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
The craving for money yields fantastic devices invented by the best minds capitalism can hire. What is one to make of this: if you earn Britain’s average annual income of £26,500 you will pay the basic rate of 20% income tax, but if your income is £6bn you can get away with less than 1% tax, and it’s all perfectly legal? Tax avoidance, money laundering, rigging money markets – these are the chosen means of enhancing profits used by many of Britain’s biggest companies. Receive child tax credits that are later ruled to have been mistakenly paid and you are relentlessly pursued for every penny, even into the courts, by Her Majesty’s Revenue and Customs; make the most minor infraction of the Job Centre’s commands and you are sanctioned and denied benefits; head a company with a household name, shift fortunes abroad, out of the government’s reach, and you are knighted for services to the country. Trevor Rayne reports.
This November The Guardian published the findings of over 80 journalists in 26 countries working with the International Consortium of Investigative Journalists. They examined 28,000 pages of leaked tax agreements and returns for over 1,000 companies. Most of the documents were Advance Tax Agreements, known as comfort letters, arranged by Britain’s biggest accounting firm PricewaterhouseCoopers (PwC) with Luxembourg’s tax authorities. They are tax avoidance schemes organised for the likes of Ikea, Dyson, Amazon, Pepsi, Heinz, Vodafone, Fiat and so on. Only a third of the documents examined mentioned the sums of money to be moved through Luxembourg but these amounted to $215bn between 2002 and 2010 for PwC clients alone. Companies pay tax rates of 1% on profits shuffled into Luxembourg, although Luxembourg’s official corporation tax is 29.2%.
The big four accountancy firms are PwC, KPMG, Deloitte and Ernst and Young. Together in 2013 they employed 750,000 and made £74bn. Globally PwC employed 195,400 people and made £139,153 per employee. These firms audit the books for the giant multinationals and banks; they sit at the centre of finance capital and entwine governments and political parties in their gilded webs. A PwC spokesperson, responding to the findings, said PwC advice was ‘given in accordance with applicable local, European and international tax laws and agreements and is guided by the PwC code of conduct.’ These parasites drafted the laws!
British Prime Minister Cameron and Chancellor Osborne say that they will stop the multinationals avoiding taxes. This is for public consumption only; they say something quite different in private and act accordingly. In 2012 Osborne reduced anti-tax avoidance laws aimed at multinational companies and their overseas subsidiaries. For the benefit of companies set up in Luxembourg, Osborne reduced taxes on their profits to no more than 5% (The Guardian 5 November 2014). The intention was to attract multinational companies to Britain, where tax avoidance schemes, such as those practised in Luxembourg, are acceptable. The multinationals then establish subsidiaries abroad, ‘shell companies’, abroad through which to transfer their profits.
It is estimated that up to $1trillion is being taken out of underdeveloped countries every year by a network of corrupt activities employing anonymous shell companies. ‘A World Bank report in 2011, found that 70% of the biggest corruption cases between 1980 and 2010 involved anonymous shell companies. The US and UK were among the jurisdictions most frequently used to incorporate legal entities that hold proceeds of corruption,’ (Financial Times 17 November 2014). At their November meeting in Brisbane, the G20 leaders declared, ‘We endorse the 2015-16 G20 anti-corruption action plan’ to improve transparency against corporate secrecy. Should any of its readers fret about the stated intentions the Financial Times offers reassurance, ‘But doubts remain over the willingness of politicians to undertake effective action. Only a handful of governments have so far acted on similar commitments made more than a decade ago to tighten the rules against money laundering.’
‘A magical fairyland’
Luxembourg is smaller than Kent and has a population of 543,202 people. For every police officer in Luxembourg there are four accountants; they have an awful lot of money to count, some $4 trillion is invested there! Harvard law professor Stephen Shay, testifying to the US Senate on tax avoidance mechanisms, described the Grand Duchy as being ‘like a magical fairyland’. In 2012 bank assets in Luxembourg amounted to 1,725% of its Gross Domestic Product, compared to 549% in Britain and 284% in Germany. A magical world indeed where over 1,600 companies share just one address, 5, rue Guillaume, but then the companies may amount to little more than a brass plate.
Ikea provides an example of the conjuring tricks that PwC and Luxembourg perform. Inter Ikea, based in the Netherlands Antilles, lent up to €6bn to Inter Ikea Finance in Luxembourg. This subsidiary then transferred the money to Ikea’s branch in Switzerland. The Swiss branch lent the money to Ikea group companies elsewhere. Interest received from the group companies went back to the Swiss branch where it was taxed at very low rates. The money that passed through Luxembourg was taxed at 0.03% for each 1bn euro sent on to Switzerland and once the fund exceeded 6bn euro the tax would fall to 0.016%, all ‘in compliance with current tax legislation’, announced a Luxembourg tax official.
