Dec 202014
 

By William Blum, 99GetSmart

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American Exceptionalism and American Torture

In 1964, the Brazilian military, in a US-designed coup, overthrew a liberal (not more to the left than that) government and proceeded to rule with an iron fist for the next 21 years. In 1979 the military regime passed an amnesty law blocking the prosecution of its members for torture and other crimes. The amnesty still holds. 1

That’s how they handle such matters in what used to be called The Third World. In the First World, however, they have no need for such legal niceties. In the United States, military torturers and their political godfathers are granted amnesty automatically, simply for being American, solely for belonging to the “Good Guys Club”.

So now, with the release of the Senate Intelligence Committee report on CIA torture, we have further depressing revelations about US foreign policy. But do Americans and the world need yet another reminder that the United States is a leading practitioner of torture? Yes. The message can not be broadcast too often because the indoctrination of the American people and Americophiles all around the world is so deeply embedded that it takes repeated shocks to the system to dislodge it. No one does brainwashing like the good ol’ Yankee inventors of advertising and public relations. And there is always a new generation just coming of age with stars (and stripes) in their eyes.

The public also has to be reminded yet again that – contrary to what most of the media and Mr. Obama would have us all believe – the president has never actually banned torture per se, despite saying recently that he had “unequivocally banned torture” after taking office. 2

Shortly after Obama’s first inauguration, both he and Leon Panetta, the new Director of the CIA, explicitly stated that “rendition” was not being ended. As the Los Angeles Times reported at the time: “Under executive orders issued by Obama recently, the CIA still has authority to carry out what are known as renditions, secret abductions and transfers of prisoners to countries that cooperate with the United States.” 3

The English translation of “cooperate” is “torture”. Rendition is simply outsourcing torture. There was no other reason to take prisoners to Lithuania, Poland, Romania, Egypt, Jordan, Kenya, Somalia, Kosovo, or the Indian Ocean island of Diego Garcia, amongst other torture centers employed by the United States. Kosovo and Diego Garcia – both of which house large and very secretive American military bases – if not some of the other locations, may well still be open for torture business, as is the Guantánamo Base in Cuba.

Moreover, the key Executive Order referred to, number 13491, issued January 22, 2009, “Ensuring Lawful Interrogations”, leaves a major loophole. It states repeatedly that humane treatment, including the absence of torture, is applicable only to prisoners detained in an “armed conflict”. Thus, torture by Americans outside an environment of “armed conflict” is not explicitly prohibited. But what about torture within an environment of “counter-terrorism”?

The Executive Order required the CIA to use only the interrogation methods outlined in a revised Army Field Manual. However, using the Army Field Manual as a guide to prisoner treatment and interrogation still allows solitary confinement, perceptual or sensory deprivation, sensory overload, sleep deprivation, the induction of fear and hopelessness, mind-altering drugs, environmental manipulation such as temperature and noise, and stress positions, amongst other charming examples of American Exceptionalism.

After Panetta was questioned by a Senate panel, the New York Times wrote that he had “left open the possibility that the agency could seek permission to use interrogation methods more aggressive than the limited menu that President Obama authorized under new rules … Mr. Panetta also said the agency would continue the Bush administration practice of ‘rendition’ … But he said the agency would refuse to deliver a suspect into the hands of a country known for torture or other actions ‘that violate our human values’.” 4

The last sentence is of course childishly absurd. The countries chosen to receive rendition prisoners were chosen precisely and solely because they were willing and able to torture them.

Four months after Obama and Panetta took office, the New York Times could report that renditions had reached new heights. 5

The present news reports indicate that Washington’s obsession with torture stems from 9/11, to prevent a repetition. The president speaks of “the fearful excesses of the post-9/11 era”. There’s something to that idea, but not a great deal. Torture in America is actually as old as the country. What government has been intimately involved with that horror more than the United States? Teaching it, supplying the manuals, supplying the equipment, creation of international torture centers, kidnaping people to these places, solitary confinement, forced feeding, Guantánamo, Abu Ghraib, Bagram, Chile, Brazil, Argentina, Chicago … Lord forgive us!

In 2011, Brazil instituted a National Truth Commission to officially investigate the crimes of the military government, which came to an end in 1985. But Mr. Obama has in fact rejected calls for a truth commission concerning CIA torture. 6 On June 17 of this year, however, when Vice President Joseph Biden was in Brazil, he gave the Truth Commission 43 State Department cables and reports concerning the Brazilian military regime, including one entitled “Widespread Arrests and Psychophysical Interrogation of Suspected Subversives.” 7

Thus it is that once again the United States of America will not be subjected to any accountability for having broken US laws, international laws, and the fundamental laws of human decency. Obama can expect the same kindness from his successor as he has extended to George W.

“One of the strengths that makes America exceptional is our willingness to openly confront our past, face our imperfections, make changes and do better.” – Barack Obama, written statement issued moments after the Senate report was made public. 8

And if that pile of hypocrisy is not big enough or smelly enough, try adding to it Bidens’ remark re his visit to Brazil: “I hope that in taking steps to come to grips with our past we can find a way to focus on the immense promise of the future.” 9

If the torturers of the Bush and Obama administrations are not held accountable in the United States they must be pursued internationally under the principles of universal jurisdiction.

In 1984, an historic step was taken by the United Nations with the drafting of the “Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment” (came into force in 1987, ratified by the United States in 1994). Article 2, section 2 of the Convention states: “No exceptional circumstances whatsoever, whether a state of war or a threat of war, internal political instability or any other public emergency, may be invoked as a justification of torture.”

Such marvelously clear, unequivocal, and principled language, to set a single standard for a world that makes it increasingly difficult for one to feel proud of humanity. We cannot slide back. If today it’s deemed acceptable to torture the person who supposedly has the vital “ticking-bomb” information needed to save lives, tomorrow it will be acceptable to torture him to learn the identities of his alleged co-conspirators. Would we allow slavery to resume for just a short while to serve some “national emergency” or some other “higher purpose”?

If you open the window of torture, even just a crack, the cold air of the Dark Ages will fill the whole room.

Cuba … at long, long last … maybe …

Hopefully, it’s what it appears to be. Cuba will now be treated by the United States as a country worthy of at least as much respect as Washington offers to its highly oppressive, murdering, torturing allies in Saudi Arabia, Egypt, Honduras, Israel, Pakistan, Afghanistan, and elsewhere.

It’s a tough decision to normalize relations with a country whose police force murders its own innocent civilians on almost a daily basis, and even more abroad, but Cuba needs to do it. Maybe the Cubans can civilize the Americans a bit.

Let’s hope that America’s terrible economic embargo against the island will go the way of the dinosaurs, and Cuba will be able to demonstrate more than ever what a rational, democratic, socialist society can create. But they must not open the economy for the Yankee blood-suckers to play with as they have all over the world.

And I’ll be able to go to Cuba not as a thief in the night covering my tracks and risking a huge fine.

But with the Republicans taking over Congress next month, all of this may be just a pipe dream.

Barack Obama could have done this six years ago when he took office; or five years ago when American Alan Gross was first arrested and imprisoned in Cuba. It would have been even easier back then, with Obama’s popularity at its height and Congress not as captured by the Know-Nothings as now.

So, Cuba outlasted all the punishment, all the lies, all the insults, all the deprivations, all the murderous sabotage, all the assassination attempts against Fidel, all the policies to isolate the country. But for many years now, it’s the United States that has been isolated in the Western Hemisphere.

Reason Number 13,336 why capitalism will be the death of us.

Antibiotic-resistant bacteria – the “superbugs” – if left unchecked, could result in 10 million deaths a year by 2050. New drugs to fight the superbugs are desperately needed. But a panel advising President Obama warned in September that “there isn’t a sufficiently robust pipeline of new drugs to replace the ones rendered ineffective by antibiotic resistance.”

The problem, it appears, is that “Antibiotics generally provide low returns on investment, so they are not a highly attractive area for research and development.” 10

Aha! “Low returns on investment”! What could be simpler to understand? Is it not a concept worth killing and dying for? Just as millions of Americans died in the 20th century so corporations could optimize profits by not protecting the public from tobacco, lead, and asbestos.

Corporations are programmed to optimize profits without regard for the society in which they operate, in much the same way that cancer cells are programmed to proliferate without regard for the health of their host.

Happy New Year. Here’s what you have to look forward to in 2015.

  • January 25: 467 people reported missing from a university in Mexico. US State Department blames Russia.
  • February 1: Military junta overthrows President Nicolás Maduro in Venezuela. Washington decries the loss of democracy.
  • February 2: US recognizes the new Venezuelan military junta, offers it 50 jet fighters and tanks.
  • February 3: Revolution breaks out in Venezuela endangering the military junta; 40,000 American marines land in Caracas to quell the uprising.
  • February 16: White police officer in Chicago fatally shoots a 6-year old black boy holding a toy gun.
  • March 6: Congress passes a new law which states that to become president of the United States a person must have the surname Bush or Clinton.
  • April 30: The Department of Homeland Security announces plan to record the DNA at birth of every child born in the United States.
  • May 19: The Supreme Court rules that police may search anyone if they have reasonable grounds for believing that the person has pockets.
  • May 27: The Transportation Security Administration declares that all airline passengers must strip completely nude at check-in and remain thus until arriving at their destination.
  • June 6: White police officer in Oklahoma City tasers a 7-month-old black child, claiming the child was holding a gun; the gun turns out to be a rattle.
  • July 19: Two subway trains collide in Manhattan. The United States demands that Moscow explain why there was a Russian citizen in each of the trains.
  • September 5: The Democratic Party changes its name to the Republican Lite Party, and announces the opening of a joint bank account with the Republican Party so that corporate lobbyists need make out only one check.
  • September 12: White police officer in Alabama shoots black newborn, confusing the umbilical cord for a noose.
  • November 16: President Obama announces that Iran, Syria, Lebanon, Palestine, North Korea, Sudan, Nicaragua, Venezuela, Bolivia and Cuba all possess weapons of mass destruction; have close ties to the Islamic State, al Qaeda, and the Taliban; are aiding pro-Russian rebels in Ukraine; were involved in 9-11; played a role in the assassination of John F. Kennedy and the attack on Pearl Harbor; are an imminent threat to the United States and all that is decent and holy; and are all “really bad guys”, who even (choke, gasp) use torture!
  • November 21: The United States invades Iran, Syria, Lebanon, Palestine, North Korea, Sudan, Nicaragua, Venezuela, Bolivia and Cuba.
  • December 10: Barack Obama is awarded his second Nobel Peace Prize
  • December 11: To celebrate his new peace prize, Obama sends out drones to assassinate wrong-thinking individuals in Somalia, Afghanistan and Yemen.
  • December 13: Members of Ukraine’s neo-Nazi parties, which hold several high positions in the US-supported government, goose-step through the center of Kiev in full German Storm Trooper uniforms, carrying giant swastika flags, shouting “Heil Hitler”, and singing the Horst Wessel song. Not a word of this appears in any American mainstream media.
  • December 15: US Secretary of State warns Russia to stop meddling in Ukraine, accusing Moscow of wanting to re-create the Soviet Union.
  • December 16: White police officer shoots a black 98-year-old man sitting in a wheel chair, claiming the man pointed a rifle at him. The rifle turns out to be a cane.
  • December 28: The Washington Redskins football team finish their season in last place. The White House blames Vladimir Putin.

Notes

  1. Associated Press, December 11, 2014
  2. New York Times, December 11, 2014
  3. Los Angeles Times, February 1, 2009
  4. New York Times, February 6, 2009
  5. New York Times, May 24, 2009
  6. Washington Post, December 11, 2014
  7. National Security Archive’s Brazil Documentation Project
  8. Washington Post, December 10, 2014
  9. See note 7
  10. Washington Post, December 13, 2014
Dec 182014
 

By James Petras, 99GetSmart

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Introduction

The US Senate Report documenting CIA torture of alleged terrorist suspects raises a number of fundamental questions about the nature and operations of the State, the relationship and the responsibility of the Executive Branch and Congress to the vast secret police networks which span the globe – including the United States.

CIA:  The Politics of a Global Secret Police Force

The Senate Report’s revelations of CIA torture of suspects following the 9/11 bombing is only the tip of the iceberg. The Report omits the history and wider scope of violent activity in which the CIA has been and continues to be involved. CIA organized large scale death squad activities and extreme torture in Vietnam (Phoenix Project); multiple assassinations of political leaders in the Congo, Chile, Dominican Republic, Vietnam, the Middle East, Central America and elsewhere; the kidnapping and disappearance of suspected activists in Iraq and Afghanistan; massive drug-running and narco-trafficking in the “Golden Triangle” in Southeast Asia and Central America (the Iran-Contra war).

The Senate Report fails to locate the current acts of CIA terror and torture in a broader historical context – one which would reveal the systematic use of torture and violence as a ‘normal instrument of policy.  Contrary to White House and Senate claims that torture was a “policy error” committed by “incompetent” (or deranged) operatives, the historical record demonstrates that the long term extensive and intensive use by the CIA of torture, assassinations, kidnappings are planned and deliberate policies made by highly qualified, and experienced policymakers acting according to a global strategy approved by both Executive and Congressional leaders.

The Report treats torture as a “localized” set of events, divorced from the politics of empire building. In point of fact, torture is and always has been an integral part of imperial wars, colonial military occupations and counter-insurgency warfare.

Imperial wars and occupations provoke widespread opposition and nearly unanimous hostility. ‘Policing’ the occupied country cannot rely on community-wide support, least of all providing voluntary ‘intelligence’ to the imperial officials. The imperial armed forces operate out of fortresses surrounded by a sea of hostile faces. Bribes and persuasion of local collaborators provides limited information, especially regarding the operations of underground resistance movements and clandestine activists. Family, neighborhood, religious, ethnic and class ties provide protective support networks. To break this web of voluntary support network, the colonial powers resort to torture of suspects, family members and others. Torture becomes “routinized” as part and parcel of policies sustaining the imperial occupation. Extended occupation and intensive destruction of habitation and employment, cannot be compensated by imperial “aid” – much of which is stolen by the local collaborators. The latter, in turn, are ostracized by the local population, and, therefore, useless as a source of information. The “carrot” for a few collaborators is matched by torture and the threat of torture for the many in opposition.

Torture is not publicized domestically even as it is ‘understood’ by ‘knowing’ Congressional committees. But among the colonized, occupied people, through word and experience, CIA and military torture and violence against suspects, seized in neighborhood round-ups, is a weapon to intimidate a hostile population. The torture of a family member spreads fear (and loathing) among relatives, acquaintances, neighbors and colleagues. Torture is an integral element in spreading mass intimidation – an attempt to minimize co-operation between an active minority of resistance fighters and a majority of passive sympathizers.

The Senate Report claims that torture was “useless” in providing intelligence. It argues that victims were not privy to information that was useful to imperial policymakers.

The current head of the CIA, John Brennan rejects the Senate claim, while blithely admitting “some errors” (underwater submergence lasted a minute too long, the electric currents to the genitals were pitched to high?), heargues that “torture worked”. Brennan argues that his torturer colleagues did obtain “intelligence” that led to arrests of militants, activists and “terrorists”.

