default on which does not happen for a country that is meant to be one of the insider's club, yet there appear to be no funds to pay it.

The ECB may have today (Sunday) issued the coup de grace that the euro system is not otherwise able to deliver by refusing to increase its liquidity provision to Greek banks. So there will be a banking system closure in Greece on Monday, with no sign of when banks will be able to open again.

There is no legal mechanism for being kicked out of the euro, nor for a member leaving it, as far as I am aware. If anything, a euro member leaving might well threaten its membership of the wider EU. Yet, the ECB can stop doing business with one of its constituent parts, namely the Greek central bank. By stopping further funding of Greek's imploding banking system, the ECB, if it continues, will preside over the collapse of Greece's economy, forcing an exit from the euro system.

There are many economic details in dispute regarding the EU/IMF/ECB conditions to be agreed with Greece, but the creditor position at present is that the debtors have walked away from negotiations, so there is no more to discuss. One interesting angle is the question of taxes. Syriza's offer was to push the burden of adjustment onto corporate taxes rather than spending cuts, given that the latter would be focused on pensions, etc. Apart from any normal, reactionary bias in creditor demands, the inability of the Greek government to collect taxes must have been a factor in rejecting this alternative programme.

What happens in the next few days will signal again how far the 'independent' ECB is independent of the need to abide by its formerly sacrosanct rules in order to keep the euro political-economic system intact. A Greek exit from the euro is believed by many politicians to be less of a problem than it would have been in 2010-11. That is probably true, but it will nevertheless be a serious blow. One aim of Europe's bumbling ruling classes may have been to crush Syriza in order to undermine oppositional movements, such as Podemos in Spain. However, by showing that there is an exit door for euro members, even if it leads a lift shaft, this also shows that other countries may be pushed into it.

More broadly, the destruction of the Greek economy is a sign of what awaits other, previously privileged, countries that cannot make the grade in today's rapacious and imperialist world economy. If there is a lesson in the Syriza episode it is that a middle class-led movement that tries to restore the status quo ante inevitably fails.

Tony Norfield, 28 June 2015

Note: One of the first articles on this blog, 'Origins of the Greek Crisis', 24 June 2011, covered the background to recent events.



Friday, 12 June 2015

Making Things Does Not Make You Smile

A pervasive economic euphemism is the 'value chain'. This neatly glides over what is meant by 'value' and simply notes, as far as statistics allow, how much each part of the initial development, production and marketing of the overall cycle takes of the final selling price of the good that is sold. The overwhelming lesson is this: to use use fashionable parlance, absolutely worst thing you could do, OMG, is to produce anything! How could you be so dumb?!

What you need to do instead is to get poorly paid underlings to produce the goods. Then, assuming that you have any business sense, you take your cut from the branding, design or marketing of what the underlings have sweated over. If this simple lesson of modern international capitalist economics has escaped you, then let me present the 'Smiling Curve of Sam Shih', the founder of Acer, Taiwan's main IT company, as reproduced in an 8 June UNCTAD report:


As Mr Shih illustrates, if you want to add 'value', forget about manufacturing, ie actually making the product. I have not read the original document, but it probably does no more than note a material fact of his experience, rather than explain that the world economy is dominated by major monopolies and other companies that can use their market power to decide who benefits from the labour of humanity, and who works on behalf of whom.

The curve may be smiling, but billions of workers are not. Just consider: an idea, concept and brand design that cannot be marketed because nobody made it. This does not seem to cross the mind of those who draw the curves, even if their lines reflect imperial reality

Tony Norfield, 12 June 2015











Wednesday, 10 June 2015

History and Change

Modern humans originated some 200,000 years ago. Agricultural society began a little over 10,000 years ago, and brought the first forms of civilisation. Capitalism as a form of organising social production began some 300 years ago, but many people see capitalism as the ultimate, unchangeable form of society, even though it has been such a small portion of human existence. If today we consider that, because we have lived our whole lives under capitalism, this would continue forever, that would be equivalent to believing, from humanity’s social standpoint, that the last eleven days in the past year would also continue forever. By contrast, history shows that things change. Not necessarily as quickly, although John Reed’s book, Ten Days that Shook the World, on the Russian revolution, indicates that it could even be less.[1]
Tony Norfield, 10 June 2015


[1] The calculation has been changed from when this text was originally posted in order to make the point more clearly. Note that 300 years of capitalism divided by 10,000+ years of all forms of human civilisation is 3% at most.

Wednesday, 3 June 2015

FIFA and World Power

It is amusing to see the powerful fall down, but more interesting to see who pushed them over, especially when the ramifications highlight how the world works. Football (soccer, to some) is a big global business, but has developed with some odd features that are now being ironed out in a complex political game.