Dyson is another company that perfected a sleight of hand to profitable effect by conjuring up different identities in Malta, the Isle of Man and Luxembourg. £300m worth of loans would be pumped from abroad to Dyson James Limited in Britain. Money paid on the loans would go to Dyson’s Luxembourg entity Blue Blade. As costs these payments would be tax deductible. Blue Blade paid under 1% corporation tax in Luxembourg; it could demonstrate that it had borrowed money from the Isle of Man subsidiary and this would be registered as a cost for tax deduction purposes, but the money from the Isle of Man was interest free, there was no cost! Magic it is when profits resurface as costs, and the profits just got bigger.
The pervasiveness of corporate tax avoidance is demonstrated by the Financial Times and The Guardian, who both call for a clamp down. The Financial Times is owned by the Pearson Group plc which has employed complex tax avoidance structures in Luxembourg. The Guardian Media Group refinanced an offshore joint venture in trade publishing, Emap, with the private equity firm Apax ‘via a purchase of external mezzanine debt’ conducted through two new Luxembourg companies. Very fancy!
The Napoleon of crime
‘Princes should devolve all matters of responsibility upon others, take upon themselves only those of grace’. Niccolo Machiavelli, The Prince.
The European Commission is now charged with negotiating measures to stop tax avoidance. However, the European Commission president is Jean-Claude Juncker, prime minister of Luxembourg between 1995 and 2013, when Luxembourg became the top European tax haven. One commentator remarked that putting Juncker in charge of efforts to combat tax avoidance was like putting Dracula in charge of a blood bank. Juncker says that he did not design Luxembourg’s tax regime and that the tax authorities acted independently. This did not convince Britain’s Secretary of Work and Pensions Iain Duncan Smith who said it was time for European commissioners to show they had ‘no fear of investigating their own’. Duncan Smith was echoed by Labour shadow European spokesperson Pat McFadden, ‘if more comes out on this then really serious questions will have to be asked about his [Juncker’s] position’. Following a motion proposed by, among others, Britain’s Ukip and France’s National Front, the European parliament is to debate whether Juncker should resign as the European Commission president. Meanwhile, the mastermind behind the entire contrivance, the Napoleon of crime, sits untouched behind any one of the desks in PwC’s 776 offices in 157 countries.
The Conservative Party, the Liberal Democrats and the Labour Party are all in thrall to PwC. Since 2010 PwC staff held positions in the offices of Labour’s Shadow ministers for international development, business and education. A senior PwC associate is currently on a six month posting worth £75,000 to Shadow Education Secretary Tristram Hunt. Shadow Business Secretary Chuka Umunna received research support worth £60,000 from PwC in 2013-14 to help shape tax, welfare and business policy. A Labour Party spokesperson said that accountancy firms ‘do not influence opposition policy decisions’. What on earth are they doing then? Rachel Reeves, Labour’s Shadow Work and Pensions’ secretary, is getting help from a PwC consultant from October to January for £41,000. Shadow Chancellor Ed Balls received almost £200,000 from PwC and the rest of the Shadow Treasury team got over £170,000 of support. Labour has also received over £250,000 for staff costs from KPMG.
The Labour Party is the direct beneficiary of PwC and its tax avoidance schemes, it invites PwC to advise and direct its would-be ministers. We may have the vote but who runs this country? The City runs it.
Full of self-importance after his jaunt to the G20 meeting of world leaders in Brisbane Australia, the British Prime Minister, David Cameron, declared in an article in The Guardian (17 November 2014) that ‘red warning lights are once again flashing on the dashboard of the global economy’. He pointed to the eurozone on the brink of a third recession, the slowing of growth in the emerging market economies, the stalling of global trade talks, the Ebola epidemic and the escalating conflicts in Ukraine and the Middle East as ‘all adding a dangerous backdrop of instability and uncertainty’. He contrasted this to the British economy which, he said, is the fastest growing in the G7 major capitalist countries, with record numbers of new businesses and the largest ever annual fall in unemployment. But Cameron, preparing his excuses well in advance of the coming General Election, warned that ‘in our interconnected world’ these wider problems in the global economy ‘pose a real risk to our recovery at home’. David Yaffe reports.