If torture “works” as Brennan claims, then presumably the Senate and the President would approve of its use. The brutalization of human life, of family members and neighbors is not seen as, in principle, evil and morally and politically repugnant.

According to the explicit rules of conduct of Brennan and the implicit beliefs of the Senate, only “useless” torture is subject to censure – if an address is obtained or a torture victim names a colleague a ‘terrorist’ to avoid further pain, then by the criteria of the Senate Report  torture is justified.

According to the operational code of the CIA, international law and the Geneva Conventions have to be modified: torture should not be universally condemned and its practioners prosecuted. According to the Senate only torture that “doesn’t work” is reprehensible and the best judge of that is the head of the torturers, the CIA director.

Echoing Brennan, President Obama, leaped to the defense of the CIA, conceding that only some ‘errors’ were committed. Even that mealy mouth admission was forcibly extracted after the President spent several years blocking the investigation and months obstructing its publication and then insisting on heavily editing out some of the most egregious and perverse passages implicating NATO allies

The Senate Report fails to discuss the complicity and common torture techniques shared between Israel’s Mossad and the CIA and Pentagon. In defense of torture, the CIA and White House lawyers frequently cited Israel’s Supreme Court ruling of 1999 which provided the “justification “for torture. According to Israel’s Jewish judges, torturers could operate with impunity against non-Jews (Arabs) if they claimed it was out of “necessity to prevent loss of or harm to human life”. The CIA and Harvard law professor and uber-Zionist zealot, Alan Dershowitz echoed the Israeli Mossad “ticking time bomb” justification for torture, according to which “interrogators can employ torture to extract information if it prevents a bombing”. Dershowitz cited the efficiency of Israel’s torturing a suspect’s children.

The CIA officials frequently cited the Israeli ‘ticking bomb’ justification for torture in 2007, at Congressional hearings in 2005, and earlier in 2001 and 2002. The CIA knows that the US Congress, under the control of the Zionist power configuration, would be favorably disposed to any official behavior, no matter how perverse and contrary to international law, if it carried an Israeli mark of approval or ‘logo’.

The US CIA and Israeli’s Mossad share, exchange and copy each other’s’ torture methods. The US torturers studied and applied Israel’s routine use of sexual torture and humiliation of Muslim prisoners. Racist colonial Israeli tracts about techniques on destroying the ‘Arab Mind’ were used by US intelligence. Israeli officials borrowed US techniques of forced feeding hunger strikers. Mossad’s technique of ‘Palestinian hanging’ was adopted by the US. Above all, the US copied and amplified Israel’s extra-judicial ‘targeted’ killings – the center piece of Obama’s counter-terrorism policy. These killings included scores of innocent bystanders for every ‘successful target’.

The Senate Report fails to identify the intellectual authors, the leading officials who presided over and who ultimately bear political responsibility for torture.

Top leaders, Presidents George W. Bush and Barack Obama, and Senate Intelligence Committee chairperson, Diane Feinstein, resort to the Nazi war criminals plea “we didn’t know”, “we were misled” and “the CIA didn’t tell us”.

No judge at the Nuremberg Trials believed them. Nor will any international court of law believe US political leaders’ pleas of ignorance of the CIA’s decade-long practice of torture – especially after former Vice President Cheney lauded the practice on US television and boasted he would implement the same policies again. (One has to wonder about the ‘source’ of Cheney’s transplanted heart…)

During the administration of President Bush, Jr., CIA leaders submitted detailed reports on intelligence, including the sources and the methods of obtaining the information, on a routine basis – with videos and ‘live feeds’ for the politicians to view. Nothing was ‘held back’ then and now, as current CIA head John Brennan testifies. From 2001 onward torture was the method of choice, as testimony from top military officials revealed during the Abu Ghraib investigation.

National Security Agency (NSA) meetings, attended by the President, received detailed reports extracted from CIA “interrogations”. There is every reason to believe that every NSA attendee ‘knew’ how the ‘intelligence’ was obtained. And if they failed to ask it was because torture was a ‘normal, routine operating procedure’.

When the Senate decided to investigate the “methods of the CIA”, half a decade ago, it was not because of the stench of burning genitals. It was because the CIA exceeded the boundaries of Senate prerogatives –it had engaged in pervasive and hostile spying against US Senators, including the Uber-Senator Feinstein herself; CIA crimes were compromising client regimes around the world; and most of all because their orgy of torture and dehumanization had failed to defeat the armed resistance in Afghanistan, Iraq, Yemen and Syria.

The Senate Report is an exercise in institutional power – a means for the Senate to regain political turf, to rein in CIA encroachment. The Report goes no further than to chastise “inappropriate” techniques: it does not proceed from crimes of state to prosecute officials responsible for crimes against international and domestic laws.

We know, and they know, and as every legal authority in the world would know, that without the punishment of political leaders, torture will continue to be an integral part of US imperial policy: Impunity leads to recidivism.

Richard Cheney, Vice-President under President George W. Bush, notorious war criminal on many counts, and prime advocate of torture, publicly declared on December 10, 2014 that President Bush specifically authorized torture. He bragged that they were informed in detail and kept up to date.

In the political world of torture, practiced by Islamic extremists and US imperialists, how does the decapitation of non-combatant prisoners, match up with the CIA’s refrigeration of naked political suspects?  As for “transparency”, the virtue claimed by the Senate Report publicists in publishing the CIA’s crimes, as “refurbishing the US image”, the Islamists went one step further in “transparency”: they produced a video that went global, revealing their torture by beheading captives.

The Senate Report on CIA torture will not result in any resignations, let alone prosecutions or trials, because over the past two decades, war crimes, police crimes, spy crimes, and financial swindles have not been prosecuted. Nor have any of the guilty officials spent a day in court. They are protected by the majority of political leaders who are unconditional defenders of the CIA, its power, techniques and especially its torture of captives. The vast majority of Congress and the US President repeatedly approve over $100 billion annual budgets for the CIA and its domestic counterpart, Department Homeland Security. They approved the annual budget voted on December 10, 2014, even as the “revelations” rolled in. Moreover, as the tempest over CIA torture proceeds, Obama continues to order the assassination by drone of US citizens “without ever crossing the door of a judge”.

Despite over 6,000 pages of documents and testimony, recording crimes against humanity, the Senate Report is unlikely to trigger any reforms or resignations. This is not because of the actions of some mysterious “deep state” or because a ballooning national security apparatus has taken power. The real problem is that the elected officials, Presidents and Congress people, Democrats and Republicans, neo-liberals and neo-conservatives, are deeply embedded in the security apparatus and they share the common quest for world supremacy. If Empire requires wars, drones, invasions, occupations and torture, so be it!

Torture will truly disappear and the politicians will be put on trial for these crimes, only when the empire is transformed back to a republic: where impunity ends justice begins.

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James Petras latest book, The Politics of Imperialism: The US, Israel and the Middle East (Atlanta:  Clarity Press 2014)

Dec 152014
 

By James Petras, 99GetSmart

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Introduction

The Brazilian working class is facing the most savage assault on its living standards in over a decade. And it is not just the industrial workers who are under attack. The landless rural workers, public and private salaried employees, teachers and health professionals, the unemployed and the poor are facing massive cuts in income, jobs and welfare payments.

Whatever gains were made between 2003 – 2013 will be reversed. Brazilian workers face a ‘decade of infamy’. The Rousseff regime has embraced the politics of “savage capitalism” as personified in the appointment of two of the most extreme advocates of neo-liberal policies.

The “Workers Party” and the Ascendancy of Finance Capital

In early December 2014, President Rousseff appointed Joaquin Levy as the new Finance Minister –  in effect the new economic czar to run the Brazilian economy. Levy is a leading member of the Brazilian financial oligarchy. Between 2010-2014 he was president of Bradesco Asset Management, an asset arm of the giant conglomerate Bradesco, with more than $130 billion dollars under management. Since his doctoral days at the U of Chicago, Levy is a loyal follower of neo-liberal supremo Professor Milton Friedman, former economic adviser to Chilean military dictator Augusto Pinochet. As a former top official in the International Monetary Fund (1992 – 1999), Levy was a strong advocate of the harsh austerity programs which a decade later impoverished southern Europe and Ireland. During the Presidency of Henrique Cardoso, Levy served as a top economic strategist, directly involved in the massive privatization of lucrative public enterprises – at bargain basement prices – and the liberalization of the financial system which facilitated the illicit financial outflow of $15 billion a year. Levy’s presence as a prominent member of Brazil’s financial oligarchy and his deep, longstanding ties to international financial institutions is precisely the reason President Rousseff put him in charge of the Brazilian economy. Levy’s appointment is part and parcel of Rousseff’s embrace of a new strategy of vastly increasing the profits of foreign and domestic finance capital, in the hope of attracting large scale investments to end economic stagnation.

For President Rousseff and her mentor, ex-President Lula DaSilva, the entire economy must be directed to gaining the “confidence” of the capitalist class.

The social policies which were implemented earlier are now subject to elimination or reduction, as the new financial czar Joaquin “Jack the Ripper” Levy, moves forward to implement his “shock therapy”. Deep and comprehensive cuts in labor’s share of national income is at the top of his agenda. The objective is to concentrate wealth and capital in the upper ten percent in hopes that they will  invest and increase growth.

While Levy’s appointment represents a decidedly turn to the extreme right, the economic policies and practices of the previous twelve years laid the foundations for the return of a virulent version of neo-liberal orthodoxy.

The Economic Foundations for the Return of Savage Capitations

During the electoral campaign in 2002, Lula DaSilva signed off on an economic agreement with the IMF which guaranteed a budget surplus of 3%. Lula sought to reassure bankers, international financiers and multi-nationals that Brazil would pay its creditors, increase foreign reserves for profit remittance and illicit financial flows overseas.

The Lula regime’s adoption of conservative fiscal policies, was accompanied by his austerity policies, reducing public employees’ salaries and pensions and providing only marginal increases in the minimum wage. Most of all, Lula supported all of the corrupt privatizations which took place under the preceding Cardoza regime. At the end of Lula’s first year in office, 2003, Wall Street hailed Lula as the “Man of the Year” for his “pragmatic policies” and his demobilization and de-radicalization of the major trade unions and social movements. In January 2003, President Lula Da Silva appointed Levy as Treasury Secretary, a position he held until 2006 – the most socially regressive period of the Da Silva Presidency. This period also coincided with a series of enormously lucrative multi-billion dollar corruption scandals involving dozens of top PT officials in the Lula regime receiving kickbacks from leading construction companies

Two events in the middle 2000’s allowed Da Silva to moderate his policies and introduce limited social reforms. The commodity boom – a sharp increase in the demand and prices of afro-mineral exports filled the coffers of Treasury. And increased pressure from the trade unions, rural movements and the poor for a share in the economic bonanza led to increases in social spending,  wages, salaries and easy credit without affecting the wealth, property and privileges of the elite.  With the economic boom, Lula could also satisfy the IMF, the financial sector and the business elite with subsidies, tax breaks, low interest loans and lucrative “overpriced” state contracts. The poor received 1% of the budget via a “family allowance” a $60 dollar a month handout and low paid labor received a higher minimum  wage. The cost of social welfare was a fraction of the 40% of the budget that the banks received in payments of principle and interest payments on dubious public debt incurred by previous neo-liberal regimes.

With the end of the boom, the government of Rousseff has reverted back to Lula’s orthodox policies of 2003 – 2005 and re-appointed Levy to carry them out.

Levy’s Shock Therapy and Its Consequences

Levy’s task of re-concentrating income, raising profits and revertng social policies is much harder in 2014 – 2015 than it was in 2003 – 2005. Mainly because, earlier, he was merely continuing the policies of the Cardoso regime – and Lula promised the workers it was only temporary. Today Levy must cut and slash gains that workers and the poor take for granted. In fact in 2013 – 2014 mass urban movements pressed for greater social expenditures for transport, education and health.

To advance Levy’s shock therapy, at some point, repression will be necessary, as was the case in Chile and Southern Europe when similar austerity policies depressed incomes and multiplied unemployment.

Levy proposes to rescue the interests of finance capital by taking several crucial measures which will be in line with the agenda of Wall Street, City of London and the Brazilian financial moguls. Taken in their entirety, Levy’s financial policies amount to “shock treatment” – harsh, rapid economic measures applied against workers living standards, equivalent to electric shocks to patients with disorders, applied by deranged psychologists who claim that “pain is gain”, but more frequently than not, turn patients into zombies or worse.

Levy’s first priority is to cut and slash public investments, pensions, unemployment payments and public sector salaries. Under the pretext of “stabilizing the economy” (for the financial groups) he will destabilize the household economy of tens of millions. He will rescind tax breaks for the mass of consumers buying cars, household appliances and ‘white goods’, thus increasing the costs to millions of working class households or pricing them out of the market. Levy’s purpose is to unbalance household budgets (increase debt over income) in order to increase the state budget surplus and ensure full and prompt debt payments to creditors like his own Bradesco conglomerate.

Secondly, Levy will “adjust” prices. More specifically end price controls on fuel, energy and transport so that the financial oligarchs with millions of shares in those sectors can jack-up prices and “adjust” their wealth upward into the billions of dollars. As a result, the working and middle class will have to spend a greater share of their declining income for fuel, transport and energy.

Thirdly, Levy will probably let the currency weaken to promote afro-mineral exports under the guise of greater “competiveness”. But a cheaper currency will increase the cost of imports, especially, of basic foodstuffs and manufactured goods.The de facto devaluation will hit hardest the millions who cannot hedge their savings and favors the financial speculators who will capitalize on currency movements. And comparative studies demonstrate that a cheaper currency doesn’t necessarily increase  productive investments.

Fourthly, Levy is likely to claim that energy shortfalls due to drought, which has reduced Brazil’s hydropower dams, requires “reform” of the energy sector, Levy’s euphemism for privatization. He will propose to sell-off  the semi-public billion dollar petroleum giant Petrobras, and accelerate the privatization of offshore exploitation sites, at terms favorable to big investment banks.

Fifthly, Levy is likely to slash and burn environmental and business regulations, including those affecting the rain-forest, labor and Indian rights, to facilitate the easy entry and fast exit of financial capital.

Levy’s “shock therapy” will have a profound social and economic impact on Brazilian society. Every indication, from past and present experiences, is that  in every country “Chicago Boys”, like Levy, have applied their “shock” formula, has resulted in profound economic recession, social regression and political unrest.

Contrary to the expectations of President Rousseff, cuts in credit, salaries and public investment will depress the economy – and send it from stagnation into recession. Retrograde budget balancing lessens demand and does not induce productive capital flows. The most dynamic growth sectors in manufacturing, the car industry, will be sharply and adversely affected by the increase in taxes on purchases. And the same goes for appliances.

Heretofore the expansion of public investment has been the main driving force of even the current meagre growth. There is no rational reason to believe that vast flows of private capital will suddenly take up the slack, especially in a shrinking market. This is especially true, if as is likely to happen, class conflict intensifies from across the board reductions in wages, salaries and living standards.