Sepp Blatter, head of FIFA, has sort of resigned, but not quite yet. The immediate cause of his almost-exit was the probe by the US Department of Justice into fraud and money transfers using the US payments system, with many FIFA officials in the frame, and with more revelations to come. FIFA officials should have been more aware of the risk of such a reaction because US agencies have a strong record of tracking down dollar-based fraud when it does not involve their own top financiers. They might have done better to transfer funds in euros, not US dollars.

Blatter's problem was his success in getting support for his shenanigans from countries outside the usual realm of power, since in the FIFA form of democracy there was one vote per FIFA member-country irrespective of economic size or population, which included a large number of often small states outside Europe and North America. You do not need to imagine how much this annoyed the established powers, since they have made their complaints clear. For example, the UK has been anti-FIFA since losing its bid to host the 2018 World Cup tournament, when its own attempts to influence the vote were outmanoeuvred.

The main mistake of the Blatter-FIFA set up looks like it was to award Qatar with the 2022 World Cup, given the absurdly high summer temperatures in the country and the unwillingness of the Europeans to reschedule the tournament because it would then clash with their league season. That decision put the voting mechanism under  more scrutiny. However, the real problem for FIFA in the current political climate was that the 2018 tournament was given to Russia. Can you imagine? A pariah country facing the barbs of all media news outlets in Europe and the US, and one that has had the cheek to argue that western policy in the Middle East has led to disaster, is soon to hold a major world sports tournament! The western powers did not care that much about Russia's 2014 Sochi Winter Olympics, but football is serious business watched by billions of people and attracting many billions of advertising and subscription revenues.

This anti-FIFA move could yet become embarrassing for the main imperialist powers. One point is that FIFA's inability to deal with corruption is partly related to the fact that national and regional football organisations, such as UEFA in Europe, have refused to be monitored by FIFA. Furthermore,  the investigations have uncovered corruption not only in South Africa's World Cup award in 2010. Today sees evidence from Charles Blazer, American former soccer administrator, that there was a similar game for the 1998 World Cup, which was hosted by France!

Football is not yet a big business in the US, and it probably has more room to investigate in this field where others fear to tread. The forthcoming news is liable to deliver more revelations, but the British and the other Europeans will use the turmoil to try and exert more influence over the international business of football.

Tony Norfield, 3 June 2015

Sunday, 10 May 2015

A Deeply Conservative Country


I had not expected any good news from the UK general election. So I was pleasantly surprised to find that the Labour apparatchik and Shadow Chancellor, Ed Balls, had lost his seat as an MP, that Nigel Farage, leader of UKIP, had failed to get his, and that I would probably in future be hearing much less from the weird Ed Miliband, now that he has resigned the Labour Party leadership. Small mercies in a result that only confirms that the UK is a deeply conservative country.
The election result unexpectedly gave the Conservative Party an outright, although small, overall majority, when previous opinion polls had only suggested it would have the largest number of seats in Parliament. The best summary of results for the UK, including breakdowns by region and constituency, the number of votes, changes in voting share, etc, can be found on the BBC website here.
In the wake of the biggest capitalist crisis for a generation or more, the share of votes for the two major political parties hardly changed. Compared to the previous general election in 2010, the share of the vote for the Conservative party went up a tiny bit; the Labour party’s vote went up by a tiny bit more. The big changes were elsewhere. The Liberal Democrat share of the total vote collapsed by 15.2 percentage points, offset by a rise in the UKIP share (up 9.5%), while the Scottish National Party got an extra 3.1% and the Green Party an extra 2.8% of the total vote.
The share of votes only counts as a measure of opinion. It does not lead to a seat in the House of Commons, which is determined by a first-past-the-post ballot in each constituency. So, for example, a winner with 20,000 votes gets the seat. If the runner up has 19,999 votes, then these votes go nowhere. A strictly proportional representation of votes in the 650 seats in the UK Parliament would mirror public opinion (assuming that voters fully agree with a party’s political programme). Comparing the seats implied by a PR ‘opinion’ with the actual seats gained, these are the results:

Share of vote
PR-implied seats
Actual seats
Conservative
36.9%
240
331
Labour
30.4%
198
232
UKIP
12.6%
82
1
Liberal Democrat
7.9%
51
8
SNP
4.7%
31
56
Green
3.8%
25
1
Others
3.7%
23
21
One can assign different scores on a spectrum of progressive to reactionary for each of these parties. But the overall picture remains depressing, although it is not surprising. In political terms, I consider half the UK electorate to be on a different planet, and the other half to be in a different solar system.

