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

Euro Labour Costs

The previous chart is calculated from some recently published Eurostat data on labour costs in the business sector. For several euro member countries, I have compared changes in their average hourly labour costs (wages, salaries, benefits, etc) to the average for the euro area as a whole. Eurostat does not seem to publish absolute levels of these costs, and only gives an index number (2008 = 100 for all countries). It might be that one country's costs have risen faster than the average, but still remain below average, or vice versa. Also, these numbers take no account of productivity developments and just show changes in an employer's hourly cost of hiring a worker. Despite these qualifications, the picture is still striking.

The chart is indexed to 100 at the start of 2001, thus showing the relative change in each country's labour costs compared to the average since then. This is not to argue that 2001 is some kind of equilibrium year when everything was fine, it just makes the longer-term development easier to see than Eurostat's index numbers with 2008 as 100.

Greece also joined the euro in 2001, and it stands out in the chart. From 2001 to 2005, Greek labour costs rose by around 15% more than the average, then, after falling back, rose again into early 2010. Thereafter, relative costs slumped along with the Greek economy. In absolute terms, the level of Greek labour costs jumped from an index number (2008 = 100) of 76.7 in early 2001 to a peak of 113.4 in early 2010. By the end of 2014, the index number had crashed to 84.3. Nominal wage costs in Greece are back to where they were in 2002, and lower still when adjusted for inflation. On the face of it, this should be encouraging for capitalist employers, but there is still barely any sign of economic recovery. Profitable production depends upon more than cheap labour.

Spain stands out too, as the euro member country with the most sustained rise in relative labour costs. From 2001 to 2010 these rose by some 15% more than the euro average. Mass unemployment in Spain has made the gap narrower since then, but, by the end of 2014, Spain's relative costs were still 10% higher than in 2001. In absolute terms, Spain's labour costs have flatlined in the past few years, rather than having fallen drastically, as in Greece. Spain's index number (2008 = 100) rose from 72.3 in 2001 to 110 in 2012, where it has since stayed.

France and Italy's labour costs have risen only a little faster than the average, by less than 5% in the period to end-2014. Germany's labour costs, however, rose less quickly than the average for a decade, and only began to rise a little faster from 2010.

Tony Norfield, 20 April 2015

Immigration and the Imperial Mentality

In the previous post about the UK Labour Party's attachment to British imperialism's nuclear weapons, I forgot to mention another aspect of their policy: on immigration. Especially in the wake of the crisis, there has been a growing shift of UK public opinion to blame immigration for all manner of social ills, from a lack of jobs for Brits, to poor availability of decent housing, to putting a strain on the health and welfare services. British political parties have adapted to this shift in opinion, rather than prompting it, something that is also true of UKIP, the most overtly anti-immigrant party that has gained significant support. Views on immigration are interesting because they reveal a lot about politics in the UK, if not also in other rich countries.

People who vote in elections choose the candidate they think will best represent their interests. Electoral turnouts may decline, as even the dumbest voter realises that nothing much will change and, in any case, the major parties have very similar policies. But this also means that the major political parties will respond, at least rhetorically, to how those interests are expressed. In Britain's case, the clear expression now is that immigration is a problem.

This is not racism, since the immigrants being opposed are mainly white Europeans, rather than black or Asian immigrants as in earlier decades. It is nationalism, the nationalism of an imperialist power that has an implicit deal with the local population to keep their privileges intact.

In the 1980s, the Conservative Party's attacks on trade unions undermined much of the institutional support for racial discrimination in Britain that was given by those unions. A capitalist policy of hiring whoever the boss wanted meant that colour did not enter the calculation as it did before: the boss did not now have to worry about the union objecting on behalf of the existing white workforce. It was this that led the UK to be probably the least racist European country, although that is not saying very much.

This development also meant that those from ethnic minorities could join in the national consensus to defend domestic privileges against outsiders. So even UKIP has non-white members and candidates. Also, despite the Labour Party traditionally getting most ethnic minority votes in the UK, it has had no hesitation in backing an anti-immigration policy, something that dates back more recently to Labour Prime Minister Gordon Brown's infamous 'British jobs for British workers' statement in 2007.[1]

It will not come as a surprise to readers that I will not be voting in the forthcoming UK election on 7 May. Still less, if that were possible, for a party that has issued the following special election mug:

The word 'scum' doesn't seem to be strong enough to describe these people, but it is apt for the ideological dirt or froth bubbling above a reactionary political development.

Tony Norfield, 11 April 2015

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[1] Notes on the background to this statement are set out in 'Gordon Brown's 'British jobs' pledge has caused controversy before', The Guardian, 30 January 2009.

Britannia Needs a Trident

The UK general election campaign has the virtue of being quite short. In other respects, it is an exercise that induces nausea. My sick feeling comes from the recognition that the campaigns of the political parties involved reflect the concerns of the electorate. Not what the parties think are these concerns, but what are in fact the main topics on the mind of the voting masses, as revealed in numerous opinion surveys. Common themes are immigration, the National Health Service and relationships with Europe. But this makes the latest campaign political 'issue', Trident, something of a surprise.

