In a document prepared for the 20-21 September 2014 meeting of the G20 group of finance ministers and central bank governors in Cairns, Australia, the IMF warned that global economic recovery from the 2008 crisis is precarious. Rising ‘geopolitical tensions’, excessive risk taking and the prospects of tighter monetary policy in the US pose new threats to what is already an unbalanced and weaker than expected recovery. The IMF pointed to lower growth rates in the developed capitalist and emerging economies, continuing high public and private debt and growing risks associated with low inflation despite the stimulative monetary policies in place for over five years. Escalating conflicts in Ukraine and the Middle East will further undermine prospects for the global economy. This is the context in which the growing economic crisis is reinforcing divisions within Europe. David Yaffe reports.
The ‘geopolitical tensions’ are not in any way separate from the global economic crisis that was precipitated by the imperialist banks in 2008, but are integral to it and a necessary component of it. The unending conflicts in the Middle East and more recently in Ukraine are concrete expressions of growing inter-imperialist rivalry over the spoils of a parasitic and decaying capitalist system. The US’s superpower status is being challenged as its failed and costly military interventions undermine both its geopolitical standing and its economic supremacy. The US-EU sponsored coup in Ukraine is an attempt to create a barrier between a newly assertive Russia and its principal trade partners in Europe, with the intention of ultimately breaking up the Russian Federation. The US actively pressurised Europe to impose punitive sanctions on Russia and the main European powers complied, urged on by Britain. The German government joined the offensive despite German business leaders pointing out that the US has much less to lose from sanctions than Germany. US companies account for 3.8% of Russia’s imports compared to the nearly 10% share of German companies. In addition Germany is very dependent on Russia’s Gazprom for its energy needs and is the single largest buyer of Russian natural gas. Russia responded with reciprocal sanctions, especially on agricultural goods, while it began establishing alternative trading partners. The immediate impact will be to exacerbate the long-term stagnation and chronic recession already engulfing the eurozone and particularly in the countries of southern Europe still deeply engulfed in a devastating economic and social crisis.1
Meanwhile austerity continues to devastate the lives of millions of working class people, while a small privileged minority in the dominant capitalist countries not only remains untouched by the financial crash but has continued to prosper throughout the six years of recession. According to the OECD, the number of long-term unemployed in the world’s major capitalist economies has increased by 85% since the financial crash in 2008. Almost 45 million people are without work in the OECD area (34 mainly developed capitalist economies), 11.9 million more than before the crisis. Over 16 million have been out of work for at least a year in the first quarter of 2014, compared to 8.7 million before the crisis. For millions more working class people, low-paid, insecure and temporary employment has become the predominant feature of their working lives. This development has led to a significant polarisation of political forces within those countries most affected by imposed austerity, giving rise to both mass popular resistance movements and right–wing neo-fascist reaction. In Scotland rejection of British ruling class imposed austerity was the driving force behind the remarkably dynamic ‘Yes’ campaign for Scottish independence.
Deepening crisis in the eurozone
In the second quarter of 2014 the eurozone’s recovery came to a halt. In the year to May 2014 eurozone prices grew by only 0.5%, well below the European Central Bank’s (ECB) target of just under 2%. This was the lowest level since Autumn 2009. Pressure built up on the ECB’s President Mario Draghi to take action against the growing threat of deflation. At the beginning of June the ECB became the first large central bank to cut its deposit rate below zero. The cut in the deposit rate from zero to -0.1% imposes a levy on banks’ ‘excess reserves’ parked at the ECB. It also cut its main refinancing rate from 0.25% to 0.15%. In addition the ECB unveiled a package of liquidity measures to encourage banks to lend to small and medium size businesses, allowing banks access of up to €400bn worth of cheap four-year loans. Short of full-scale quantitative easing (buying specified amounts of financial assets from commercial banks and other private institutions to increase liquidity) there is little more the ECB is able to do to halt what could turn into a dangerous deflationary spiral.