A week earlier the Governor of the Bank of England (BofE), Mark Carney, had put forward his own gloomy prognosis. Echoing the words of Marx and Engels in the Communist Manifesto during the presentation of the BofE’s monetary policy committee’s quarterly inflation report, he declared: ‘A spectre is now haunting Europe – the spectre of economic stagnation’, with growth in the eurozone disappointing and confidence falling back.
In the third quarter of 2014, the eurozone’s two largest economies narrowly avoided recession (a fall in GDP in two successive quarters): Germany growing by 0.1% and France by 0.3%. Growth in France was driven primarily by a 0.8% rise in government spending. Italy, the third largest economy in the eurozone, suffered its third recession since the financial crash, with growth falling by 0.1%. Overall the eurozone grew by 0.2%, a small increase on the 0.1% growth experienced in the second quarter of 2014. Eurozone GDP is still more than 2% below its level at the beginning of 2008. Eurozone inflation in October at 0.4% was marginally higher than the 0.3% of September but well below the European Central Bank’s target of just under 2%. A more expansionary monetary and fiscal policy to stimulate economic growth in the eurozone has so far been blocked by the German government.
Preliminary data for July to September show Japan falling back into recession again. The Japanese economy unexpectedly contracted by 1.6% on an annualised basis in the third quarter of 2014. It had been expected to grow by 2.2%. This came after a 7.3% fall in GDP on an annualised basis in the second quarter of 2014. This is the fourth time since the financial crash in 2008 that Japan has been in recession. The US has now ended its $4.5 trillion quantitative easing programme, tightening its monetary policy. Overall the global economy is stalling and red warning lights are, indeed, flashing.
Record debt levels
A new report, Deleveraging? What Deleveraging? (the Report) highlights the record debt levels existing throughout the global economy.1 It argues that contrary to widely held beliefs, six years on from the financial crisis the deleveraging process to bring down the global debt-to-GDP ratio has not yet begun. On the contrary, the debt ratio is still rising to an all-time high. The ratio of global total debt to GDP, excluding the financial sector (financials), rose 38 percentage points, from 174% in 2008 to 212% in 2013 (p11). Since the financial crisis the ratio of public debt to GDP increased by 46 percentage points in the UK, 40 points in the US and 26 points in the Eurozone (p16). The Report points to ‘the poisonous combination of high and rising global debt and slowing nominal GDP, driven by both slowing real growth and falling inflation’. It goes on to argue that the ongoing vicious circle of high levels of leverage (debt/asset ratios) and policy attempts to deleverage, on the one hand, and slower nominal growth on the other, set the basis either for painful deleveraging or another crisis, possibly originating in the emerging economies, with China being the highest risk (p19). The total debt/GDP ratio, excluding financials, of the developed capitalist economies (DM) reached 272% in 2013, with that of Japan at 411%, the UK at 276%, the US at 264% and the eurozone at 257%. With financials the totals rise significantly as a ratio to GDP: DM at 385%, Japan at 562%, UK at 495%, the eurozone at 385% and the US at 362% (p15).
Martin Wolf, the chief economist of the Financial Times in commenting on the Report warns that ‘a great deal more trouble lies ahead’ (8 October 2014). He laments that the world economy seems incapable of generating growth without an unsustainable credit boom appearing somewhere. In the last 25 years, he says, a credit boom in Japan collapsed after 1990; a credit boom in Asian emerging economies collapsed in 1997; a credit boom in the north Atlantic economies collapsed after 2007, and finally China, whose total debt (excluding financials) has risen a spectacular 72 percentage points to 220% of GDP (p68) in its attempt to offset the loss of export earnings after the financial crash in 2008, could be next. Each credit boom, says Wolf, ‘is greeted as a new era of prosperity, to collapse into crisis and post-crisis malaise.’2 Red warning lights indeed.
Britain’s sham recovery
In his 17 November Guardian article, Cameron claims that, because of the ‘difficult decisions’ made by the government over recent years, Britain has the fastest growing economy in the G7 countries, ‘with record numbers of businesses, the largest ever annual fall in unemployment, and employment up 1.75 million in four years: more than the rest of the EU put together.’ What he fails to tell us is that the recovery of the economy is largely based on debt-fuelled consumer spending and inflated house-prices, accompanied by stagnant productivity, falling wages, and millions of workers in insecure jobs. Inequality and poverty are growing. And further, all of this has been accompanied by savage welfare cuts that are having devastating consequences for the lives of millions of British people.3
According to the Office of National Statistics (ONS), productivity (output per hour) in the UK economy was 17 percentage points below the average for the rest of the major G7 industrialised economies in 2013, the widest productivity gap since 1992. Between 2007 and 2013 output per hour in the UK economy fell by 3%, the worst performance of the G7 major capitalist countries. In 2013 UK productivity was only 76% of US levels and well below that of France and Germany at 88% and 85% of US levels respectively (Financial Times 14 November 2014). Productivity continues to fall. This stagnant productivity explains how the UK economy can have weak growth and rising employment, at the cost of falling wages.