Levy, like all free market fanatics, will argue that recession and regression are short-term, necessary and, will succeed “in the long run”. But   in all contemporary countries pursuing his shock formula, the result has been prolonged regression. Greece, Spain, Italy and Portugal are in the seventh year of austerity induced depression and their public debt is growing.

The Real Effective Consequences of Shock Therapy

We have to discard the ideological “stability and growth” claims of the Levyites and look at the real results of the policies he promises.

First and foremost, inequalities will increase because whatever income gains ensue will be concentrated at the top. Government deregulation and fiscal and exchange rate policies, will deepen the imbalances in the economy, favoring creditors over debtors, foreign finance over local manufacturers, owners of capital over wage workers, the private sector over the public.

Levy will indeed “secure the confidence of capital” because what is dubbed as “investor confidence” rests on an unimpeded license to plunder the environment, reduce  wages and eploit a growing reserve army of unemployed.

Conclusion

Levy’s shock therapy will heighten class tension and inevitably result in the break-down of the social pact between the so-calledWorkers Party regime and the trade unions, the landless rural workers and the urban social movements.

Rousseff and the leadership of the self-styled “Workers’ Party” regime, faced with economic stagnation resulting from the decline in commodity prices and the  decision of private capital to withhold investments, could have chosen to socialize the economy, end crony capitalism and increase public investment. Instead it capitulated. Rousseff has recycled the orthodox neo-liberal policies which Lula implemented during the first two years of his regime.

Instead of mobilizing workers and professionals for deeper structural changes, Rousseff and Lula Da Silva are counting on the “left-wing” of the PT to complain, criticize and conform. They are counting on the co-opted leaders of the trade union confederation (CUT), to hyperventilate and confine themselves to inconsequential symbolic protests which will not disrupt Levy’s “shock therapy”. However, the scope, depth and extremism of Levy’s so-called adjustment and stabilization program will provoke general strikes, first and foremost in the public sector. The cutbacks in the auto industry and rise in unemployment, will result in job action in the manufacturing sector. The cuts in public investment and rise in the costs of transport, health care and education will revive the mass urban movements.

Within a year, Rousseff and Levy’s shock policies will convert Brazil into a boiling cauldron of social discontent. Lula’s pseudo-populist gestures and empty rhetoric will have no effect. Rousseff will not be able to convince working people to accept Levy’s class biased “austerity” program, his incentives “to gain the confidence of international markets” and his incomes policies shrinking incomes of the vast majority of working people.

Levy’s policies will deepen the recession, not “re-awaken the animal spirits of entrepreneurs”. After a year of  “more pain and no gain” (except for higher profits for financiers and afro-mineral exporters), President Rousseff will face the inevitable negative political outcome of having lost the support of the workers, middle class and rural poor without gaining the support of the business and financial elite – they have their own reliable party leaders. Once having put in place his radically regressive free market policies, and having provoked massive popular discontent, Levy will  resign and return to the presidency of Bradesco, the multi-billion dollar investment fund, claiming “mission accomplished”

Rousseff might replace Levy and try to ‘moderate’ his ‘shock therapy’. But by then it will be too little too late. The Workers’ Party will end up in the dust bin of history. Rousseff’s decision  to appoint Levy as economic czar is a declaration of class war. And in order to win the class war, we cannot exclude that the radically regressive policies will be enforced by state violence – the repression of mass urban protests, the savage dislodgement of peaceful landless rural workers occupying fallow lands.

The “Workers’ Party” regime’s turn from “inclusive neo-liberalism” to Friedmanite free market extremism will radicalize and polarize Brazilian society. The oligarchy will push to remilitarize civil society. This in turn, will spur the growth of class conscious social movements, like those that ended twenty years of military rule. Perhaps this time, the social upheaval may not end in a liberal-democracy; perhaps the coming struggle will bring Brazil closer to a socialist republic.

Dec 142014
 

Written by Turkish political analyst / blogger, Gürkan Özturan:

haber2eyvWo

With the constitution written during military rule in Turkey in 1982, the president of the republic – then a top general – was awarded the power to issue Presidential Decrees to manage duties such as secretarial institutionalization, organization, governance, working principles, and appointment of officers. Erdoğan, the first popularly elected president of Turkey, has now used this power to change aspects of the institution of the presidency itself by presidential decree.

In previous years, when Erdoğan was prime minister, the Turkish electorate became accustomed to the term “law decree,” which does not require parliamentary debate or even a vote, but can be declared simply by approval of the cabinet. A presidential decree, on the other hand, does not even require the approval of cabinet ministers; moreover it is out of the reach of judicial controls, which makes the decree unchallengeable. Having been created with an unchallengeable presidential decree, the new cabinet has strong chances of being “above the law” with its untouchable qualities, bypassing the constitutional and judicial checks on lawfulness.

Erdoğan’s Shadow Cabinet

The decree that establishes a shadow cabinet is declared through a secret order, which means the official papers do not refer to it. The current organization of the presidency puts four bodies under the president’s responsibilities: financial and economic affairs, institutional communications, information technologies, and human resources. These directorates answer directly to the President and will take guidance from his office.

With the new decree, the number of these institutions has been increased to 13, including such directorates as:

National Security Directorate

Foreign Affairs Directorate

Economy Directorate

Defense Directorate

Energy Directorate

Social Affairs Directorate

Investment Tracking Directorate

Communications Central Directorate

More stories by Gürkan Özturan http://theradicaldemocrat.wordpress.com

More stories about Turkey @ http://99getsmart.com/category/turkey/

Dec 112014
 

Written by Turkish political analyst / blogger, Gürkan Özturan:

POMA_Bulldozer_Hijacked_by_Carsi_at_Gezi_protests

Gezi Park was raided by the police and most people were losing hope when the ultra group Çarşı started a call for solidarity and asked for 100 gas masks to take back the park. Raising hopes in doing so, the ultras have emerged to win people’s hearts by helping take back the park and be at the forefront of the OccupyGezi Resistance. In the aftermath of taking the park, Çarşı activists had hijacked an excavator and chased the police’s water cannons, the TOMAs, with it. Çarşı was originally founded in 1980s as a reaction to the military dictatorship that was then ruling Turkey. They are supporters of the Beşiktaş soccer club, who have been carrying out social responsibility actions and standing against many injustices over the decades.

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As a prosecutor accepted the action accusing Çarşı of plotting a coup d’état against the government by joining the OccupyGezi Movement, leaders and main figures of the ultras were detained and taken to court. On December 14th, Çarşı groups across Europe will be gathering in Cologne to protest against this unlawful trial their fellow ultras are facing in Turkey. Çarşı Berlin announced that there will be a protest rally to call for justice for the Çarşı supporters.

Çarşı Duisburg will officially organize the protest and they have published this release to call for support and solidarity:

“This supporters’ group in Turkey is being accused of a coup d’état. If the court proceeds, the ultras will receive life sentences. We the people who have loved Çarşı would like to draw attention to the absurdity that the government in Turkey is forcing on any opposition, and we want to show that we stand with our friends. We denounce the lawsuit opened against our friends and we find the accusation of a coup absurd. Such a charge is comical and funny to the point of frivolity. Beşiktaş is the people’s team, and of course will deal with people’s problems. The scarves thrown for the children who were left homeless after the Van earthquake in 2011, the campaigns to donate blood for leukemia patients, the shelters we have built for stray animals on the streets, the funds and aid we have collected as relief for the children in rural areas… if all these were a coup d’état, then we are all guilty of this coup.”

On December 14, Çarşı supporters from various European cities will be at Hans-Böckler-Platz/BF West Sq., Cologne.

More stories by Gürkan Özturan http://theradicaldemocrat.wordpress.com

More stories about Turkey @ http://99getsmart.com/category/turkey/

Dec 052014
 

Written by Turkish political analyst / blogger, Gürkan Özturan:

caferağa-2

In the aftermath of the #OccupyGezi protests, a group had occupied an unused space and turned it into a Community House in Istanbul’s Kadikoy district. Officially, it is the second place that has been occupied in Turkey, right after Gezi Park itself. For some time, the house had been targeted by the authorities and faced eviction. One more notification has just arrived to the squat house recently and informs of eviction to begin at 10 a.m. on December 5th, on Friday.

The occupiers have issued a public statement calling for solidarity and support from all friends, inviting them for a defense of the house at 9 a.m.

The statement follows:

“We, who revolted to prevent concretion of our lives one and a half years ago, are people who do not look alike but suffer from the same grievances.

There is a house in our neighborhood whose door is open to anyone. A publicly owned abandoned place that we brought into use, a place where everyone can pull up a chair and catch their breath, join in a deep conversation while having some tea, a place that belongs to all of us. This house was brought into being by the contribution and labor of thousands of people up until now, as a place where everyone can cook and eat together, that has a library, darkroom, carpenter’s shop, swap market, as a place for everyone who is willing to talk, discuss and produce.

We are the residents who embrace the ones who go down under alive and come out dead, whose heads with gas canisters, whose infant bodies with bullets, whose dark bodies with bombs smashed into pieces, as our own neighbors. We are your neighbors, who long for soil among piles of concrete and thus create gardens, who protect disaster assembly areas for the coming earthquake from concretion, who discuss their desires regarding our neighborhood, who take it to the streets wearing bathrobes, stinking of lack of water during shortages or who keep watch in our parks and streets against any quarrel.

We heard that they will come to shut our doors down. Those tyrants who have taken an oath to sell everything that is beautiful and everything that lives; every drop of water, every tree and every shadow, they will attempt to wreck our house on us. We invite everyone whose hearts beat with ours to our Community Center/Squat to defend our common space that we are in existence all together, shoulder to shoulder on Friday, the 5th of December, at 9 a.m.

This house belongs to all of us, let us defend it together.

CAFERAGA SOLIDARITY

Meeting:

Date: 5th of December, Friday, 9 a.m.

Address: Hacı Şükrü sok. No. 24

Caferağa Mahallesi, Kadıköy”

CCJx3AGt

 

More stories by Gürkan Özturan http://theradicaldemocrat.wordpress.com

More stories about Turkey @ http://99getsmart.com/category/turkey/

Dec 042014
 

By James Petras, 99GetSmart

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Introduction

Over the past 30 years, wealth has grown exponentially and has become increasingly concentrated foremost in the upper .01%, then the .1%, followed by the 1% and the upper 10% – 20%.

The large scale, long-term concentration of wealth has continued through booms and busts of the real economy, the financial and IT crises. Wealth grew despite long-term economic recessions and stagnation, because the so-called recovery programs imposed austerity on  80% of the households while transferring public revenues to the rich.

The so-called ‘crises of capitalism’ has neither reversed nor prevented the emergence of an international class of billionaires who acquire, merge and invest in each other’s activities. The growth of wealth has been accompanied by the pillage of accumulated profits from productive sectors which are stored as wealth not investment capital.

The dispossession of capital and its conversion to private wealth subsequently led to the rapid expansion of the financial and real estate sector. Capital accumulation of profits has been the source of private accumulation of wealth at the expense of wages, salaries, public welfare, and state revenues.

The growth of private wealth at the expense of productive investments is a world-wide phenomenon which has been facilitated by an international network of banks, political leaders and ‘regulators’ centered in the United States and England.

The single most important aspect of private wealth accumulation on a world-scale is criminal behavior by the elites in multiple locations and involves the violation of multiple laws and regulations.

The Chain of Illegality: From Exploitation of Labor to the Pillage of the Nation

The original source of private wealth is the exploitation of labor by capital,of which a small percentage of the profits are reinvested in expanding production in the ‘home market’ or overseas. The bulk of the profits are transferred into financial networks which in turn illicitly channel the funds into overseas accounts.

The movements of profits ‘overseas’ takes multiple forms (transfer pricing, phony invoices, etc.) and  they are primarily converted to private wealth. These ‘international movements’ of profits are largely composed of mega-thievery or plunder by political and business leaders from ‘developing countries’. According to the Financial Times (17/11/14, p2).  “Up to $1 trillion (dollars) is being taken out of developing countries every year through a web of corrupt activities involving anonymous shell companies that typically hide the identity of their true owners”. (my emphasis)

The $1 trillion of stolen profits and revenues from the ‘developing countries’ (Africa, Asia, South America) are part of a “corruption chain” which is organized, managed and facilitated by the major financial institutions in the US and UK. According to a World Bank report in 2011 “70 percent 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 held proceeds of corruption” (Financial Times, 17/11/14, p2.).

This process of “taking out” or pillage of developing countries feeds into rent seeking, conspicuous consumption and other non-productive activity in the ‘developed countries’ or more accurately the imperialist states.  The principle beneficiaries of the pillage of ‘developing countries’ by the local elites are their counterparts in the top 1% of the imperial countries, who control, direct and manage the financial, real estate and luxury sectors of their economies.

The very same financial institutions in the imperial countries (and their related accountancy, legal and consultancy arms) facilitate the pillage of trillions from the ‘developed’ countries to offshore sites, via massive tax evasion operations, hoarding wealth instead of investing profits or paying taxes to the public treasury.

Long-term, large scale pillage and tax evasion depends on the central role, at both ends of the world economy, of the financial sector. This results in the ‘imbalance of the economy’ – predominance of finance capital as the final arbiter on how ‘profits’ are disposed.

The extremely narrow membership in the dominant financial sectors means that its growth will result in greater inequalities between classes. A disproportionate share of wealth will accrue to those who pillage the revenues and profits of the productive sector. As a result so-called ‘productive capitalists’ hasten to join and lay claims to membership in the financial sector.

The links between ‘productive’ and ‘fictitious’ capital or financial swindle capital, defy any attempt to find a progressive sector within the dominant classes. But the effort to enter the charmed circle of the dominant financial 1% is fraught with dangers and risks . . . because the financial sector has a very dynamic and super-active capacity for swindles.

The entire process of de-capitalizing the economy is underwritten in the US by the financial elite’s controls over the executive branch of government, especially the ‘regulatory’and enforcement agencies -Security Exchange Commission, the Treasury and Justice Departments.

Financial institutions facilitate the inflow of trillions of dollars from the kleptocrats in the developing countries as well as the outflow of trillions of dollars by multi-nationals to off-shore tax havens. In both instances the banks are key instruments in the process of dis-accumulation of capital by dispossessing nations and treasuries of revenues and productive investments.

The ‘hoarding’ of MNC profits in offshore shell companies does not in any way prevent speculative activity and large scale swindles in the for-ex, equity and real estate markets. On the contrary, the boom in high-end real estate in London, New York and Paris, and the high growth of luxury goods sales, reflects the concentration of wealth in the top .01%, .1% and 1%. They are the beneficiaries of ‘no risk’ pillage of wealth in developing countries, receiving lucrative commissions and fees in laundering the illicit inflows of wealth and outflows by tax dodging multi-nationals.

The Inverted Pyramid of Wealth

A small army of accountants, political fixers, corporate lawyers, publicists, financial scribblers, consultants and real estate promoters make-up the next 15% of the beneficiaries of the pillage economies. Below them are the 30% upper and lower middle classes who experience tenuous affluence subject to the economic shocks, ‘market volatility and risks of downward mobility. Below them, the majority of wage, salaried and small business classes experience declining incomes, downward mobility, rising risks of mortgage foreclosure,  job-loss and destitution among the bottom 30%.