By July eurozone inflation had fallen to 0.4%. Eurozone GDP was stagnant with zero growth in the second quarter of 2014. Growth in Germany, the driving motor of the eurozone economy, contracted by 0.2%, as did that of Italy. French GDP was stagnant with no increase. Together the latter three countries make up two-thirds of eurozone GDP. The annual rate of growth in the eurozone fell from 0.9% in the first quarter to 0.7% in the second. The eurozone economy remains smaller than it was before the financial crisis in 2008. Joseph Stiglitz, the former chief economist of the World Bank, warns that the eurozone has begun to resemble Japan, which endured a decade-long struggle in the 1990s to eliminate deflation and stagnant economic growth.
Matters continue to deteriorate. In August the rate of inflation in the eurozone fell further to 0.3%. At the beginning of September Draghi surprised markets once again by cutting interest rates to another record low and pledging to buy hundreds of billions of euros of private sector bonds in a dramatic intervention to save the eurozone from economic stagnation. The main financing rate was further cut from 0.15% to 0.05% and the charge for banks parking excess reserves at the central bank increased to 0.2% from 0.1%. The euro has fallen over 5% against the dollar since the start of June when the ECB first cut its deposit rate to below zero.
The outlook for the eurozone is not promising. The escalating conflict with Russia is already having a seriously negative impact on eurozone economic growth. Divisions in the eurozone are beginning to widen. Germany has made it clear that it will not increase borrowing to boost public investment to aid a recovery in the eurozone. France has put off reaching its 3% deficit target for a further two years. Poland’s Finance Minister told the Financial Times (12 September 2014) that Europe should agree a fresh €700bn in spending over the next five years, warning that a continuation of austerity and loose monetary policy risks extending Europe’s decline for decades. This proposal will face strong opposition from Germany. Finally the ECB attempt to kick-start the stagnant eurozone economy got off to a very poor start when banks’ demand for the cheap four-year loans fell far short of expectations.
European Union and Britain
British Prime Minister David Cameron’s commitment in January 2013 to renegotiate the terms of Britain’s membership of the European Union (EU) and follow this with an in/out referendum on Britain’s membership in 2017 has backfired.2 Far from appeasing the eurosceptics in his party and outflanking the anti-EU United Kingdom Independence Party (UKIP), the eurosceptics have become ever more demanding and UKIP has strengthened its hand. Developments over this year show Cameron’s plan to reform the EU, and persuade British voters to stay in the EU, is in disarray.
In June Cameron was dealt a humiliating blow when his efforts to prevent Jean-Claude Juncker’s election as President of the European Commission (EC) were overwhelmingly defeated. The Prime Minister had warned that the choice of the veteran dealmaker and former Prime Minister of Luxembourg for the top European position could push Britain towards an EU exit. Angela Merkel, Germany’s Chancellor, admonished him for making ‘threats’. Cameron was left almost completely isolated as 26 of 28 countries in the EU endorsed Juncker’s election as head of the EC for the next five years.
In July, in yet another concession to his increasingly eurosceptic party, Cameron reshuffled his Cabinet in favour of those in the party wanting to reassert the sovereignty of Parliament over the European Court of Human Rights (ECtHR). He sacked three ministers who were resolutely opposed to the UK withdrawal from the European Convention on Human Rights, which the ECtHR enforces and which underpins English law. They included the Attorney General, Dominic Grieve. It was to little avail. At the end of August a leading Tory eurosceptic MP, Douglas Carswell, resigned from the Tory Party, defected to UKIP and triggered a by-election. Privately Cameron was told by hard line eurosceptics in his party that the Conservative Party will split after the 2015 General Election if he fails to renegotiate Britain’s EU membership terms to a common market-style trade deal (The Guardian 30 August 2014).
