We have no money so central banks give more money to banks

It’s unanimous! The European Central Bank confirms that the only possible solution to falling wages and depressed spending is to throw more money at the banks and inflate another stock-market bubble.

The ECB thus joins the world’s other most important central banks in the hope that “quantitative easing” — a form of “trickle-down” economics — will somehow work despite having never achieved anything other than the inflation of asset bubbles, a benefit primarily to the one percent. Then again, perhaps that might explain it.

Mario Draghi, the president of the ECB, last week committed €1.1 trillion to buying eurozone government bonds and, to a lesser degree, asset-backed securities and pools of mortgage loans known as “covered bonds.” Starting in March, the ECB will buy €60 billion of assets a month, with a commitment to continue this program until September 2016. The ECB’s stated goal is to boost inflation and prevent deflation, while also driving down the value of the euro.

The European Central Bank joins the Federal Reserve, the Bank of England and the Bank of Japan in flooding the financial system with money, and joins all those central banks and the Swiss National Bank in attempting to drive down the value of its currency. One problem is that all currencies can’t decline against one another, any more than all countries can simultaneously produce trade surpluses. At the moment, it is the euro that is declining in value, which theoretically will give a boost to exports from eurozone countries, but as eurozone countries conduct most of their trade with one another, the boost from a weakened euro will not necessary be significant.

Blockupy 2013: Securing the European Central Bank (photo by Blogotron)

Blockupy 2013: Securing the European Central Bank (photo by Blogotron)

But with declining wages, fewer people have enough to spend, and the super-wealthy already have more money than they can possibly use for productive investment. Nonetheless, the “market” has decreed that more austerity for working people and more speculation by the one percent is the magic elixir that will finally fix the economy.

Fix it for whom? Let’s start to answer that question by noting the supposed purpose of quantitative-easing programs: to stimulate the economy by encouraging investment. Under this theory, a reduction in long-term interests rates would encourage working people to buy or refinance homes; encourage businesses to invest because they could borrow cheaply; and push down the value of the currency, thereby boosting exports by making locally made products more competitive.

In actuality, quantitative-easing programs cause the interest rates on bonds to fall because a central bank buying bonds in bulk significantly increases demand for them, enabling bond sellers to offer lower interest rates. Seeking assets with a better potential payoff, speculators buy stock instead, driving up stock prices and inflating a stock-market bubble. Money not used in speculation ends up parked in bank coffers, boosting bank profits, or is borrowed by businesses to buy back more of their stock, another method of driving up stock prices without making any investments.

Trillions for asset buying sprees

We are not talking about small change here. In three rounds of quantitative easing, the Federal Reserve spent about $4.1 trillion. The Bank of England has spent £375 billion. The Bank of Japan, after boosting its QE program last October, will now spend ¥80 trillion (about US$680 billion) per year. This after 18 months of quantitative easing failed to revive the economy, as with an earlier QE program that ran from 2001 to 2006. In just the past 18 months, the Bank of Japan’s QE spending was ¥75 trillion ($640 billion).

Imagine what could have been done with these enormous sums of money had they been used for directly creating jobs, or simply by giving it directly to working people, who would have gone out and spent it. Or by putting the money to productive use, such as rebuilding crumbling infrastructure.

Instead, what is planned is more austerity — that is, more punishment. The other component of the European Central Bank’s January 22 announcement is that favorite term, “structural adjustment.” A euphemism used by the World Bank and International Monetary Fund when ordering an end to job security and social safety nets as a condition for granting loans to developing countries, this is now being applied to the global North. Near the end of his remarks announcing the quantitative easing, ECB President Draghi said:

“[I]n order to increase investment activity, boost job creation and raise productivity growth, other policy areas need to contribute decisively. In particular, the determined implementation of product and labour market reforms as well as actions to improve the business environment for firms needs to gain momentum in several countries. It is crucial that structural reforms be implemented swiftly, credibly and effectively as this will not only increase the future sustainable growth of the euro area, but will also raise expectations of higher incomes and encourage firms to increase investment today and bring forward the economic recovery.”

Labor “reforms” are necessary to “improve the business environment.” In plain language, that means more austerity in an effort to boost corporate profits. In the question-and-answer session after the announcement, President Draghi gave revealing answers to two different questions: “For investment you need confidence, and for confidence you need structural reforms” and “it would be a big mistake if countries were to consider that the presence of this programme might be an incentive to fiscal expansion. … This programme should increase the lending capacity of the banks.”