Despite wide variations in the class structure between ‘developing’ neo-colonial and developed imperial states, the top 1% across national boundaries has forged economic, personal, educational, and social ties. They attend the same elite schools, own multiple private residences in similar high end neighborhoods, and share private bankers, money launderers and financial advisors. Each elite group has their own national police and military security systems, as well as political influentials who also co-operate and collaborate to ensure  impunity and to  defend the illegal financial flows for a cut of the wealth….

The investigatory authorities of each developed country tend to specialize in prosecuting rival financial institutions and banks, occasionally levying fines – never imprisonment – for the most egregious swindles that threatens the ‘confidence’ of the defrauded investors.

Yet the basic structure of the pillage economy, continues unaffected – in fact thrives – because the ‘show’ of ‘oversight’ and judicial ‘charges’ neutralizes public indignation and outrage.

The Decisive Role of Dis-Accumulation in the World Economy

While orthodox economists elaborate mathematical models that have no relationship to the operations, agencies and performance of the economy and ignore the real elite actors which operate the economy, Leftist economists similarly operate with theoretical premises about capital and labor, profits and capital accumulation, crises and stagnation, which ignore the centrality of pillage, dis-accumulation, and the dynamic growth of wealth by the international 1%.

The research center, the Capital Financial Integrity Group provides a vast array of data documenting the trillion dollar illicit financial flows which now dominate the world economy.

US MNCs have ‘hoarded’ over $1.5 trillion dollars in overseas shell companies, ‘dead capital’, to avoid taxes and to speculate in stocks, bonds and real estate.

Mexico’s ruling elite organizes massive illicit financial flows, mostly laundered by US banks, ranging from $91 billion in 2007 to $68.5 billion in 2010. The massive increase in illicit financial flows is greatly facilitated by the de-regulation of the economy resulting from the North American Free Trade Agreement (NAFTA). Contrary to most leftist critics the main beneficiaries of NAFTA are not Canadian mine owners or US agro-business or auto manufacturers – it is the US and Canadian financial and real estate money launderers.

From 1960 to 2010 the Brazilian 1% pillaged over $400 billion dollars. These illicit financial flows are laundered in New York, Miami, London, Switzerland and Montevideo. In recent years the rate of pillage has accelerate:  between 2000 -2012 illicit financial flows averaged $14.7 billion a year. And under the self-styled ‘Worker’s Party” (PT) regime of Lula DaSilva and Dilma Rousseff, $33.7 billion in illicit outflows were laundered annually – 1.5% of the GDP. Much of the pillage is carried out by private and public “entrepreneurs” in the so-called “dynamic” economic sectors of agro-minerals, energy and manufacturing via ‘trade mispricing’, import overpricing and export underpricing invoices.

According to a study published in the Wall Street Journal, (10/15/12), China’s elite’s illicit financial flows top $225 billion a year – 3% of national economic output. China’s 1%, the business-political elite, finance their children’s overseas private education, providing them with half million dollar condos. Illicit flows allow Chinese ‘investors’ to dominate the luxury real estate markets in Toronto, Vancouver, New York and London. They hoard funds in overseas shell companies. The Chinese corporate kleptocrats are the leaders in the drive to deregulate China’s financial markets – to legalize the outflows.

The scale and scope of China’s elite pillage has provoked popular outrage that threatens the entire capitalist structure – provoking a major anti-corruption campaign spearheaded by China’s President Xi Jinping. Thousands of millionaire officials and business people have been jailed, causing a sharp decline in the sales of the world’s luxury manufacturers.

India’s capitalists- as kleptocrats – have long played a major role in de-capitalizing the economy.  According to the Financial Times (11/24/14, p3) the Indian elite’s illicit financial flows totaled $343 billion dollars from 2002 to 2011. The Indian Finance Ministry immediately threw up a smoke screen on behalf of the 1%, claiming the Indian elite had only $1.46 billion in Swiss accounts. Most of India’s wealthy have taken up with holing their illicit wealth to  Dubai, Singapore, the Cayman and Virgin Islands as well as London

India’s neo-liberal policies eased the illegal outflows. Massive corruption accompanied the privatization of public firms and the allocation of multi-billion dollar assets such as mobile phones, coal fields and energy.

Indonesia, – percentage-wise is the leader in the outflow of illicit flows – fully 23% of annual output. The 1% elite of foreign and domestic capitalists, plunders natural resources, timber, metals, agriculture and dis-accumulates. Profits flow to foreign accounts in Tokyo, Hong Kong, Singapore, Sydney, Los Angeles, London and Amsterdam.

Ethiopia, with per-capita income of $365 dollars, is the site of vast pillage by its ruling elite. From 2000 to 2009, over $11.7 billion dollars in illicit financial flow was laundered mostly by US banks. These outflows enriched the Ethiopian and the US 1% and provoked famine for Ethiopia’s 90%.

Conclusion

The illicit financial flows surpass the capital invested in productive activity. The process of dis-accumulation of capital through relocation is channeled to overseas shell corporations and private bank accounts and beyond into financial holdings and real estate. The accumulation of private wealth exceeds the sums invested in productive activity generating investments and wages. Massive perpetual tax evasion means higher regressive taxes on consumers (VAT) and wage and salaried workers, reductions in social services, and austerity budgets targeting food, family and fuel subsidies

The past thirty years of deregulated capitalism and financial liberalization, is a product of the financial takeover of state regulatory agencies. The signing of free trade agreements has provided the framework for large scale long-term illicit financial flows.

While illicit financial flows have financed some productive activities, the bulk has vastly expanded the financial sector. The absorption of illicit flows by the financial elite has led to greater inequalities of wealth between the 1% – 10% and the rest of the labor force.

Illicit earnings via mega swindles among the largest and most respected US and EU banks, has curtailed the amount of capital which is available for production, profits, wages and taxes. The circuits of illicit capital flows militate against any form of long-term economic development – outside of the wealth absorbing elites which control both the financial and political centers of decision-making.

The growth and ascendancy of financial elites which pillage public treasuries, resources and productive activity, is the result of an eminently political process. The origins of de-regulation, free trade and the promotion of illicit flows are all made possible by state authorities.

First and foremost, finance capital conquered state power – with the cooperation of “productive capital”. The peaceful transition reflected the interlocking directorates between banks and industry, aided and abetted by public officials rotating between government and investment houses.

The entire African continent was pillaged by billionaire rulers, many former nationalist politicians (South Africa), ex-guerilla and ‘liberation leaders’ (Angola, Mozambique, Guinea Bissau), in collaboration with US, EU, Chinese, Russian and Israeli oligarchs. Trillions of dollars were laundered by bankers in London, New York, Zurich, Tel Aviv and Paris. Growth of the commodity sector bolstered Africa’s decade long expanding GDP – and the mega-outflows of illicit earnings.

World-wide, billionaires multiplied profits ‘received’, but wages, salaries, pensions and health coverage declined! Swindles multiplied as outflows accelerated in both directions. The higher the growth in China, India, Indonesia and South Korea the bigger and more pervasive the corruption and outflows of wealth-led by “Communist” neo-liberals in China, Indian “free marketers” and Russian “economic reformers”.

The World Bank’s and IMF’s proposed “economic reforms”  ‘freed’ the incipient political kleptocrats of controls and unleashed two-sided illicit financial flows – laundering funds from abroad and establishing trillion dollar offshore tax dodging citadels.

Illicit swindles dwarfed earnings from ‘capital accumulation’. The relations between capital and labor were framed by the organization and policies dictated by the directors and operators of the trillion-dollar financial networks based on the pillage of treasuries and the wealth of nations.

The center of China’s growth is shifting from manufacturing and the exploitation of labor, to real estate and “financial services”, as worker’s demand and secure double-digit increases in wages. The exploiters of labor turned predators of the national treasury.  Under the pretext of “stimulating” the construction sector, real estate speculators in tow with Communist Party officials, absconded with over a trillion dollars from 2009 to 2014. According to Jonathan Anderson of the Emerging Advisors Group “over a trillion dollars” has gone missing in China in the past five years (Financial Times, 28/11/14, p 1.).

Factories still produce, agro-business still exports, the paper value of high tech companies has risen into the high billions, but the ruling 1% of the system stands or falls with the illicit financial flows drawn from the pillage of treasuries. To replenish pillaged treasuries, regimes insist on perpetual ‘austerity’ for the 90%: greater pillage for the 1%, less public revenues for health care which results in more epidemics. Less funds for pensions means later retirement — work till you die.

The plunder of the economy is accompanied by unending wars – because war contracts are a major source of illicit financial flows. Plunder oligarchs share with militarists a deep and abiding belief in pillage of countries and destruction of productive resources.  The one reinforces the other in an eternal embrace – defied only by insurgents who embrace a moral economy and who proclaim the need for a total change – a new civilization.

Nov 232014
 

By Eric Toussaint, 99GetSmart

We don’t owe, we won’t pay

We don’t owe, we won’t pay

This article reviews a number of developments that occurred between 2000 and 2014 related to the debt issue, various aspects of the international crisis |1|, international financial institutions, the scope of attacks against social and economic rights, and CADTM priorities.

Several changes have occurred since the end of the 1990s.

1. Several countries in the South have moved away from neoliberal policies

After over twenty years of neoliberal policies and multiple forms of resistance, towards the end of the 1990s and at the beginning of the new millennium, several Latin American nations disposed of their neoliberal presidents thanks to massive social mobilisations and elected heads of state who implemented policies that meet the people’s interests. The people of those countries wanted to free themselves from measures derived from the ‘Washington consensus,’ as imposed by the IMF and the World Bank (privatisations, cuts in public services, ‘liberalisation’ of trade that deprives small local producers of any protection, enforced commodification, destruction of decent jobs, cancellation of subsidies for food staples and services such as water, electricity, gas, and transport). These policies were implemented on the pretence of repaying their public debts, much of which was illegitimate or illegal, as was the case in Venezuela, Ecuador, Bolivia… |2| Ecuador’s government took a remarkable initiative in 2007-2008 when it carried out a complete audit of its debt with the active participation of representatives from social movements |3|. On the basis of this audit, it then suspended repayment of the part of the external debt identified as illegitimate, and imposed a significant reduction of the debt to its creditors |4|. This made it possible to increase social spending. Unfortunately, this initiative did not snowball as had been hoped, since other countries in the area did not follow suit.

On the upside, let us note that the governments of these three countries also increased taxation on large foreign corporations that exploit these countries’ natural resources. This development significantly boosted their tax revenues, and made it possible to increase social spending.

Moreover, citizens in these three countries democratically adopted new Constitutions, which include a measure on the removing of elected representatives at mid-term.

Finally, it should also be added that Bolivia in 2007, Ecuador in 2009, and Venezuela in 2012 took the wise step of leaving the WB International Centre for Settlement of Investment Disputes (ICSID).

The International Centre for the Settlement of Investment Disputes (ICSID),The ICSID was founded in 1966, with the purpose of providing a means of conciliation and arbitration to settle investment disputes between contracting States and nationals of other contracting States. To put it simply, it is an international arbitration tribunal, which deals with disputes arising between a private investor from a contracting party State and the State where the investment is based. The Centre’s jurisdiction (article 25) extends to disputes of a legal nature, relating directly to an investment, between a contracting State (or a government organisation or body dependent on that State and designated by it to the Centre) and a national from another contracting State.

The Centre is usually designated as competent to deal with disputes arising within the context of bilateral investment agreements. Thus, almost 900 bilateral treaties on the promotion and protection of investments explicitly name the Centre as the instance for settling disputes between the private investor of a contracting party, on the one hand, and the State where the investment concerned is based, on the other. The Centre’s arbitral sentence is mandatory and cannot be appealed (article 53). The ICSID is a member of the World Bank Group, but from an institutional point of view, it is an autonomous international organisation, which completes the Bank’s range of intervention.

There is no obligation to have recourse to the ICSID for conciliation or arbitration. However, once the parties are engaged, neither may withdraw unilaterally from the ICSID’s arbitration. Once the ICSID has made a decision, all the countries that have ratified the convention, even if they are not involved in the dispute, must acknowledge and apply the decision. Since 1978, the ICSID’s area of jurisdiction has been extended. A whole new set of rules allow it to intervene in cases that do not fall within the domain of the convention. Thus, it can now intervene in arbitration procedures even when one of the parties to the dispute is a State or the national of a State that has not ratified the convention. It can also be called on to bear witness on facts in a case.

Until the mid-1980s, the disputes dealt with by the ICSID arose from agreements made under investment contracts. Since then, it has dealt increasingly with disputes arising from agreements made under bilateral treaties.

The World Bank’s spider web 

The World Bank’s subsidiaries (the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for the Settlement of Investment Disputes (ICSID)) have been designed to weave an even tighter web.

Let us take a theoretical example to illustrate the effects of their policies. The World Bank grants a loan to the government of a country if it promises to privatise its water distribution and purification system. In this process, the public company is sold to a private consortium including the IFC, a World Bank subsidiary.

Then the population affected by the privatisation protests against the sudden sharp increase in rates and the fall in the quality of the service provided, and the government turns against the predatory transnational company, the dispute is dealt with by the ICSID, which thus finds itself on both sides of the judge’s bench.

A situation has been reached where the World Bank Group is present at every level: it imposes and finances privatisation via the IBRD and IDA, it invests in the privatised company through the IFC, it provides the company with guarantees covering it against political risk, through the good offices of the MIGA, and it judges any disputes that may arise through the ICSID.

This is exactly what happened in El Alto, Bolivia, between 1997 and 2005.

2. Increases in raw materials prices and currency reserves

In 2003-2004, the prices of raw materials and agricultural products began to rise |5|. This situation enabled the developing countries |6| exporting such products to increase their revenues, especially in strong currencies (dollar, euro, yen, and pound). Certain developing countries used the additional revenues to increase social spending, while most of them accumulated foreign exchange reserves |7| or purchased US Treasury Bonds—thus contributing to financing the leading world power. In other words, they increased their loans to the world’s principal economic power, thus contributing to maintaining its domination by providing it with the means to continue living on credit and maintaining a large trade deficit. An explanation for this is that the US borrows large amounts from countries that are prepared to purchase its debt instruments (US Treasury Bonds).

The table below indicates the volumes of US Treasury Bonds and other treasury bonds held in March 2014 by a number of developing countries. China alone has lent the USA $1,270 billion (from its foreign reserve exchange accumulated through its trade surplus with the USA), and therefore holds more than one fourth of US external public debt.

Developing countries that are creditors of the USA: values of US Treasury Bonds (in $billionsdollars) held in March 2014 |8|

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The yield on US Treasury Bonds and other government bonds is from 0 to 2.57% in function of the maturity (one month = 0.01%, while 10 years = 2.57%) |9|. Given the inflation rate in the US, the real yield is very low, or even negative, which enables the US to finance itself at a very low cost.