Tony Norfield, 10 May 2015

Wednesday, 29 April 2015

Imperialism and Social Democracy


This item is a response to comments made by 'Anonymous' on two of my blog articles earlier this month: Immigration and the Imperial Mentality, with a comment on 24 April, and The Dead Sea, with a comment on 27 April. I would prefer that people who comment use a name, but let that be. I would also prefer that the comments or questions had more substance, rather than simply recycling prejudices. But, since the prejudices raised are commonly held, I feel inclined to answer them, rather than to think they are from an Internet troll or a calculated wind up from someone who knew that they would make my blood boil.
I have reproduced each of the main comments in bold below, and then answered the points raised in the text below each one. My replies are brief, partly because I have other things to do and partly because the ill thought out nature of the comments does not deserve a more extensive response. The views of Anonymous reek of imperial prejudice. However, it is not the confident prejudice of the British establishment, but the no less sickening hypocrisy and prejudice of the British ‘labour movement᾿.
The latter is cloaked in a concern for the mass of people, but is really an assertion of the rights of imperialist country workers over those elsewhere. Notably, the comments from Anonymous have been raised on the question of immigration. The answer to this question determines whether you are on the side of the working class internationally, or whether you want special privileges for your ‘own’ working class, ones that you think will come from calling on ‘your’ state to implement the correct policies. This is the core of the argument presented by Anonymous, covered with the stinking slime of ‘Europe’ and ‘Western values’.
So, to begin …

1. “Should Europeans commit the last of their pension money, destroy their social democracy, extirpate their cultures, genetic identity, etc., to facilitate invasion of their countries? Would mass-suicide be a proper move, speeding the process up a few years?” 27 April 2015
a) Pension money. This comes from money invested in financial securities, usually with a return based on income gained from equities and bonds, but perhaps also from property, commodities, etc. This money is not simply workers’ and others’ savings, but savings that are directed into funds that earn revenues from worldwide investments, particularly in the funds run by the major powers. So, pension payments are based on the profits produced worldwide, rather than simply being a means of saving for retirement. Note also that many poor countries do not pay any pensions of significance, while most rich country pension funds have payment liabilities that greatly exceed the expected returns on their assets.
b) Social democracy. This is a form of politics that originated in Western Europe from the late 19th century, one that tried to reconcile the newly enfranchised working class masses with the capitalist system. It offered social reform as a palliative to the exigencies of the capitalist market that drove many into poverty. Particularly in Germany before 1914, it also offered a gradual, reform-based road to socialism, but everywhere it supported the state’s war on other states, mass slaughter and the oppression of Europe’s colonies. No political movement in the West today could in any sense be called social democratic; the mainstream parties all accept capitalism as a permanent fact of life. It is appropriate that even radical ones adopt ‘Keynesian’ views of managing the economy, as Keynes himself wanted to save capitalism.
c) Cultures. Europe? Personally, I prefer Indian and Middle Eastern mathematics to Roman numerals, and jazz and other forms of music (from Africa and the Caribbean) to Classical music. I really do not like Morris dancing. Everyone to his or her own taste.
d) Genetic identity. You should check this out more. Scientific evidence would suggest that everybody comes from Africa. In any case, what has genetics got to do with the development of society, which in its main forms has developed in the past ten thousand years?
e) Invasion of countries. This is a preposterous exaggeration of the scale of immigration. You would also do better to study European military invasions in the Americas, Africa and Asia to find real examples of how to ‘extirpate’ cultures.
f) Suicide. Everyone must make his or her own decision whether life is worth living. More important is the decision whether to try and understand what drives the world, rather than accepting first impressions or whatever the political climate imposes.