GDP is certainly higher than its pre-crisis peak in the first quarter of 2008, but, once the 3.5 million rise in the population since then is taken into account (from 60.5 to 64 million), GDP per capita is still around 3.4% lower than it was before the financial crash some six years ago. By April 2014 British workers’ real pay had fallen for the sixth year running, back to levels paid in the early 2000s. Since their peak in 2008, average wages have fallen in real terms by 9.2%. This does not take into account the differential rates of inflation affecting different sections of the workforce. For example, in the six years from early 2008 to early 2014, according to the Institute of Fiscal Studies, the cost of energy rose by 67% and the cost of food by 32%. Over the same period the retail price index went up by 22%. The poorest fifth of households spent 8% of their budgets on energy and 20% on food, whilst the richest fifth spent 4% on energy and 11% on food. There are clearly different rates of inflation for the poor and rich.
Cameron claims that employment has gone up 1.75 million over the four years the Coalition government has been in office. But what kind of jobs have been created and at what level of pay? TUC research shows that employment increased by 1.08 million from the first quarter of 2008 to the second quarter of 2014. Job creation has been dominated by rising self-employment and part-time work. Only 1 in every 40 new jobs created since the recession has been full-time, 24 in every 40 have been self-employed and 26 in every 40 have been part-time. 4.6 million people are self-employed, accounting for 15% of those in work, the highest percentage point in the past four decades and a rise of 732,000 since the first quarter of 2008. Average income from self-employment has fallen 22% since 2008/9. In 2014 9.9%, or 3 million, of those in work in the UK were underemployed and wanting to work more hours (ONS). Insecure, low-paid jobs mean that record numbers of working families live in poverty, with two-thirds of people who found work taking jobs for less than the living wage according to the Joseph Rowntree Foundation.
Cameron makes it clear that the government ‘will stick to [its] plan on the deficit and continue to use monetary policy to support growth without adding to borrowing or debt’. The Coalition’s austerity programme has been spectacularly unsuccessful in reducing public debt. Even its new target of eradicating the public sector current deficit by 2017–18 is unachievable without politically unsustainable cuts in public services or very significant rises in tax. It would require around £17bn more spending cuts on top of the £8.5bn departmental cuts already planned for 2015–16. The Chancellor George Osborne will challenge the Labour Party to match his plans in his Autumn Statement on 3 December. Labour has tried to keep its options open. Ed Balls says Labour will continue with austerity but will bring the current deficit into balance ‘as early as possible in the next parliament’. He has said that the Tory spending plans after the 2015 election are a fantasy. Osborne will put him on the spot. As it is, Osborne’s planned borrowing is way off earlier plans, exacerbated by the government’s savage austerity programmes. Tax revenues are far below government plans. Latest figures suggest extra borrowing of up to £15bn will be needed to reach the 2017–18 target, necessitating much deeper and even more politically explosive cuts.
Even this disastrous state of public finances has not deflected the Tory party’s intention to fight the next election on a platform which includes tax cuts. Cameron recently promised to increase the personal tax allowance to £12,500 and the higher-rate tax threshold from £41,865 to £50,000. This will cost around £7.2bn. A senior Treasury official called this ‘a potential disaster’ and the Coalition’s Business Secretary, Vince Cable, dismissed it as a ‘total fantasy’. This is no fantasy but the reality of intensifying class war in austerity Britain.
2. Wolf, originally a strong advocate of neo-liberal globalisation, now admits that he failed to anticipate a meltdown in the global capitalist system. For a discussion of his failure to understand the structural crisis of the capitalist system grounded in an overaccumulation of capital in the heartlands of capitalism, see David Yaffe ‘Global economic recovery falters’ in FRFI 236 December 2013/January 2014 at http://tinyurl.com/mzbdt27 on our website.
3. See David Yaffe ‘British Economy: On the path to a new crisis’ in FRFI 240 August/ September 2014 at http://tinyurl.com/pe9ohqj on our website and earlier articles.
Fight Racism! Fight Imperialism! 242 December 2014/January 2015
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.
Fight Racism! Fight Imperialism! 240 August/September 2014
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.