3. The loss of power of the World Bank and IMF vis-à-vis certain developing countries

The increase in foreign exchange reserves and the decision of some governments in the South to use part of them to increase social spending and infrastructure investments have contributed to decreasing the influence of the IMF, World Bank, and most industrialised countries over some of the developing countries |10|. This loss of influence also comes from the fact that China and the other ‘BRICS’ (Brazil, Russia, India, China, and South Africa), especially Brazil, have greatly increased the number of their loans to certain developing countries.

4. China becomes a powerful creditor

Another factor has reinforced this phenomenon: a rapidly expanding China has become the world’s workshop, and has accumulated huge currency reserves (mostly in dollars). In December 2013, China’s foreign exchange reserves reached $3,821 billion |11|. It has significantly increased its international trade, particularly with developing countries on various continents. It has also increased very significantly its loans to African, Latin-American, and many Asian countries. Its loans are now competing with those of the World Bank and the IMF, other multilateral financial institutions and the governments of the most industrialised countries. That has reduced the ability of these institutions and of countries in the North to exert pressure on some developing countries. However, we should remain vigilant regarding these large debts taken on by developing countries. China is a new capitalist power, which does not give anything away, and its investments are aimed at ensuring its control over the raw materials it needs and over the markets to which it exports its manufactured goods.

5. In 2014, the BRICS (Brazil, Russia, India, China, and South Africa) announced the creation of a multilateral bank that would belong to them |12|

If this bank begins doing business one day (which is not sure), it will not be an entity capable of offering a positive alternative for developing countries, because the governments founding it are seeking to create a bank which will directly serve their interests (ensuring sources of raw materials and outlets for their exportations) and not those of the people.

6. Increases in internal public debt

Over the past 20 years, internal public debt has increased significantly. In a significant number of developing countries, it has become greater than external public debt (see table below on Argentina, Brazil, Colombia, Ecuador, and Mexico). This is true for all of the richest developing countries, particularly for the so-called ‘emerging’ economies.

Comparison of external and internal public debt (in $billions and as a % of total debt) for some Latin American countries (2000-2013) |13|

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However, we should not be fooled. The domestic banks that issue loans to the public authorities of their country in the local currency are often in fact subsidiaries of foreign banks, and the loans in local currency, in many cases, are pegged to a strong currency (generally the dollar). This means that if the local currency is devalued or the value of the strong currency increases, the amount to be reimbursed increases considerably |14|. It also means that the major foreign banks are making large profits from the internal public debt. For example, Santander, the principal Spanish bank, makes enormous profits from the loans granted by its subsidiaries in Brazil |15| and other Latin American countries to public authorities by buying government securities from them. The same is true of other banks like Citigroup/CitiBank, which have a strong presence in Mexico, and the Spanish bank BBVA, present in several Latin-American economies, not to forget the British bank HSBC, which is particularly active in Asia.

7. The food and climate crisis

In 2007-2008, the peoples of the developing countries were faced with a sharp increase in the price of foodstuffs. This situation resulted in food riots in 18 countries. The number of people suffering from hunger, which was approximately 900 million before the crisis, increased by nearly 120 million, bringing the total to over one billion in 2009. As we will see farther on, that figure has gradually been reduced, but the fact can only alert us to the incredible vulnerability of hundreds of millions of people. This dramatic situation is directly linked to other factors related to the global crisis and the debt system. One thing is certain: the rising price of food staples and increasing number of human beings suffering from hunger are not the result of a lack of food resources throughout the world. Some of the factors behind this global food crisis, which is keeping one out of eight humans in a permanent state of hunger, are financial speculation on the prices of basic food items (and fuels) on the over-the-counter market in Northern countries, as well as the promotion of agro-fuels in Northern and some Southern countries— including Brazil —, land grabbing, the ‘free-trade’ agreements imposed on Southern countries, the end of subsidies for basic food staples and to local producers in Southern countries, and the priority given to cash crops intended for exportation to the detriment of local market gardening… |16|

In addition, the effects of the ongoing climate crisis are increasingly dramatic in developing countries. Here again, the policies rolled out by the World Bank in particular, and the productivist capitalist system in general, are part of the problem and not part of the solution |17|.

8. Debt is one of the core concerns in Northern countries, where it is considered to be the consequence of the crisis that erupted in 2007-2008

The crisis caused by major private banks in the US and Europe has generated a strong increase in the debt of the countries concerned. Private and public debt have become core concerns in Northern countries, particularly within the European Union and the United States. That is why the CADTM has engaged in more studies and actions targeting the countries of the North, while still not neglecting the South. The lessons drawn from the Third World debt crisis in 1980-1990 are very valuable for understanding the events that followed the crisis of 2007-2008 and taking action in its aftermath |18|. The countries in the North where people have been the most severely affected are Greece, Ireland, Iceland, Portugal, Spain, Cyprus, Romania, Hungary, the Baltic Republics, Bulgaria, and Italy. The policies being applied by creditors in the most industrialised countries in the North today closely resemble those that were imposed on the countries of the South in the 1980s, which caused and exacerbated third world debt.

9. Centre/Periphery relations within the European Union based on domination 
The existence of a common economic, trade, and political zone enables European transnational corporations and the economies of the Centre of the eurozone to profit from the debt crisis in the Periphery countries (Spain, Greece, Portugal, Ireland, Cyprus, and countries in central Europe and the Balkans), as well as in Italy, to make their companies more profitable and make points in terms of competitiveness with respect to their North American and Chinese competitors. At the current stage of the crisis, the aim of countries in the Centre of the eurozone is not to relaunch growth and reduce asymmetries between the strongest and weakest economies in the EU.

In addition, European leaders believe that the collapse of Southern Europe is going to translate into opportunities to privatize corporations and public goods massively at cut-rate prices. The intervention of the Troika and the active complicity of governments in the Periphery are helping them. The dominant classes in the countries in the Periphery are in favour of these policies, because they are counting on getting a part of the cake they have been drooling over for years. The privatisations in Greece and Portugal prefigure what is going to occur in Spain and Italy where the public commodities up for grabs are far more lucrative, given the size of these two economies.

The close ties between government leaders and Big Capital are no longer even concealed. Individuals from the world of high finance, and in particular the investment bank Goldman Sachs, are now at the head of several governments, in key ministerial positions, and President of the ECB |19|.

10. The crisis and the increase in public debt are misleading arguments exploited in the greatest offensive against human rights in Europe since the end of WWII.

Governments and employers use countless deceitful arguments in the greatest offensive in Europe since WWII against the economic and social rights of most people. Increasing unemployment, more and more debt to repay, the constraint of balanced budgets and the competitiveness of the European countries, between themselves, and on the world markets, are all used as postulates to attack and whittle away at social spending and public services.

For the Capitalists the agenda is greater insecurity for the workers, to reduce the worker’s capacity to organise and resist, while imposing lower wages and less benefits, at the same time as maintaining big differences between EU workers in order to increase the competition between them, and to precipitate them into the debt trap.

The report ‘Safeguarding human rights in times of economic crisis’ by Nils Muiznieks, Commissioner for Human Rights at the Council of Europe (4 December 2013) draws an unforgivable picture of the consequences of the austerity measures applied in Europe. The sectors of education, health, employment, justice, housing, water distribution, and subsistence are all damaged by the nefarious effects of these policies. Nils Muiznieks stresses the inefficiency of austerity plans and their counter-productive results, which in the long term will cause necessary increases in public spending |20|.

Here are the opening paragraphs of the introduction to this important report: ‘Europeans are living through the deepest economic recession since World War II. What began as a meltdown in the global financial system in 2008 has been transformed into a new political reality of austerity, which threatens over six decades of social solidarity and expanding human rights protection across Council of Europe member states.

Austerity measures have exacerbated the already severe human consequences of the economic crisis marked by record levels of unemployment. The whole spectrum of human rights has been affected and many vulnerable groups of people have been hit disproportionately. Poverty, including child deprivation, is deepening and is likely to have long-term effects.’

11. This is a worldwide attack on Labour by Big Capital.

What wage earners, pensioners and beneficiaries are going through in Cyprus, Ireland, Greece, Spain, and Portugal, among others, was imposed on the populations in developing countries during the debt crisis in the 1980-1990s. In the 1990s, during and after the Reagan presidency, the workers in North America were attacked, the Thatcher regime in the UK attacked British workers and similar policies were then applied throughout Europe, including in the ex-eastern bloc countries, which were subjected to the harsh policies imposed on them by their governments and by the IMF. According to the International Labour Organisation’s Global Wage Report 2012-13 ‘In Russia, for example, the real value of wages collapsed to less than 40 percent of their value in the 1990s, and it took another decade before wages recovered to their initial level.’ |21|. Then starting in 2003-5, although less harshly than in the Third World countries (the World’s poorest countries and the emerging economies), the attack turned against German workers. The harmful effects are still felt today by many people, even if Germany exports and the explosion of part-time work has limited the number of unemployed and part of the working class has not been directly affected.

This offensive, which started at the beginning of the 1980s, has intensified since 2007. The International Labour Organisation has analysed a shorter period (1999-2011) and made the following interesting remark: ‘Between 1999 and 2011, average labour productivity in developed economies increased more than twice as much as average wages. In the United States, real hourly labour productivity in the non-farm business sector increased by about 85 per cent since 1980, while real hourly compensation increased by only around 35 per cent. In Germany, labour productivity surged by almost a quarter over the past two decades while real monthly wages remained flat.’ |22|. Further on, the ILO indicates: ‘The global trend has resulted in a change in the distribution of national income, with the workers’ share decreasing, while the share of income earned by Big Capital has increased in most countries. Even in China, a country where wages roughly tripled over the last decade, GDP increased at a faster rate than total wages, and hence the share going to labour went down.’ |23|

Evolution of wages as a percent of global GDP (1980-2011) |24|

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This significant global trend is the demonstration of the increased added-value extracted from Labour by Capital.

12. Illegitimate personal debts

The CADTM has started focussing on a new field of analysis and intervention in the ‘debt system’. While whole populations are direct victims of the ‘debt system’, so are individuals: Indian farmers are being driven to suicide (more than 270,000 between 1995 and 2011 |25|), hoping to free their family from the burden of debt; millions of families are being dispossessed by the repossession of their homes by the creditor banks, mainly in the US (since 2007, 14 million families, unable to pay their mortgages, have been evicted from their homes by banks). The same is true in Spain, where about half a million families have been evicted |26|, in Ireland, in Iceland, in several central European countries and the Balkans. Women (men too) are victims predatory micro-credit systems in the South. English, Chilean, and North American students are over-indebted and needy or in downright misery, (the total amount of student debt in the United States exceeds $1 trillion, the equivalent of the external public debt of Latin America and Sub-Saharan Africa combined).

In fact, if one goes beyond appearances, it is not a collection of individual victims of injustice. These individuals are part of the classes being exploited and robbed by the capitalist system: the small farmers of the South, urban and rural proletariat of the North and South, educated youth from the working classes … Among the victims, women are the most exposed to class and gender exploitation: patriarchy and Capitalism work hand-in-hand to perpetuate a system of oppression and exploitation.

13. Lower interest rates in the United States and Europe have decreased the cost of debt in the South, creating a dangerous feeling of security

The lower interest rates imposed by the central banks of the most industrialised countries starting in 2007-2008 |27|, in order to help their major private banks and capitalist corporations, resulted in a lower cost to refinance the debt in developing countries. The combined low interest rates and high revenues from the exportation of raw materials have created a dangerous feeling of security for the governments of developing countries. However, the situation may be reversed in the near future: the price of raw materials could drop and interest rates may finally go up again |28|.

We must pay careful attention to this situation, and ask the governments in Southern countries to take advantage of the current economic situation that is relatively favourable to their country, and put in place policies in favour of basic human rights and nature protection. In sum, we must make a radical break with the current model of development.

14. Public and private debt has increased throughout the world, and the BIS itself has spoken of the ‘debt trap’

Private and public debt have skyrocketed in an extremely dangerous way since the beginning of the 2000s. First, there was an enormous increase in private debt (of financial corporations (banks in particular), non-financial corporations, and households), principally in the most industrialised countries. Then public debt literally exploded because of how the crisis was managed in the interest of Big Capital. In the most developed countries, public debt has increased by about 40% since 2007 |29|. Meanwhile, the debt of non-financial corporations has risen 30% throughout the world. Household debt has decreased (in response to attacks on buying power, jobs, and general living conditions, those ‘at the bottom’ have paid off their debts). The debts of financial corporations (major private banks in particular) remain the highest (they are much great than public debt), because their books have not really been cleaned up contrary to the reassuring speeches delivered by government leaders. The Bank for International Settlements (BIS), which is a forum for the principal central banks on the planet, launched an alert in its Annual Report published in June 2014 by speaking of the ‘debt trap’! Obviously, we are not astonished to learn that the BIS recommends we should continue pursuing neoliberal policies |30|, whereas in reality we must make a radical break with them.

15. The debt of developing countries, which represents a tiny portion of world debt, also increased

It is important to highlight that the total debt of all developing countries (internal + external public and private debt combined) represents only about 5% of total world debt. Meanwhile, public and private debt in the most industrialised countries, where only 15% of the world population lives, account for 95% of total world debt. The external public debt of all the developing countries (about $1.8 trillion), where 85 % of the world population lives barely represents 1% of total world debt. These figures clearly show how easy it would be to cancel this debt.

In reality, more than ever before, developing countries are net financial creditors of the most developed economies. These figures do not include the ‘ecological and historic debts’ people in developing nations could demand from the dominant classes of the most developed countries (and from the dominant classes in the developing countries, who have been complicit with those in the North).

Overview of the evolution of public debt

Evolution of the external public debt of developing countries from 1980 to 2012 (in billions of dollars) |31|

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* PECOT = central and eastern European countries + Turkey

We observe that external public debt continued to rise from 2000 to 2012, particularly in Latin America, and in the countries of central and eastern Europe + Turkey (PECOT) as well as in south Asia.

Evolution of the external debt of developing countries and of the resources used to pay it back from 1980 to 2012 (in $billions) |32|

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We observe a constant increase in the total volume of external debt. In terms of repayments, between 2005 and 2012, it is especially the ones made by private companies that increased. That means that private companies (industrial, commercial, banking, and so on) took on large amounts of external debt, and if there is a crisis, there is a very high risk that these debts will have to be paid back by the government, which has already occurred many times in the recent past.

16. Poor countries issue and sell external debt bonds on international markets

Rwanda and Senegal, two poor and heavily indebted countries, have sold public debt bonds on the financial markets of the North. This has never been seen before in the last 30 years. The Ivory Coast, having emerged from a situation of civil war just a few years ago, has also issued bonds although it is also one of the poor and heavily indebted countries. Kenya and Zambia have also issued debt bonds. This testifies to a highly peculiar international situation: the financial investors of the North hold huge cash assets, and faced with very low interest rates in their region, are on the lookout for higher yields. Senegal, Zambia, and Rwanda promise a yield of 6 to 8% on their bonds. They therefore attract financial companies, which seek to place their cash on a provisional basis even if the risks are high. The governments of these poor countries become euphoric and try to make their people believe that happiness is just around the corner although the situation may take a dramatic turn. These leaders are accumulating debt in a completely irresponsible way, and when the economic situation deteriorates, it will be their people who will have to foot the bill.
Furthermore, the bonds they issue are linked to contracts including clauses that could be real time bombs. We must require public authorities to make the contents of these contracts accessible to the public.