Cameron wants a less regulated (neo-liberal) Europe with protection of Britain’s rights in the single market as the eurozone bloc is developed and strengthened. Critical in this context is his determination to protect the parasitic and speculative activities of the City of London from European oversight and regulation. In this he will almost certainly fail. In January 2014 the European Court of Justice (ECJ) threw out Britain’s attempt to curb the power of the European Securities and Markets Authority to ban short selling. At the end of April Britain’s efforts to shield the City of London from EU rules suffered another blow when the ECJ rejected a UK legal challenge to eurozone plans for a tax on financial transactions. British banks are stepping up their opposition to the creation of EU finance directorate headed by an EU commissioner. Anthony Browne, head of the British Bankers’ Association says that such an arrangement could lead to regulation of the City’s interests in favour of the eurozone. Finally the City has recently expressed its concern about the loss of British influence in the European Commission with the number of British nationals employed in policy roles having fallen from 9.5% in 2004 to 5.3% in 2014, less than half the UK’s share of the EU population (Financial Times 4 August 2014).
With all these developments it is of little surprise that US banks are planning for a possible ‘Brexit’, Britain’s withdrawal from the EU, and are drawing up plans to move some London-based operations to Dublin. Most US and Asian banks choose to base their main European operations in the UK which gives them automatic access to all 28 countries in the EU. The UK hosts more than 250 foreign banks and last year the financial services industry, the largest net exporter of financial services in the world, generated a trade surplus of around $70bn. A third of that surplus came from trading with the EU. If Britain left the EU the City could end up as merely an offshore financial centre, leading to other European countries taking business away from the UK in what one executive from a US bank called ‘a competitive arms race’ (Financial Times 18 and 19 August 2014). Given the centrality of financial services to the UK economy this poses a serious threat to the British economy.
As we argued more than a year ago, Cameron gambled and lost. The day of reckoning is approaching. The day of decision for the British ruling class is coming ever closer. With Europe or with the United States? Whatever choice is forced on the ruling class, it is certain that any independent role for the City of London will be severely curtailed.
1. See James Petras ‘Obama Buggers Europe: Sanctions Deepen the Recession’ for useful statistics on these developments at petras.lahaine.org/?p=1999
2. See David Yaffe ‘Cameron fuels ruling class divisions on Europe’, FRFI 231 February/March 2013 tinyurl.com/bvb8m3h and ‘Tories self-destructing over Europe’, FRFI 233 June/July 2013 at tinyurl.com/ljrqo5q on our website.
Fight Racism! Fight Imperialism! 241 October/November 2014
Fight Racism! Fight Imperialism! 240 August/September 2014
Since passing the Immigration Act in May, state attacks on migrants have suffered a number of significant setbacks. Although limited, they demonstrate that resistance is possible.
In June the Home Office launched Operation Centurion, a high-profile campaign of immigration raids on businesses and homes. Documents leaked to the Anti-Raids Network exposed Home Office claims that the operation was ‘intelligence-led’ as nothing more than racial profiling: targets included ‘Vietnamese nail bars in the Manchester area’, Nigerian security guards in Sussex, and phone stalls in the North of Ireland. Networks of activists across Britain and the North of Ireland mobilised to warn as many as possible of those being targeted, and to inform people of their rights. Reports suggest the operation resulted in only 20 arrests, and the Home Office was unable to claim it as a victory.
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In July 2014, South Sudan’s elites ‘celebrated’ the third anniversary of the world’s newest nation. However, a civil war that began last December has displaced 1.5 million people (a third are children) out of a total population of over 9 million; a predicted famine as early as August 2014 looms which could affect 4 million people; nearly 400,000 refugees have fled to neighbouring countries; the UN states that 5 million people desperately need humanitarian assistance. There exists a scarcity of basic goods, hyperinflation, outbreaks of preventable diseases such as cholera, mass hunger and homelessness. Several of South Sudan’s largest towns are deserted with homes, churches, medical facilities (patients shot in their beds, wards burned down) and even UN bases attacked, looted or destroyed. There is nothing in this catastrophe for the majority of South Sudanese people to ‘celebrate’.