Firing workers and pushing wages lower will make capitalists feel better? Perhaps, but if there isn’t demand for their products, they still aren’t going to invest.

If consumers have no money, they aren’t buying

The ECB wishes to believe that further reducing job security and social safety nets will provide capitalists with the magic “confidence” that will prompt them to invest. But there is already plenty of industrial capacity sitting idle — E.U. manufacturing capacity utilization is only 80 percent while the E.U.-wide unemployment rate is 10 percent. The youth unemployment rate is 21.9 percent. More austerity isn’t going to reverse these effects of austerity.

The Bank of Japan boosted its quantitative easing program in October 2014 because it had not pulled the Japanese economy out of stagnation. Gross domestic product contracted in the second and third quarters of 2014. (zgourth-quarter statistics have yet to be reported.) Japanese wages have declined in the past year while profits have increased. Household spending in Japan had fallen for six consecutive months at the time of the Bank of Japan’s announcement, in part due to an increase in sales tax pushed through by Prime Minister Shinzo Abe.

The Federal Reserve’s quantitative easing has served to prop up a stock market that continues to rise despite ongoing stagnation. The standard measure of stock market valuation, the price/earnings ratio, remains high by historical standards. (This ratio is a company’s market value per share divided by earnings per share, or to put it another way, how many dollars a buyer pays for one dollar of profit.) The composite P/E ratio for the broadest measure of U.S. stocks, the S&P 500 Index, is 19.7. The rare times in history that ratio has risen above 20 has been followed by a crash.

Japan’s stock market has also risen during its quantitative easing; its benchmark Nikkei 225 Index has doubled since November 2012.

Trillions of dollars has been poured into programs that do little more than produce stock-market bubbles; more trillions have been poured directly into banks and other financial institutions for bailouts. The European Central Bank says more of the same, and European workers will continue to pay for it. The markets demand this, it is said. Capitalist markets, however, are nothing more than the aggregate interests of the largest industrialists and financiers — when we let “markets” make social decisions, that really means a dictatorship of big business and big banks. And supporting those banks is very expensive.

Will a Syriza victory be the first blow against austerity?

Is the first step toward the unraveling of European austerity about to begin, courtesy of Greek voters? The future direction of the European Union certainly won’t turn merely on the results of Greece’s January 25 parliamentary election, nor will the world slip off its axis if the expected Syriza victory materializes.

Nonetheless, the first blow has to be struck some time, by somebody. If Syriza does take office and if it can hold firm against the withering pressure that it will immediately be subjected to, an alternative to financial industry diktats could provide an example elsewhere in the E.U., particularly within the eurozone. That example can not be taken up too soon, given the many economic weapons likely to be deployed against a Syriza-led Greece. (Perhaps in Spain, where Podemos, the party organized a year ago by the Indignados movement, already is a near three-way dead heat with Spain’s biggest parties, Popular and Socialist, according to recent polling.) There is no Greek solution to Greece’s economic collapse, only a European solution.

View of Vikos Gorge, Greece (photo by Skamnelis)

View of Vikos Gorge, Greece (photo by Skamnelis)

As the Greek parliament was in the process of failing to elect a new president last month, thereby triggering automatic parliamentary elections, Syriza issued this statement about the New Democracy/Pasok coalition government that had continued to impose punishing austerity:

“The only option left to them is the policy of fear and terrorization of the society, the creation of false dilemmas and fake polarization. This option is triggered by the fact that the government as well as the dominant economic and media system and forces inside and outside the country are very well aware that they have a lot to lose.”

Such fear-mongering won’t only come from the Greek establishment. European governments have alternated between ordering Greek voters to vote for pro-austerity parties and to insisting that both a Greek exit from the eurozone and any changes to Greece’s debt obligations are unthinkable. These have not only come from German Finance Minister Wolfgang Schäuble, as would be expected, but from French President François Hollande, continuing his journey to becoming Paris’ Monsieur 1%.

Certainly the financiers who hold decisive power over the undemocratic institutions of the European Union, nor their representatives such as Finance Minister Schäuble, can be expected to welcome the basic self-description of Syriza’s intentions:

“Syriza insists strongly on its position that it will abolish the memoranda signed with the Troika of lenders when it assumes office and will re-negotiate the loans. At the same time it will promote a programme of social and economical reconstruction, aiming at development that promotes human needs and well-being and respects nature. … Syriza is fighting for the re-foundation of Europe away from artificial divisions and cold-war alliances such as NATO. As for the E.U., Syriza denounces the dominant extreme neoliberal and euro-atlantic policies and believes that they must and can be transformed radically in the direction of a democratic, social, peaceful, ecological and feminist Europe, open to a socialist and democratic future.”