17. The Fed is destabilizing emerging market economies

When the US Federal Reserve System (the Fed) hinted in May 2013 that it would gradually normalize its policy, there was an immediate negative impact on the ‘emerging’ economies. What changes were proposed?

1. Reducing purchases of toxic assets |33| from the US banks, made to relieve them of this burden.
2. Reducing the acquisitions of US Treasury Securities from these banks, which the Fed does in order to give them cash injections |34|.
3. Raising interest rates (0.25% today).

This announcement itself was enough to lead major financial companies in the US and other countries (banks and their satellites in the shadow banking system, mutual funds, etc.) to pack-off some of their liquid investments from the emerging market economies (EMEs). This destabilized those economies: plunge in stock markets and currency depreciation (Indonesia, Turkey, Brazil, India, South Africa …) |35|. In fact, the low interest rates prevailing in the US and Europe, combined with the central banks’ massive cash injections in the economy, have always set financial companies on the trail of maximum profit by investing in the EMEs, which offer better returns than the North. The outflow of financial investment from the EMEs towards the most industrialized economies can be explained by the fact that the financial companies expected attractive returns in the North as soon as the Fed hiked interest rates |36|. These companies thought that other ‘investors’ would withdraw their capital from these countries and it was better to act first. A herd mentality response resulted in a self-fulfilling prophecy.

Finally, the Fed did not raise interest rates and waited till the end of 2013 to reduce purchases of structured securities and treasury bills from banks. The dust has almost settled.

The situation in June 2013 gives some idea of ​​what might happen if the Fed increases interest rates significantly. The Bank for International Settlements (BIS), the central banks’ central bank, says ‘Capital flows could reverse quickly when interest rates in the advanced economies eventually go up or when perceived domestic conditions in the host economies deteriorate. In May and June 2013, the mere possibility that the Federal Reserve would begin tapering its asset purchases led to rapid outflows from funds investing in EME securities’ (BIS, 84th Annual Report, 2014, p. 76, http://www.bis.org/publ/arpdf/ar201…)

The BIS brings to light a worrying trend: financial companies that invest part of their assets in EMEs do so in the short term. They can swiftly withdraw their funds if they discover other profitable avenues. The BIS says, ‘A higher proportion of investors with short-term horizons in EME debt could amplify shocks when global conditions deteriorate. Highly volatile fund flows to EMEs indicate that some investors view their investments in these markets as short-term positions rather than long-term holdings. This is in line with the gradual shift from traditional open or close-end funds to exchange- traded funds (ETFs), which now account for around a fifth of all net assets of dedicated EME bond and equity funds, up from around 2% 10 years ago… ETFs can be bought and sold on exchanges at a low cost, at least in normal times, and have been used by investors to convert illiquid securities into liquid instruments.’ (BIS, 84th Annual Report, 2014, p. 77, http://www.bis.org/publ/arpdf/ar201…).

In short, the wellbeing of the EMEs depends a great deal on the policy followed by the most industrialised economies (especially the US, Europe, and Japan). A hike in interest rates in the US may result in a significant outflow of volatile capital invested in EMEs with higher returns in mind.

In addition, roughly 10% of the debt securities maturing from 2020 or later are callable, and an unknown proportion have covenants that allow investors to demand accelerated repayment if the borrower’s conditions deteriorate.’ (BIS, 84th Annual Report, 2014, p. 76. http://www.bis.org/publ/arpdf/ar201…) This means that financial companies that purchased debt securities maturing in a relatively distant future (2020 or later) can demand accelerated and full repayment from a crisis-hit country. Obviously, this can only aggravate the situation of an indebted country: all inflows will stop simultaneously. This is another reason why the populations of developing nations need to be aware of the serious dangers posed by their country’s public debt. Payment of the illegitimate portion of the debt must be challenged immediately.

The decline in revenues from raw material exports is another factor that might lead to a fresh and acute debt crisis in developing countries, since China – a major consumer of raw materials for its manufacturing industry – has reduced its huge imports. A drop in the price of raw materials can be fatal to the economic health of developing countries, which depend mainly on exports. In this respect, raw materials prices might also drop if the Fed increases interest rates, as this reduces speculation responsible for high prices. The combined effect of a hike in interest rates and a decline in raw material prices could produce a situation similar to what happened in the early 1980s, when the debt crisis exploded in developing countries. It is imperative to learn from that crisis and to act, so that the Southern people do not have to foot the bill again.

18. Vulture funds |37|

Public debt has become the target of the speculative strategies of ‘litigating creditors, known as ‘vulture funds’. These are private investment funds, most of them located in tax havens, which specialise in buying up debt securities from States that are in default or on the verge of default. They then sue these States in the courts of English-speaking countries, demanding that they reimburse their debt at its nominal value, with the addition of interest, penalties for late payment, and court costs. Unlike traditional creditors, they refuse to participate in any negotiation and restructuring operation, preferring judicial solutions, and in case of non-payment, seizure of debtors’ assets (diplomatic properties, revenues from exports, and various assets invested abroad). Since the 2000s, some twenty States that are among the most heavily indebted on the planet have fallen prey to these strategies, in South America (Argentina, Nicaragua, Honduras, and Peru) and Africa (Sierra Leone, the Republic of the Congo, and Uganda), during major judicial-financial battles that are still in progress today. Since 2007, the phenomenon has been directed against countries in Southern Europe (Greece, Spain, and Portugal). In the future, vulture strategies are likely to prosper in the South and North. Newly issued debts continue to be placed under American or British law, which is favourable to creditors, and certain countries are again contracting debt on the international capital markets and show a preference for indebtedness to China, which will encourage future debt repurchases on secondary markets.

Argentina was in the spotlight in 2014, when the US Supreme Court rejected an appeal by the Argentine government, and ruled in favour of the vulture funds NML and Aurelius, forcing Argentina to pay them $1.33 billion. Argentina adopted a law on 10 September 2014 aimed at providing it with a mechanism to defend itself against vulture funds. The CADTM would like to point out, however, that the best defence against them consists in refusing to recognise the competence of foreign courts in settling claims with creditors and inserting a clause in contracts stipulating that the local courts have jurisdiction.

19. Citizen audits

In recent years, movements have developed to work towards conducting a citizen audit to identify illegitimate, odious, and illegal debts. These movements in several countries |38| provide an opportunity for interesting and enriching reflection to clarify which parts of public debt should not be paid. With no claim to being exhaustive, we can propose the following definitions:

a) Illegitimate public debt: debt contracted by government authorities with no concern for the general interest or in such a way as to be detrimental to it.

b) Illegal public debt: debt contracted by the government authorities in flagrant violation of the prevailing legal order.

c) Odious public debt: credits extended to authoritarian regimes or which impose conditions for reimbursement that violate fundamental social rights.

d) Unsustainable public debt: debt whose reimbursement condemns the people of a country to impoverishment and deterioration of health and public education, increased unemployment, or problems of malnutrition. In other words, debt whose reimbursement makes it impossible for government authorities to guarantee fundamental human rights.

A citizen audit of public debt, combined in certain cases with unilateral sovereign suspension of its payment, can enable the illegitimate, unsustainable, and/or illegal part of the debt to be abolished/repudiated and the remaining part to be greatly reduced. It is also a way of discouraging this type of indebtedness in the future.

20. By way of conclusion: the impact of the ‘debt system’ – more topical than ever

The ‘debt system’ exploits public resources to pay creditors, to the detriment of people’s needs and fundamental rights. The relationship between creditors and debtors is therefore terribly unbalanced in favour of the former. One aspect common to the Latin American external debt crisis that erupted in 1982 and the euro crisis since 2010 is that in both cases the first reaction was to deny the evidence and do nothing. Subsequently, the measures taken are set up in favour of the creditors’ interests. In order to try to inverse the public deficit trend and thus be able to pay off the debt, adjustment or austerity policies are applied, whatever the price to be paid by the people, who are victims of the crisis. The creditors, supported by local elites, demand that the debt be reimbursed and that the adjustments be made to prioritise this repayment instead of all social needs, thus negatively affecting people’s most basic rights. The measures put in place also prove to be counter-productive, because they only make the problem worse. Excessive indebtedness becomes a structural problem.

The ‘debt system’ aggravates inequalities. Debt enables a privileged minority to monopolise a series of financial revenues that enable it to increase its wealth permanently. By consequence, the State loses resources necessary to satisfy people’s fundamental needs. The richest minority accumulates wealth, inequalities grow, and the increased power of the few enables them to exert greater pressure on public authorities with regard to policies. The rise in debt, and its concentration in a few hands, leads to a redistribution of income in favour of the richest members of society, which in turn is both the cause and consequence of heavier exploitation of labour and natural resources. In response, the CADTM, together with other organisations, argues that it is essential to audit public debt under citizen control in order to clarify its origins and determine which part should be considered illegitimate and/or illegal and therefore cancelled.

However, the CADTM is denouncing the entire debt system. It is the same mechanisms of domination and exploitation that govern public debts and illegitimate private debts, respectively subjugating people as collective subjects and as lower social class individuals (indebted small-scale farmers, families expelled from their homes by banks, women trapped by the micro-credit system in Southern countries, over-indebted students, etc.)

Of course, cancelling all illegitimate debts needs to be backed by other measures. For example, the socialisation of the banking and insurance sector to transform it into a public service, a radical reform of the tax system in favour of the overwhelming majority of the population, the expropriation of the energy sector and transformation into a public service, a radical reduction of working hours combined with job creation and increases in salary and social benefits, the improvement and extension of public services, the improvement of redistributive retirement pension systems, effective equality between men and women, and radical political reforms including changed constitutional processes. The aim is for these measures to be part of a vast plan for social, ecological, and political transition in order to get out of the devastating capitalist system. The struggle against the ‘debt system’ as a whole, more necessary than ever in both southern and northern countries, is part of the much broader-based struggle for a world freed from all forms of oppression and exploitation.


Translation by Christine, Snake, Mike, Charlie and Adam. Thanks a lot to all of them !

Footnotes

|1| For want of space, some aspects of the crisis, such as the climate crisis, are merely mentioned. The text does not cover every aspect of the international context. N.B. all figures are expressed in US dollars = $, unless specified.

|2| Éric Toussaint, Bank of the South An alternative to the IMF World Bank (CADTM, 2014). Available on line: http://www.scribd.com/doc/235391487…. We can also mention the massive and victorious mobilisation of the Argentine people in December 2001 in order to oust Fernando De la Rua’s neoliberal government.

|3| The CADTM participated directly in the presidential commission that led the audit of the Ecuadorian debt. Éric Toussaint, « An III de la révolution citoyenne en Équateur », 22 October 2009, http://cadtm.org/An-III-de-la-revol… (not available in English).

|4| Éric Toussaint, « Les leçons de l’Équateur pour l’annulation de la dette illégitime », 29 May 2013, http://cadtm.org/Les-lecons-de-l-Eq… (not available in English). Recently, however, Ecuador’s government seems to have shifted back to a more traditional (and harmful) approach: loans from China, a first loan from the World Bank (since 2005) in 2014, new issue of Ecuadorian securities on the financial markets led by Citibank and Crédit Suisse. This is worrying.

|5| This was a reversal of the previous trend. Generally speaking, the prices of raw materials dropped sharply as of 1981 and remained low until 2003-2004.

|6| Note on terms used: In the text that follows, the terms ‘developing countries’ (DCs) and ‘developed countries’ are simply the terms already used by the international institutions– because most of the data analysed comes from these institutions. The terms used to designate the countries targeted for World Bank development loans have changed throughout the years. At first, they were known as ‘backward regions’, then ‘under-developed countries’, and finally, ‘developing countries’, some of which are now called ‘emerging countries’. Nonetheless, it is important to recall the ideological and Western-centric connotations of this terminology. Indeed, essentially it takes into account only the economic dimension of development, and implies that there is only one model of development (the Western industrial and ‘extractivist’ capitalist model), and that certain countries are ‘behind’ and must catch up with other countries who are ‘further ahead’. The CADTM vehemently rejects this vision of the world. Likewise, when we make use of the terms such as ‘Southern countries’ and ‘Northern countries’, we are conscious that they are incorrect from a strictly geographic point of view.

|7| Bank for International Settlements (BIS), 84th Annual Report 2014, Basel, June 2014, p. 102, table V.1. Annual changes in foreign exchange reserves.

|8| Calculated by CADTM on the basis of US Treasury Department data, Major foreign holders of treasury securities, March 2014,  http://www.treasury.gov/ticdata/Pub…

|9| See the yields published by the US Treasury: http://www.treasury.gov/resource-ce… (accessed 24 September 2014 ).

|10| The IMF has, however, succeeded in returning to the forefront of the scene in western Europe with the crisis that has severely affected the weakest Eurozone countries (Greece, Ireland, Portugal, Cyprus, Slovenia, and two Baltic Republics, Estonia and Latvia).

|11| Bank for International Settlements (BIS), 84th Annual Report 2014, op.cit.

|12| See Daniel Munevar’s (CADTM economist) critical analysis, ‘BRICS Bank: Is it an alternative for development finance?’, 28 July 2014, http://cadtm.org/BRICS-Bank-Is-it-a…. See also, Benito Pérez/Éric Toussaint, ‘The alternative, would be a Bank of the South, not the BRICS Bank’, interview of Éric Toussaint, Le Courrier, 19 August 2014 (http://cadtm.org/The-alternative-wo…).

|13| Inter-American Development Bank (IADB), Latin American Macro Watch Data Tool. http://www.iadb.org. The data for Argentina’s debt correspond to 2012 instead of 2013.

|14| That is what happened between May and December 2013 for countries such as Turkey, Indonesia, and Brazil.

|15| In the case of Brazil, in 2014, government officials borrowed from private banks at an interest rate of 11%, while inflation was 6.5 %, which means hefty profits for the bankers.

|16| Éric Toussaint, ‘Une fois encore sur les causes de la crise alimentaire,’ (‘More on the causes of the food crisis’), 9 October 2008, http://cadtm.org/Une-fois-encore-su… (in French). See also: Damien Millet and Éric Toussaint, ‘Pourquoi une faim galopante au XXIe siècle et comment l’éradiquer ?’ (‘Why is hunger still rampant in the 21st century and how to eliminate it?’), 24 April 2009, http://cadtm.org/Pourquoi-une-faim-… (in French); Éric Toussaint, ‘Banks speculate on raw materials and food’, 10 February 2014, http://cadtm.org/Banks-speculate-on…

|17| Éric De Ruest and Renaud Duterme, La dette cachée de l’économie, Paris: Les Liens qui Libèrent, 2014. See  http://cadtm.org/La-dette-cachee-de… (in French).

|18| Éric Toussaint, « Du Sud au Nord : crise de la dette et programmes d’ajustement », 4 June 2014, http://cadtm.org/Du-Sud-au-Nord-cri… (not available in English).