South Sudan seceded from Sudan in 2011, with Britain and the US orchestrating events from behind the scenes, as part of their balkanisation strategy for regime change in Sudan. The imperialists unwisely plan to divide Sudan into north, south and west (Darfur). Britain plans a long-term military presence in South Sudan which BP estimates holds sub-Saharan Africa’s third biggest oil reserves. The imperialists fear being squeezed out of opportunities for exploitation in the region and intended that South Sudan would be another client state in an East African reactionary bloc with Uganda, Kenya and Rwanda, geared up to help imperialism exploit strategic resources to the exclusion of China.
South Sudan’s crude oil production (98% of government revenue) is predicted to fall to 100,000 bpd (from 350,000 bpd in 2011) in a decade; production has already halved due to fighting. Additionally, problems which preceded independence persist with no solution in sight: since South Sudan gained autonomy from Sudan in 2005, there have been brutal clashes between the army (SPLA) and various militia groups (backed by powerful but sidelined military elites), as well as brutal violence between various ethnic communities, resulting in large-scale displacement and thousands of civilian deaths ignored by the ‘free press’. A third of oil revenues from 2005-2011 were embezzled. These crimes have never been satisfactorily investigated, nor have perpetrators been held to account by the South Sudanese authorities. Imperialist interests meant that these issues, and unresolved disputes with Sudan (border demarcation, oil-wealth sharing and the disputed Abyei region) were ignored in the rush for ‘independence’.
In January and May, the imperialists forced president Salva Kiir and his erstwhile deputy Riek Machar on pain of arrest to sign phony ceasefire or peace agreements (ignored by both sides), to maintain a facade of control rather than looking to solve chronic, deep-seated problems. Seemingly interminable ethnic strife, a divided army, poor socio-economic prospects (almost half the 2013/14 budget was used to pay back bank loans), and the loss of life means South Sudan is considered a failed state.
The imperialists’ plans are in tatters – Sudan has lost 80% of its oil and been forced to develop its agrarian economy. They hoped Sudan would collapse following the south’s secession; this hasn’t happened. Rather, with established infrastructure and an understanding of its internal politics, Sudan may now be South Sudan’s only hope. South Sudan’s corrupt elite and the imperialists are responsible for the country’s near collapse. Britain and the US used people’s genuine desires for freedom from poverty and oppression to balkanise the country. It’s time Britain and the US stopped interfering in the two Sudans’ internal affairs.
Fight Racism! Fight Imperialism! 240 August/September 2014
One hundred years ago, Austria declared war on Serbia on 28 July 1914. The following day the British Grand Fleet sailed to war stations in the North Sea. The slide to war was rapid; Russia mobilised its armed forces on 31 July, Germany and France mobilised on 1 August. Britain declared war on 4 August. The first imperialist world war had been long in preparation. Over 70 million military combatants fought. Leading the Allies were Britain, France, Russia, Italy, Japan, Serbia and, from 1917, the United States. Against them were the Central Powers including Germany, Austria-Hungary, the Ottoman Empire and Bulgaria. Nearly ten million combatants were killed, 21 million wounded and eight million went missing. Barbarism, the age of mass murder, was upon us. The same forces that drove humanity into the conflagration of 1914-18 drove us into the Second World War and impel humanity towards Armageddon today. Trevor Rayne reports.
At the 6th BRICS summit held on 15-16 July 2014 in Fortaleza, Brazil, the BRICS countries (Brazil, Russia, India, China and South Africa) announced the creation of a New Development Bank and multilateral reserve fund. This is a direct alternative to the dominance of the International Monetary Fund (IMF) and World Bank and represents a significant challenge to the US and EU. The new bank gives countries like Cuba, Venezuela, Ecuador and Bolivia, which are explicitly building and working towards socialism, access to trade, credit and investment without having to accept the dictates of US and EU imperialism.
Fight Racism! Fight Imperialism! 239 June/July 2014
On 22 April 2014 the Economist Intelligence Unit issued grim news: food security has fallen in almost 70% of countries since the beginning of the year, as the global price of grains, sugar and other farm commodities rose at their fastest pace in 18 months. Food prices have doubled on average since 2000 and keep some 842.3 million people – 12% of the world’s population – in a state of perpetual undernourishment. Misery for the many is good business for the few, and the prospect of easy money is encouraging a new wave of land grabs by British companies, with the enthusiastic support of Britain’s Department for International Development (DfID).