Trident is possibly the biggest ever UK military spending programme, with a lifetime cost of close to £100bn. But it gets far from proportional attention or debate, whereas the ability of the health service to manage the costs of cosmetic surgery or comments on the latest tattoo fad would fill many pages. Instead, the major UK political parties take for granted as, implicitly, does the UK population, that being able to nuke other countries with submarine-launched missiles is an important sign that Britain is in the Premier League of world nations. After all, countries like Iran are not even allowed to join the club.

Michael Fallon, the Conservative defence secretary, saw fit to impugn the imperial loyalty of Labour leader Ed Miliband on the question of Trident. He claimed that Miliband would dare to give up this fiendish device in a deal with the Scottish National Party, who are using Scottish nuclear bases as a bargaining chip in their claim for more subsidy from the London-based authorities. This is how the Labour leader reacted:

"National security is too important to play politics with. I will never compromise on national security. I will never negotiate away our national security.

"The Conservative Party can throw what they like at me, but I'm going to concentrate on what matters to the British people.

"On the question of four boats [submarines] or three boats, we will be guided by the experts. The experts say four boats. It's right to have a review."

Imperial status matters to the British people. Despite Miliband being the personification of incongruity, even he understands that. It is probably also indicated by Labour's opinion polls.

Tony Norfield, 9 April 2015

Jack Straw, Social Hero

I would not normally give recognition to someone who has a record of being a war criminal and who, in the usual manner of things these days, is responsible for the deaths of hundreds of thousands, if not more, but has not even been charged, let alone jailed. However, recent revelations lead me to make an exception in the case of a UK Member of Parliament, Jack Straw.

The former Labour Party foreign secretary has proudly proclaimed the importance of social relationships that give meaning, and value, to the role that individuals can play in the world. In these atomised times of extreme anomie, Straw has explained that he can earn £5,000 per day from companies hiring him, owing to his extensive contacts, experience and the advice he can give to them. Surely, this is a clear affirmation of the importance of social production!? No individual can produce anything like £5,000 alone per day.

Tony Norfield, 26 February 2015

Body Language: Germany, ECB & Greece

A picture paints a thousand words. Here are two pictures, and not many words, covering two events.

One is of the European Central Bank's Quantitative Easing programme, opposed by Germany, depicting the Italian head of the central bank, Mario Draghi (left), and Germany's finance minister, Wolfgang Schäuble (right). The second is of the new Greek finance minister, Yanis Varoufakis (right) with his German counterpart (left), after not even agreeing to disagree on Greece's proposals for managing its debt burden.
 

 Tony Norfield, 5 February 2015

Europe Gets Even More QuEasy

Today the European Central Bank did what financial markets had expected, after lots of leaking of the policy moves. They announced they would buy securities in the asset markets, at a rate a little higher than had been expected of €60 billion per month, from March 2015. The policy will continue until inflation looks like getting closer to 2%, which, with the slump in energy prices, will be a while yet. In all likelihood, this extra asset buying (there has been some before) will amount to a bit over €1 trillion and last until September 2016, maybe longer. For comparison's sake, the new policy is around 10% of euro area GDP, compared to the US and UK policies of 'quantitative easing' that have amounted to more than 20% of GDP.

This policy move is the latest in a series that indicate there is no way out of the crisis. How can anyone believe that this policy, essentially making government bonds have even lower yields, can do anything for the economy when 10-year government borrowing costs were already less than 1% in Germany and France and less than 2% in Italy and Spain, the euro area's biggest economies?

The central bank's notion is that this will feed into private sector borrowing costs being lower, but there are some difficulties here. One is that there is very little demand to borrow to invest, given the dire economic outlook; the other is that banks would not to lend at anything like the sub-1% or 2% numbers to private investors, and the level of interest rates is not the problem. The problem is that there is no profitable avenue for large-scale capital investment, or any investment that does not depend upon government subsidy, tax dodging or some form of financial trickery. Even the countries that claim they have done better than the euro average - especially the US, but also the UK and Switzerland - are now faced with higher currency values against the ones that are under the market's cosh. Last week, the Swiss National Bank's made a dramatic move to abandon its 3-year attempt to stabilise its currency against the euro. This was done largely in anticipation of this week's action by the ECB and so far the euro's value has fallen 18% against the Swiss franc. Unsurprisingly, the euro fell another 1-2% today.

The ECB made a concession to German worries about the new policy. They said that 80% of the risk of the new purchases would be borne by national central banks, because central banks in the euro area might buy rubbish and face a loss. In its press releases today, they did not explain who would buy what, or how much. Because the scale of the buying, if it is not directed, would evidently be concentrated on the better risks - Germany, especially - a proviso was included: only up to one-third of a country's outstanding debt could be bought in this way, and the debt had to have a maturity of 2-30 years. Germany has around €1.1 trillion of debt outstanding, with less than this in the 2-30 maturity range. So these, the 'safest assets', will not be able to use up more than about a third of the new programme. German government securities out to a maturity of 5 years also have a yield that is zero or negative. So, presumably, this is good news for the government securities of France, Italy and Spain, the other countries with large bond markets.

The ECB's hope is that the lower yields will force investors to take on more economy-boosting risks. Instead, the likelihood is that there will be a continued reliance by capitalists on 'making money' through financial investment, something that further stretches the gap between value creation and financial accounting. On occasion, that gap is narrowed by a slump of financial market prices for bonds and/or equities, but the ECB has signalled that it will gamble for a while longer on trying to push the gap still wider.

Tony Norfield, 22 January 2015