|19| Éric Toussaint, ‘Bankocracy: from the Venetian Republic to Mario Draghi and Goldman Sachs’, 11 November 2013, http://cadtm.org/Nouvelle-traductio…

|20https://wcd.coe.int/com.instranet.I…

|21| ILO Global Wage Report 2012-2013, Executive Summary, Geneva, December 2012.

|22| ILO, ibidem, pp. VI-VII.

|23| ILO, ibidem, p. VII. The same report also underscores the increasing differences between low and high incomes in each country.

|24| UNCTAD, Trade and development report 2013, United Nations, New York and Geneva, 2013, p.15. Available at http://unctad.org/en/PublicationsLi…

|25| According to Law in India, normally, if the head of a family dies, his debt cannot be transmitted to his family. This is one of the reasons some Indian agricultural smallholders commit suicide hoping to thus free their families from debt. However, this does not always work in practice. Swallowing pesticides is one of the most common methods used to commit suicide. It is also worth nothing that outside India, in Europe, especially in France there is an alarming rate of suicide among small farmers.

|26| Éric Toussaint, ‘Banks and the New “Too Big to Jail” Doctrine’, 9 March 2014, http://cadtm.org/Banks-and-the-New-…; ‘Bank abuses in the real estate sector and illegal foreclosures in the United States’, 4 April 2014, http://cadtm.org/Bank-abuses-in-the…

|27| In November 2014, the key interest rate of the US Federal Reserve stands at 0.25 %, that of the European Central Bank is 0.05 %, the Bank of England 0.5 %. The rate of the Bank of Japan has been 0% since the country entered a crisis in 1990.

|28| For raw materials, the price of a barrel of oil dropped significantly from May to November 2014. As I am writing these lines on 9 November 2014, the price of a barrel of oil was $105 on 1 May, 2014 and reached its lowest level in 13 years on 7 November 2014 ($83 dollars). As for interest rates, since June 2014 the US Federal Reserve has been suggesting they will soon increase. Although the Fed’s key rate is very low today (0.25%), the situation must be monitored closely. To that effect, see point 17 about what happened in 2013 when the economies of certain emerging countries were strongly shaken up.

|29| This is the estimate provide by the Bank of International Settlements (BIS): 84th Annual Report, op.cit., p. 10, Figure I.1. (June 2014)

|30| Bank of International Settlements (BIS), Ibidem, page 17.

|31| World Bank, International Debt Statistics, http://databank.worldbank.org/data/…

|32| World Bank, op.cit. Debt servicing is the total amount of repayments for interest and capital.

|33| The Fed has bought huge amounts of Mortgage-Backed Securities (MBS) from US banks. Its purchases of such assets between 2008 and early 2014 were worth more than $1.5 trillion. During 2012-2013, it purchased toxic assets worth $40 billion per month from banks and real estate agencies that guarantee mortgages, to reduce their burden. By the end of 2013, it started to make fewer purchases, which went up to $35 billion per month by March 2014. By October 2014, the Fed was holding $1.7 trillion in MBS, or about 21% of the total volume of such assets, an enormous amount. The Fed finally stopped purchasing MBS in November 2014.

|34| By October 2014, the Fed was holding US Treasury Securities worth $2.45 trillion. Please note, contrary to popular belief, the Fed does not buy Treasury Securities directly from the Treasury, it buys them through open market operations from private banks which had acquired them previously. See the US laws on this matter: http://www.federalreserve.gov/about…

|35| The Bank for International Settlements (BIS) describes this situation as follows: – ‘The first episode was abrupt and generalised in nature, with sharp asset price movements ending a period of fairly stable interest and exchange rates. As the sell-off spilled over from advanced economies, EMEs experienced a sharp reversal of portfolio flows, especially in June 2013. . . EME equities fell by 16% before stabilising in July, and sovereign bond yields jumped more than 100 basis points, driven by rising concerns over sovereign risk… At first, the indiscriminate retrenchment from EMEs affected many currencies simultaneously, leading to correlated depreciations amid high volatility. The currencies of Brazil, India, Indonesia, South Africa and Turkey depreciated by more than 10% against the US dollar during the first episode…. Brazil, India, Indonesia and Russia each lost more than $10 billion in reserves. Countries with rapid credit growth, high inflation or large current account deficits were seen as more vulnerable and experienced sharper depreciations.’ (BIS, 84th Annual Report, 2014, pp. 27-28). http://www.bis.org/publ/arpdf/ar201…

|36| For an analysis of what happened in 2013, please read Daniel Munevar’s “Inestabilidad en los mercados emergentes: El fin de un ciclo?” available only in Spanish here : http://cadtm.org/Inestabilidad-en-l… (1st part) and http://cadtm.org/Inestabilidad-en-l… (2nd part).

|37| I would like to thank Louise Abellard for her contribution to this point.

|38| Brazil, Spain, Portugal, France, Belgium, and others.

Éric Toussaint is a historian with a doctoral degree in political science. He is the spokesperson for CADTM International, and the author of several books translated into English, including Bankocracy (Merlin Press, 2015), The Life and Crimes of an Exemplary Man (CADTM, 2014), A Glance in the Rear View Mirror. Neoliberal Ideology from its Origins to the Present (Haymarket Books, Chicago, 2012), and The World Bank: A Critical Primer (Pluto Press, London, 2008).

Nov 212014
 

By James Petras, 99GetSmart

svoboda-party-nazi4

Introduction

There are clear signs that a major war is about to break out in Ukraine: A war actively promoted by the NATO regimes and supported by their allies and clients in Asia (Japan) and the Middle East (Saudi Arabia). The war over Ukraine will essentially run along the lines of a full-scale military offensive against the southeast Donbas region, targeting the breakaway ethnic Ukraine-Russian Peoples Republic of Donetsk and Lugansk, with the intention of deposing the democratically elected government, disarming the popular militias, killing the guerrilla resistance partisans and their mass base, dismantling the popular representative organizations and engaging in ethnic cleansing of millions of bilingual Ukraino-Russian citizens. NATO’s forthcoming military seizure of the Donbas region is a continuation and extension of its original violent putsch in Kiev, which overthrew an elected Ukrainian government in February 2014.

The Kiev junta and its newly ‘elected’ client rulers, and its NATO sponsors are intent on a major purge to consolidate the puppet Poroshenko’s dictatorial rule. The recent NATO-sponsored elections excluded several major political parties that had traditionally supported the country’s large ethnic minority populations, and was boycotted in the Donbas region. This sham election in Kiev set the tone for NATO’s next move toward converting Ukraine into one gigantic US multi-purpose military base aimed at the Russian heartland and into a neo-colony for German capital, supplying Berlin with grain and raw materials while serving as a captive market for German manufactured goods.

An intensifying war fever is sweeping the West; the consequences of this madness appear graver by the hour.

War Signs: The Propaganda and Sanctions Campaign, the G20 Summit and the Military Build Up

The official drum- beat for a widening conflict in Ukraine, spearheaded by the Kiev junta and its fascist militias, echoes in every Western mass media outlet, every day. Major mass media propaganda mills and government ‘spokesmen and women’ publish or announce new trumped-up accounts of growing Russian military threats to its neighbors and cross-border invasions into Ukraine. New Russian incursions are ‘reported’ from the Nordic borders and Baltic states to the Caucuses. The Swedish regime creates a new level of hysteria over a mysterious “Russian” submarine off the coast of Stockholm, which it never identifies or locates – let alone confirms the ‘sighting’. Estonia and Latvia claim Russian warplanes violated their air space without confirmation. Poland expels Russian “spies” without proof or witnesses. Provocative full-scale joint NATO-client state military exercises are taking place along Russia’s frontiers in the Baltic States, Poland, Romania and Ukraine.

NATO is sending vast arms shipments to the Kiev junta, along with “Special Forces” advisers and counter-insurgency experts in anticipation of a full-scale attack against the rebels in the Donbas.

The Kiev regime has never abided by the Minsk cease fire. According to the UN Human Rights office 13 people on average – mostly civilians – have been killed each day since the September cease fire. In eight weeks, the UN reports that 957 people have killed – overwhelmingly by Kiev’s armed forces.

The Kiev regime, in turn, has cut all basic social and public services to the Peoples’ Republics’, including electricity, fuel, civil service salaries, pensions, medical supplies, salaries for teachers and medical workers, municipal workers wages; banking and transport have been blockaded.

The strategy is to further strangle the economy, destroy the infrastructure, force an even greater mass exodus of destitute refugees from the densely populated cities across the border into Russia and then to launch massive air, missile, artillery and ground assaults on urban centers as well as rebel bases.

The Kiev junta has launched an all-out military mobilization in the Western regions, accompanied by rabid anti-Russian, anti-Eastern Orthodox indoctrination campaigns designed to attract the most violent far right chauvinist thugs and to incorporate the Nazi-style military brigades into the frontline shock troops. The cynical use of irregular fascist militias will ‘free’ NATO and Germany from any responsibility for the inevitable terror and atrocities in their campaign. This system of ‘plausible deniability’ mirrors the tactics of the German Nazis whose hordes of fascist Ukrainians and Ustashi Croats were notorious in their epoch of ethnic cleansing.

G20-plus-NATO: Support of the Kiev Blitz

To isolate and weaken resistance in the Donbas and guarantee the victory of the impending Kiev blitz, the EU and the US are intensifying their economic, military and diplomatic pressure on Russia to abandon the nascent peoples’ democracy in the south-east region of Ukraine, their principle ally.

Each and every escalation of economic sanctions against Russia is designed to weaken the capacity of the Donbas resistance fighters to defend their homes, towns and cities. Each and every Russian shipment of essential medical supplies and food to the besieged population evokes a new and more hysterical outburst – because it counters Kiev-NATO strategy of starving the partisans and their mass base into submission or provoking their flight to safety across the Russian border.

After suffering a series of defeats, the Kiev regime and its NATO strategists decided to sign a ‘peace protocol’, the so-called Minsk agreement, to halt the advance of the Donbas resistance into the southern regions and to protect its Kiev’s soldiers and militias holed-up in isolated pockets in the East. The Minsk agreement was designed to allow the Kiev junta to build up its military, re-organize its command and incorporate the disparate Nazi militias into its overall military forces in preparation for a ‘final offensive’.  Kiev’s military build-up on the inside and NATO’s escalation of sanctions against Russia on the outside would be two sides of the same strategy: the success of a frontal attack on the democratic resistance of the Donbas basin depends on minimizing Russian military support through international sanctions.

NATO’s virulent hostility to Russian President Putin was on full display at the G20 meeting in Australia: NATO-linked presidents and prime ministers, especially Merkel, Obama, Cameron, Abbott, and Harper’s political threats and overt personal insults paralleled Kiev’s growing starvation blockade of the besieged rebels and population centers in the south-east. Both the G20’s economic threats against Russia and the diplomatic isolation of Putin and Kiev’s economic blockade are preludes to NATO’s Final Solution – the physical annihilation of all vestiges of Donbas resistance, popular democracy and cultural-economic ties with Russia.

Kiev depends on its NATO mentors to impose a new round of severe sanctions against Russia, especially if its planned invasion encounters a well armed and robust mass resistance bolstered by Russian support. NATO is counting on Kiev’s restored and newly supplied military capacity to effectively destroy the southeast centers of resistance.

NATO has decided on an ‘all-or-nothing campaign’: to seize all of Ukraine or, failing that, destroy the restive southeast, obliterate its population and productive capacity and engage in an all-out economic (and possibly shooting) war with Russia. Chancellor Angela Merkel is on board with this plan despite the complaints of German industrialists over their huge loss of export sales to Russia. President Hollande of France has signed on dismissing the complaints of trade unionists over the loss of thousands French jobs in the shipyards. Prime Minister David Cameron is eager for an economic war against Moscow, suggesting the bankers of the City of London find new channels to launder the illicit earnings of Russian oligarchs.

The Russian Response

Russian diplomats are desperate to find a compromise, which allows Ukraine’s ethnic Ukraine- Russian population in the southeast to retain some autonomy under a federation plan and regain influence within the ‘new’ post-putsch Ukraine. Russian military strategists have provided logistical and military aid to the resistance in order to avoid a repeat of the Odessa massacre of ethnic Russians by Ukrainian fascists on a massive scale. Above all, Russia cannot afford to have NATO-Nazi-Kiev military bases along its southern ‘underbelly’, imposing a blockade of the Crimea and forcing a mass exodus of ethnic Russians from the Donbas. Under Putin, the Russian government has tried to propose compromises allowing Western economic supremacy over Ukraine but without NATO military expansion and absorption by Kiev.

That policy of conciliation has repeatedly failed.

The democratically elected ‘compromise regime’ in Kiev was overthrown in February 2014 in a violent putsch, which installed a pro-NATO junta.

Kiev violated the Minsk agreement with impunity and encouragement from the NATO powers and Germany.

The recent G20 meeting in Australia featured a rabble-rousing chorus against President Putin. The crucial four-hour private meeting between Putin and Merkel turned into a fiasco when Germany parroted the NATO chorus.

Putin finally responded by expanding Russia’s air and ground troop preparedness along its borders while accelerating Moscow’s economic pivot to Asia.

Most important, President Putin has announced that Russia cannot stand by and allow the massacre of a whole people in the Donbas region.

Is Poroshenko’s forthcoming blitz against the people of southeast Ukraine designed to provoke a Russian response – to the humanitarian crisis? Will Russia confront the NATO-directed Kiev offensive and risk a total break with the West?

James Petras latest book is THE POLITICS OF IMPERIALISM: THE US, ISRAEL AND THE MIDDLE EAST (CLARITY PRESS:ATLANTA)

Nov 202014
 

By William Blum, 99GetSmart

1bqFaoP

“Russia reinforced what Western and Ukrainian officials described as a stealth invasion on Wednesday [August 27], sending armored troops across the border as it expanded the conflict to a new section of Ukrainian territory. The latest incursion, which Ukraine’s military said included five armored personnel carriers, was at least the third movement of troops and weapons from Russia across the southeast part of the border this week.”

None of the photos accompanying this New York Times story online showed any of these Russian troops or armored vehicles.

“The Obama administration,” the story continued, “has asserted over the past week that the Russians had moved artillery, air-defense systems and armor to help the separatists in Donetsk and Luhansk. ‘These incursions indicate a Russian-directed counteroffensive is likely underway’, Jen Psaki, the State Department spokeswoman, said. At the department’s daily briefing in Washington, Ms. Psaki also criticized what she called the Russian government’s ‘unwillingness to tell the truth’ that its military had sent soldiers as deep as 30 miles inside Ukraine territory.”

Thirty miles inside Ukraine territory and not a single satellite photo, not a camera anywhere around, not even a one-minute video to show for it. “Ms. Psaki apparently [sic] was referring to videos of captured Russian soldiers, distributed by the Ukrainian government.” The Timesapparently forgot to inform its readers where they could see these videos.

“The Russian aim, one Western official said, may possibly be to seize an outlet to the sea in the event that Russia tries to establish a separatist enclave in eastern Ukraine.”

This of course hasn’t taken place. So what happened to all these Russian soldiers 30 miles inside Ukraine? What happened to all the armored vehicles, weapons, and equipment?