Conquering ‘the last frontier’
Containing more than half the world’s uncultivated but agriculturally suitable land, the World Bank described Africa as ‘the last frontier in global food and agricultural markets’. It has become a target for international land grabs, with at least 56m hectares of land snapped up by foreign investors since 2001 – an area almost the size of Kenya. Britain, as the fourth largest investor in African land, is leading in the process, leasing over 1.2m hectares in 16 African countries – the result of no fewer than 47 deals between British companies and foreign states since 2000. These figures, recording only publicised deals involving units of land above 200 hectares, understate Britain’s role in a notoriously secretive business; nor do they account for British investments in deals spearheaded by non-British investors, such as the palm oil plantations in Liberia acquired by the Malaysian conglomerate Sime Darby. Vast tracts of land are removed from African farmers and placed in the hands of British profiteers; in Sierra Leone, where almost one in three people is undernourished, at least 1.1m hectares of farmland have been converted into cash crop plantations controlled by foreign investors – over half of whom are British.
These investors have a firm ally in the British state, providing extensive political and financial support for agricultural projects in Africa. Between 2008 and 2011 Britain provided £7m in support for the Alliance for Green Revolution in Africa (AGRA), an initiative established by the Rockefeller and Bill and Melinda Gates foundations, seeking to integrate African farmers into global input supply chains by encouraging the use of high-yield fertilisers, pesticides and hybrid seeds produced by multinationals like DuPont and Monsanto. These inputs, which must be purchased annually, are financed by loans whose repayment depends on regular – and unsustainable – high yields; farmers are made reliant on monopoly suppliers and trapped in debt. The implications were summarised by Zitto Kabwe, chairman of the Tanzanian Parliament’s Public Accounts Committee, ‘By introducing this market, [small] farmers will have to depend on imported seeds... It will be like colonialism. Farmers will not be able to farm until they import, linking farmers to [the] vulnerability of international prices. Big companies will benefit. We should not allow that’.
Britain has provided £600m to the G8 New Alliance for Food Security and Nutrition, a ten-year partnership uniting G8 countries, African governments, the World Bank and multinational corporations behind investments of at least $3bn in selected African countries. To receive investments African governments must reform their policies on trade, land, seed and agrochemical market regulation to serve foreign capital; Ethiopia has accordingly committed to remove regulations forcing foreign investors to acquire business licences; Tanzania pledges to remove trade rules protecting local peasant farmers. African countries are also encouraged to ring-fence land for foreign investment; Malawi has pledged some 200,000 hectares of prime land by 2015, while Ghana aims to make 10,000 hectares available.
British state and corporate collaboration is blatant. In November 2013 International Development Secretary Justine Greening visited Tanzania with representatives from British firms – including Unilever, Diageo and SAB Miller – to discuss plans to ‘accelerate’ private agricultural investments. The collusion runs far deeper, with state funds indirectly channelled into British companies via the DfID, which has supported a Kenyan tea project benefiting Lipton and a barley-substitution project in Cameroon supporting Diageo. The Department is promoting land grabs in Tanzania via a £38m grant to the Big Results Now project, offering 350,000 hectares of land for commercial sugar cane and rice production to foreign investors; in Ethiopia it has pledged £795m to the World Bank’s Protection of Basic Services programme, financing the authorities involved in violently displacing 260,000 people occupying 375,000 hectares of land earmarked for foreign agri-business plantations in the Lower Omo Valley.
Resisting the robber barons
African governments have been keen to collaborate with British land-grabbers, but thousands displaced by them have not given up without a fight. In 2012 the British company Equatorial Palm Oil (EPO) expanded its plantations onto 200,000 hectares occupied by 7,000 members of the Jogbahn clan in Liberia. The clan was not consulted nor did it consent to this; responding to their refusal to leave the land, EPO security officers and the elite Liberian Police Support Unit were drafted in to assault and arrest clan members. The resistance did not stop, forcing President Ellen Johnson Sirleaf to intervene saying that EPO could not claim the land – an impressive feat in a country where more than 50% of land has been handed over to corporations. However, EPO is still preparing to clear the land.