2. “Do you know how much wage suppression causes, extending capitalism by keeping profits at that sweet 12 percent/year it demands? Do you know how the accelerated the destruction of social services are, a combination of right-wing cuts and over extension from millions of illiterate, intolerant peasants? Do you know the hundreds of millions in remittances the immigrants send home, further eroding the domestic economy in an age of austerity?” 27 April 2015
a) Wage suppression. It is a mystery where you get your 12% (rate of) profit. In any case, there is always an attempt by capitalist employers to keep wages low. How have ‘millions of illiterate, intolerant peasants’ contributed to this? You also ignore the role of trade unions in colluding with management to split the workforce into insiders and outsiders, the latter being part-time, temporary workers, etc.
b) Destruction of social services. There has been little cut back in social services spending, at least so far in the UK. There will be significant cuts in future, and these are attempts by the ruling class to restore profitability, the lack of which has undermined the revenues from which these unproductive (for capitalism) expenditures can be funded. However, you want to blame immigration for putting pressure on social services, rather than capitalism for being increasingly unable to provide decent living standards. As for ‘right-wing cuts’, you ignore the role of the previous Labour Government in backing privatisation, school academies, etc. In any case, this raises a point about the origin of the social services. If you look, you will find that the 1945'ish origin was (i) promoted by the Liberals (Beveridge) and (ii) was planned under the subsequent Labour Government as being funded by exploitation of Britain's colonies. This was part of a ‘social contract’ between the British ruling class and the mass of people: in return for mass support for British imperialism, the state delivered some social welfare. The economics behind that game is over. But you moan about not getting your goods, while still clinging loyally to the capitalist state. The term reactionary fool comes to mind.
c) Illiterate, intolerant peasants. Is it so hard to meet the relatives of those who made the shirt you are wearing? Those who are more than 10 years behind our elevated standards on women’s rights? Those who often have a stronger sense of community than the British? Your European culture has been fuelled by the blood and oppression of countries that are the source of your fearsome peasants.
d) Remittances. Yes, I do know the scale of remittances. It is very small indeed compared to the other items in the balance of payments, on imports, exports, etc. Notably, you are more nationalist-minded, not to say racist, in these calculations than British and other national capitalists, who also take into account the benefits they get from the supply of cheap labour from immigrants. For example, since the 1950s, low-paid immigrants have increasingly staffed the NHS. Presumably, you would be opposed to higher wages in such jobs because that would only increase the remittances these foreigners could make. That would be consistent with your choice of nation before class.

3. “Have you ever traveled? If so, you know full well not one non-Western country is importing workers, much less to the point of total destruction of the home culture by ones that do not believe in tolerance or left politics.” 24 April 2015
a) Have you ever travelled? Yes.
b) Not one non-Western country is importing workers. Migration is affected by many things, wars, social disruption, natural disasters, people seeking a better life or job elsewhere. Countries have many different ways in which they regulate immigration, naturalisation of immigrants as citizens, etc. While economics is a key driver of migrant flows, with poorer people usually moving, or attempting to move, to richer countries, it is not a one-way street. It is simply wrong to say that non-Western (meaning poorer) countries do not import workers. There are about six million migrants from other countries in India. Brazil even has co-official languages (usually Italian or German) in cities where there is a large proportion of immigrants.
c) Total destruction of home culture, tolerance and left politics. I cannot tell you how much I miss bread and dripping, a day at the dogtrack, breeding pigeons, colour bars on jobs and housing and racist chanting at football matches, because I don't miss them. Tolerance is a function of relative comfort. ‘Left politics’ has been moribund for decades in rich countries, not least the UK. It tried to connect with the pro-imperial mentality of the masses in rich countries and was always delusional, relying on the state.

4. “There's nothing in Marxism that demands obliteration of one culture by importing unlimited amounts from another culture to offer a one-off wage suppression.” 24 April 2015
There is nothing in Marxism that calls upon the state to defend the privileges of one group of workers at the expense of another.

Tony Norfield, 29 April 2015

Wednesday, 22 April 2015

The Dead Sea

The Mediterranean is becoming the new Dead Sea. Dead, not because of a lack of fish, but because of an abundance of human corpses. Hundreds of refugees from the Middle East and Africa try to cross into western Europe every day on unseaworthy traffickers' boats and many of them drown: 1500 so far this year.

One irony of not being able to swim is that, if you drown, your body decomposes and gases inflate your stomach. This then makes you lighter than water. So, after failing to stay afloat alive after many hours in the cold sea, you end up being able to float, dead, and coloured a little more grey and blue than a European beach tourism brochure would want to have on its front page.

Italy and Malta have raised the alarm about refugees crossing the Mediterranean, and this week European ministers will decide what to do about it. But they have a problem, since European politics is at the centre of the trouble. The UK and France promoted the intervention in Libya to unseat Gaddafi; France has screwed up its colonies in Tunisia, Mali and Chad; Sudan, Kenya, Ethiopia and Somalia have been on the receiving end of many powers' interests; Syria has been undermined by the western powers, while Israel, a key force of instability in the Middle East, is persistently backed by the Europeans as well as by the US, something adding to the Palestinian contingent among the refugees.

The political trouble for Europe is exacerbated by a chronic economic crisis that means it is even harder to maintain the veneer of supporting 'human rights' and all the other verbiage. So, their policy will probably target the symptoms, ie the traffickers. The cause, their role in the oppression of the Middle East and Africa, will obviously not be considered.

Tony Norfield, 22 April 2015