“The United States has photographs that show the Russian artillery moved into Ukraine, American officials say. One photo dated last Thursday, shown to a New York Times reporter, shows Russian military units moving self-propelled artillery into Ukraine. Another photo, dated Saturday, shows the artillery in firing positions in Ukraine.”

Where are these photographs? And how will we know that these are Russian soldiers? And how will we know that the photos were taken in Ukraine? But most importantly, where are the fucking photographs?

Why am I so cynical? Because the Ukrainian and US governments have been feeding us these scare stories for eight months now, without clear visual or other evidence, often without even common sense. Here are a few of the many other examples, before and after the one above:

  • The Wall Street Journal (March 28) reported: “Russian troops massing near Ukraine are actively concealing their positions and establishing supply lines that could be used in a prolonged deployment, ratcheting up concerns that Moscow is preparing for another [sic] major incursion and not conducting exercises as it claims, US officials said.”
  • “The Ukrainian government charged that the Russian military was not only approaching but had actually crossed the border into rebel-held regions.” (Washington Post, November 7)
  • “U.S. Air Force Gen. Philip M. Breedlove told reporters in Bulgaria that NATO had observed Russian tanks, Russian artillery, Russian air defense systems and Russian combat troops enter Ukraine across a completely wide-open border with Russia in the previous two days.” (Washington Post, November 13)
  • “Ukraine accuses Russia of sending more soldiers and weapons to help rebels prepare for a new offensive. The Kremlin has repeatedly denied aiding the separatists.” (Reuters, November 16)

Since the February US-backed coup in Ukraine, the State Department has made one accusation after another about Russian military actions in Eastern Ukraine without presenting any kind of satellite imagery or other visual or documentary evidence; or they present something that’s very unclear and wholly inconclusive, such as unmarked vehicles, or unsourced reports, or citing “social media”; what we’re left with is often no more than just an accusation. The Ukrainian government has matched them.

On top of all this we should keep in mind that if Moscow decided to invade Ukraine they’d certainly provide air cover for their ground forces. There has been no mention of air cover.

This is all reminiscent of the numerous stories in the past three years of “Syrian planes bombing defenseless citizens”. Have you ever seen a photo or video of a Syrian government plane dropping bombs? Or of the bombs exploding? When the source of the story is mentioned, it’s almost invariably the rebels who are fighting against the Syrian government. Then there’s the “chemical weapon” attacks by the same evil Assad government. When a photo or video has accompanied the story I’ve never once seen grieving loved ones or media present; not one person can be seen wearing a gas mask. Is it only children killed or suffering? No rebels?

And then there’s the July 17 shootdown of Malaysia Flight MH17, over eastern Ukraine, taking 298 lives, which Washington would love to pin on Russia or the pro-Russian rebels. The US government – and therefore the US media, the EU, and NATO – want us all to believe it was the rebels and/or Russia behind it. The world is still waiting for any evidence. Or even a motivation. Anything at all. President Obama is not waiting. In a talk on November 15 in Australia, he spoke of “opposing Russia’s aggression against Ukraine – which is a threat to the world, as we saw in the appalling shoot-down of MH17”. Based on my reading, I’d guess that it was the Ukranian government behind the shootdown, mistaking it for Putin’s plane that reportedly was in the area.

Can it be said with certainty that all the above accusations were lies? No, but the burden of proof is on the accusers, and the world is still waiting. The accusers would like to create the impression that there are two sides to each question without actually having to supply one of them.

The United States punishing Cuba

For years American political leaders and media were fond of labeling Cuba an “international pariah”. We haven’t heard that for a very long time. Perhaps one reason is the annual vote in the United Nations General Assembly on the resolution which reads: “Necessity of ending the economic, commercial and financial embargo imposed by the United States of America against Cuba”. This is how the vote has gone (not including abstentions):

Year Votes (Yes-No) No Votes
1992 59-2 US, Israel
1993 88-4 US, Israel, Albania, Paraguay
1994 101-2 US, Israel
1995 117-3 US, Israel, Uzbekistan
1996 138-3 US, Israel, Uzbekistan
1997 143-3 US, Israel, Uzbekistan
1998 157-2 US, Israel
1999 155-2 US, Israel
2000 167-3 US, Israel, Marshall Islands
2001 167-3 US, Israel, Marshall Islands
2002 173-3 US, Israel, Marshall Islands
2003 179-3 US, Israel, Marshall Islands
2004 179-4 US, Israel, Marshall Islands, Palau
2005 182-4 US, Israel, Marshall Islands, Palau
2006 183-4 US, Israel, Marshall Islands, Palau
2007 184-4 US, Israel, Marshall Islands, Palau
2008 185-3 US, Israel, Palau
2009 187-3 US, Israel, Palau
2010 187-2 US, Israel
2011 186-2 US, Israel
2012 188-3 US, Israel, Palau
2013 188-2 US, Israel
2014 188-2 US, Israel

This year Washington’s policy may be subject to even more criticism than usual due to the widespread recognition of Cuba’s response to the Ebola outbreak in Africa.

Each fall the UN vote is a welcome reminder that the world has not completely lost its senses and that the American empire does not completely control the opinion of other governments.

Speaking before the General Assembly before last year’s vote, Cuban Foreign Minister Bruno Rodriguez declared: “The economic damages accumulated after half a century as a result of the implementation of the blockade amount to $1.126 trillion.” He added that the blockade “has been further tightened under President Obama’s administration”, some 30 US and foreign entities being hit with $2.446 billion in fines due to their interaction with Cuba.

However, the American envoy, Ronald Godard, in an appeal to other countries to oppose the resolution, said:

The international community … cannot in good conscience ignore the ease and frequency with which the Cuban regime silences critics, disrupts peaceful assembly, impedes independent journalism and, despite positive reforms, continues to prevent some Cubans from leaving or returning to the island. The Cuban government continues its tactics of politically motivated detentions, harassment and police violence against Cuban citizens. 1

So there you have it. That is why Cuba must be punished. One can only guess what Mr. Godard would respond if told that more than 7,000 people were arrested in the United States during the Occupy Movement’s first 8 months of protest in 2011-12 2; that many of them were physically abused by the police; and that their encampments were violently destroyed.

Does Mr. Godard have access to any news media? Hardly a day passes in America without a police officer shooting to death an unarmed person.

As to “independent journalism” – What would happen if Cuba announced that from now on anyone in the country could own any kind of media? How long would it be before CIA money – secret and unlimited CIA money financing all kinds of fronts in Cuba – would own or control most of the media worth owning or controlling?

The real reason for Washington’s eternal hostility toward Cuba has not changed since the revolution in 1959 – The fear of a good example of an alternative to the capitalist model; a fear that has been validated repeatedly over the years as many Third World countries have expressed their adulation of Cuba.

How the embargo began: On April 6, 1960, Lester D. Mallory, US Deputy Assistant Secretary of State for Inter-American Affairs, wrote in an internal memorandum: “The majority of Cubans support Castro … The only foreseeable means of alienating internal support is through disenchantment and disaffection based on economic dissatisfaction and hardship. … every possible means should be undertaken promptly to weaken the economic life of Cuba.” Mallory proposed “a line of action which … makes the greatest inroads in denying money and supplies to Cuba, to decrease monetary and real wages, to bring about hunger, desperation and overthrow of government.” 3

Later that year, the Eisenhower administration instituted its suffocating embargo against its everlasting enemy.

The United States judging and punishing the rest of the world

In addition to Cuba, Washington currently is imposing economic and other sanctions against Burma, Democratic Republic of the Congo, Iran, China, North Korea, South Korea, United Arab Emirates, Pakistan, Sri Lanka, Switzerland, Turkey, Germany, Malaysia, South Africa, Mexico, South Sudan, Sudan, Russia, Syria, Venezuela, India, and Zimbabwe. These are sanctions mainly against governments, but also against some private enterprises; there are also many other sanctions against individuals not included here. 4

Imbued with a sense of America’s moral superiority and “exceptionalism”, each year the State Department judges the world, issuing reports evaluating the behavior of all other nations, often accompanied by sanctions of one kind or another. There are different reports rating how each lesser nation has performed in the previous year in areas such as religious freedom, human rights, the war on drugs, trafficking in persons, and sponsors of terrorism. The criteria used in these reports are often political. Cuba, for example, is always listed as a sponsor of terrorism whereas anti-Castro exile groups in Florida, which have committed literally hundreds of terrorist acts over the years, are not listed as terrorist groups or supporters of such.

Cuba, which has been on the sponsor-of-terrorism list longer (since 1982) than any other country, is one of the most glaring anomalies. The most recent State Department report on this matter, in 2012, states that there is “no indication that the Cuban government provided weapons or paramilitary training to terrorist groups.” 5 There are, however, some retirees of Spain’s Basque terrorist group ETA (which appears on the verge of disbanding) in Cuba, but the report notes that the Cuban government evidently is trying to distance itself from them by denying them services such as travel documents. Some members of the Revolutionary Armed Forces of Colombia (FARC) have been allowed into Cuba, but that was because Cuba was hosting peace talks between the FARC and the Colombian government, which the report notes.

The US sanctions mechanism is so effective and formidable that it strikes fear (of huge fines) into the hearts of banks and other private-sector organizations that might otherwise consider dealing with a listed state.

Some selected thoughts on American elections and democracy

In politics, as on the sickbed, people toss from one side to the other, thinking they will be more comfortable.
– Johann Wolfgang von Goethe (1749-1832)

  • 2012 presidential election:
    223,389,800 eligible to vote
    128,449,140 actually voted
    Obama got 65,443,674 votes
    Obama was thus supported by 29.3% of eligible voters
  • There are 100 million adults in the United States who do not vote. This is a very large base from which an independent party can draw millions of new votes.
  • If God had wanted more of us to vote in elections, he would give us better candidates.
  • “The people can have anything they want. The trouble is, they do not want anything. At least they vote that way on election day.” – Eugene Debs, American socialist leader (1855-1926)
  • “If persons over 60 are the only American age group voting at rates that begin to approximate European voting, it’s because they’re the only Americans who live in a welfare state – Medicare, Social Security, and earlier, GI loans, FHA loans.” – John Powers
  • “The American political system is essentially a contract between the Republican and Democratic parties, enforced by federal and state two-party laws, all designed to guarantee the survival of both no matter how many people despise or ignore them.” – Richard Reeves (1936- )
  • The American electoral system, once the object of much national and international pride, has slid inexorably from “one person, one vote”, to “one dollar, one vote”.
  • Noam Chomsky: “It is important to bear in mind that political campaigns are designed by the same people who sell toothpaste and cars. Their professional concern in their regular vocation is not to provide information. Their goal, rather, is deceit.”
  • If the Electoral College is such a good system, why don’t we have it for local and state elections?
  • “All the props of a democracy remain intact – elections, legislatures, media – but they predominantly function at the service of the oligarchy.” – Richard Wolff
  • The RepDem Party holds elections as if they were auctions; indeed, an outright auction for the presidency would be more efficient. To make the auction more interesting we need a second party, which must at a minimum be granted two privileges: getting on the ballot in all 50 states and taking part in television debates.
  • The US does in fact have two parties: the Ins and the Outs … the evil of two lessers.
  • Alexander Cockburn: “There was a time once when ‘lesser of two evils’ actually meant something momentous, like the choice between starving to death on a lifeboat, or eating the first mate.”
  • Cornel West has suggested that it’s become difficult to even imagine what a free and democratic society, without great concentrations of corporate power, would look like, or how it would operate.
  • The United States now resembles a police state punctuated by elections.
  • How many voters does it take to change a light bulb? None. Because voters can’t change anything.
  • H.L. Mencken (1880-1956): “As democracy is perfected, the office represents, more and more closely, the inner soul of the people. We move toward a lofty ideal. On some great and glorious day the plain folks of the land will reach their heart’s desire at last, and the White House will be adorned by a downright moron.”
  • “All elections are distractions. Nothing conceals tyranny better than elections.” – Joel Hirschhorn
  • In 1941, one of the country’s more acerbic editors, a priest named Edward Dowling, commented: “The two greatest obstacles to democracy in the United States are, first, the widespread delusion among the poor that we have a democracy, and second, the chronic terror among the rich, lest we get it.”
  • “Elections are a necessary, but certainly not a sufficient, condition for democracy. Political participation is not just a casting of votes. It is a way of life.” – UN Human Development Report, 1993
  • “If you don’t vote, you can’t complain!” I reply, “You have it backwards. If you DO vote, you can’t complain. You asked for it, and they’re going to give it to you, good and hard.”
  • “How to get people to vote against their interests and to really think against their interests is very clever. It’s the cleverest ruling class that I have ever come across in history. It’s been 200 years at it. It’s superb.” – Gore Vidal
  • We can’t use our democracy/our vote to change the way the economy functions. This is very anti-democratic.
  • What does a majority vote mean other than that the sales campaign was successful?
  • Roman Emperor Marcus Aurelius: “The opinion of 10,000 men is of no value if none of them know anything about the subject.”
  • We do have representative government. The question is: Who does our government represent?
  • “On the day after the 2002 election I watched a crawl on the bottom of the CNN news screen. It said, ‘Proprietary software may make inspection of electronic voting systems impossible.’ It was the final and absolute coronation of corporate rights over democracy; of money over truth.” – Mike Ruppert, RIP
  • “It’s not that voting is useless or stupid; rather, it’s the exaggeration of the power of voting that has drained the meaning from American politics.” – Michael Ventura
  • After going through the recent national, state and local elections, I am now convinced that taxation without representation would have been a much better system.
  • “Ever since the Constitution was illegally foisted on the American people we have lived in a blatant plutocracy. The Constitution was drafted in secret by a self-appointed elite committee, and it was designed to bring three kinds of power under control: Royalty, the Church, and the People. All were to be subjugated to the interests of a wealthy elite. That’s what republics were all about. And that’s how they have functioned ever since.” – Richard K. Moore
  • “As demonstrated in Russia and numerous other countries, when faced with a choice between democracy without capitalism or capitalism without democracy, Western elites unhesitatingly embrace the latter.” – Michael Parenti
  • “The fact that a supposedly sophisticated electorate had been stampeded by the cynical propaganda of the day threw serious doubt on the validity of the assumptions underlying parliamentary democracy as a whole.” – British Superspy for the Soviets Kim Philby (1912-1988), explaining his reasons for becoming a Communist instead of turning to the Labour Party
  • US Supreme Court Justice Louis Brandeis (1856-1941): “We may have democracy in this country, or we may have wealth concentrated in the hands of a few, but we cannot have both.”
  • “We don’t need to run America like a business or like the military. We need to run America like a democracy.” – Jill Stein, Green Party presidential candidate 2012

Notes

  1. Democracy Now!, October 30, 2013
  2. Huffingfton Post, May 3, 2012
  3. Department of State, Foreign Relations of the United States, 1958-1960, Volume VI, Cuba (1991), p.885 (online here)
  4. For the complete detailed list, see U.S. Department of State, Nonproliferation Sanctions
  5. U.S. Department of State, “Country Reports on Terrorism 2012, Chapter 3: State Sponsors of Terrorism,” May 20, 2013