Blaming the poor
Fuelling Britain’s rush for African land are expectations of growing profits stimulated by rising prices of agricultural outputs, principally food and biofuels – business profits will grow, driving more African farmers and peasants into poverty and hunger. Into this world of increasing hunger the British ruling class re-invokes the spectre of Parson Malthus. In July 2013 Penguin Books published 10 Billion, a doom-mongering paperback by Dr Stephen Emmott, ex-scientific adviser to the British Chancellor, predicting chaos as food supplies dwindle alongside a growing population; it became a bestseller, although rebuked by several scientists for poor research and misrepresented evidence. His words were echoed by Sir David Attenborough, who argued that the Ethiopian famine was caused by ‘too many people for a too little piece of land’. This is as ridiculous as it is racist; the world already produces enough food to feed 12 billion people – almost 1.7 times current global population. Yet, as prices soar, food remains out of the hands of the poorest: between 1991 and 2011 food production in sub-Saharan Africa grew by almost 20%, yet the number of undernourished people grew by 40%. The problem is not demographic, but economic, and demands a political solution – an end to the imperialist profiteers.
Fight Racism! Fight Imperialism! 237 February/March 2014
Continued instability in the Middle East and the putative threat from emerging powers have forced imperialism to increase its military presence in Africa, to ensure control of a continent rich in strategic raw materials. Britain’s Chief of the Defence Staff, General Sir Nicholas Houghton, says that after Afghanistan emphasis will ‘certainly’ shift to ‘conflict prevention in Africa’. France’s Finance Minister, Pierre Moscovici, said that ‘French companies...must go on the offensive and fight’ the presence of China. France remains a major player in economic and military terms, with recent interventions in several African states, as CHARLES CHINWEIZU reports.
Fight Racism! Fight Imperialism! 237 February/March 2014
Multinational corporations intend to enforce their will as law. Sovereign states and democratically elected legislatures will be little more than empty phrases if the US-European Union Transatlantic Trade and Investment Partnership (TTIP), and the Trans-Pacific Partnership (TPP) between the US and 11 other countries, are brought into force. These partnerships are vehicles through which multinational companies will remove health and safety protection, end environmental safeguards, abolish legislation providing minimum conditions for labour, scrap food safety laws, abandon efforts to slow climate change, stop campaigns against fracking and forbid attempts to rescue the National Health Service from the predations of private companies – indeed, sweep away any barrier to the unfettered pursuit of maximum profits. If you are unaware of these proposed partnerships that is deliberate because it is intended that the public remains ignorant until they are signed. TREVOR RAYNE reports.
Fight Racism! Fight Imperialism! 237 February/March 2014
Immediately after the preliminary growth figures for the last quarter of 2013 had been released, Tory Chancellor George Osborne smugly announced that ‘our long-term plan is delivering a brighter economic future.’ The British economy grew 1.9% in 2013, the fastest rate since 2007. The Tories were jubilant, impervious to the Labour Party’s fake concerns about a cost of living crisis hitting the vast majority of workers throughout the country. All the main political parties are steadfastly committed to neo-liberal austerity programmes to slash public spending and cut the public sector deficit. They differ only in the opportunist slant they give to their reactionary policies. DAVID YAFFE reports.
Fight Racism! Fight Imperialism! 236 December 2013/January 2014
Much as politicians try to put an optimistic gloss on the economic recovery from what is now called the Great Recession of 2007-08, they come up against the harsh reality of faltering growth and chronically weak demand, despite near zero interest rates in the dominant capitalist countries. This was driven home by none other than Larry Summers, former top economic adviser to US President Obama, in a speech to the IMF annual research conference on 8 November. There he spoke of the possibility of ‘secular stagnation’ in the major capitalist countries, a near permanent low growth deflationary crisis similar to that which Japan endured during the 1990s. David Yaffe reports.