Putting forth a program of reforms

Syriza — the Coalition of the Radical Left — re-constituted itself as a single party at its first congress in July 2013. Nearly 500 organizations were represented at the congress, which elected Alexis Tsipras as party president and a 201-member central committee. Close to 20 groups comprised Syriza prior to this congress (when it was formally a coalition), most of which remain as part of the party while a few became “allied groups.” The party includes Trotskyist, Maoist, Eurocommunist and other non-orthodox communist Leftist groups, but that does not mean it intends to implement a revolutionary program.

The “Thessaloniki Program,” announced last September by Mr. Tsipras in the Greek city of that name, promises that Syriza will:

  • Re-negotiate the national debt and a “haircut” on the foreign debt.
  • Impose higher taxation on the rich.
  • Raise salaries for some low-paid employees.
  • Abolish a recently enacted property tax.
  • Provide more money for the municipalities and the local authorities.
  • Create 300,000 new jobs.
  • Re-open public radio and television, which were summarily shut by the outgoing government.
  • Establish a new national development bank.
  • Restore Greece’s previous monthly minimum wage of €751.

Ilias Milonas, a member of the Left Platform grouping within Syriza writing on The Socialist Network web site, in pointing out that the Thessaloniki Program consists of reforms that fall short of effecting a necessary structural change, said:

“In the Syriza leadership’s programme also absent is the most crucial matter of the nationalisation of the banks, a policy that was decided on at the last congress of Syriza – almost all the banks in Greece have been privatised in recent years. We believe that there is not one programme that can be implemented without the nationalisation of the banking system along with and the rest of the economic system. In contrast, the leadership’s proposal for the establishment of a New Development Bank with a budget of one billion Euros is like planting a tree in the Sahara in the hope of greening the desert. Indeed, all they propose for the banks is a vague form of “social control.”

Even within Germany, the Left Party advocates a nationalization of banks, so Syriza doing so would not be outlandish (especially as public control of banking and the elimination of speculation are prerequisites for a democratic economy). And a restoration of the previous Greek minimum wage of €751 a month is not living in luxury — at current exchange rates, that’s US$893 or £589. Nobody is living well on that.

The program, Mr. Tsipras said, is to cost about €13.5 billion. The Greek newspaper To Vima reports that, of that total, about €2 billion would go toward addressing the humanitarian crisis, €6.5 billion would be used in measures to help restore the economy (with an estimated €3 billion toward benefits), and €5 billion would be invested in restoring employment. This cost is six percent of the total of the loans by the troika (the European Commission, European Central Bank and International Monetary Fund).

Debt relief for Germany

These reforms — which would do nothing to challenge the prevailing power relations and amount to a program of Keynesian initiatives — are nonetheless presented as the crazy schemes of dreamers. “Every new government needs to fulfil the contractual agreements of its predecessors. … But if Greece goes in another direction then that’s going to be a difficult situation,” Finance Minister Schäuble said, as reported by Reuters. Well, no need for any more elections, then.

Most of all, it would be some sort of moral outrage, scream European leaders and echoed by the corporate media on both sides of the Atlantic. Conveniently overlooked is the huge debt forgiveness given to Germany after World War II, which surely helped the Federal Republic recover. Germany’s pre-war debt amounted to 22.6 billion marks, including interest, and its postwar debt was estimated at 16.2 billion marks, according to the Committee for the Abolition of Third World Debt. Yet the U.S., the U.K. and France agreed in 1953 to forgive nearly two-thirds of that total, and allowed Germany to negotiate payment schedules in cases of financial difficulty. On top of that, the allies voluntarily reduced the amount of goods they would export into the Federal Republic so that it could reduce its trade deficit and give a boost to its internal manufacturers.

Syriza argues, not unreasonably, that what was done for Germany in 1953 should be done for Greece today. And, although debt writedowns and aid programs such as the Marshall Plan went toward raising living standards of Germans, the €227 billion of loans that have gone to Greece benefits large financial institutions elsewhere, none more so than German and French banks. By one estimate, only €15 billion has gone to state operations; none after 2012. The Greek government has been a pass-through, taking the loans given it and promptly sending it the financiers who own the debt. At the end of 2008, more than 50 percent of the debt was owed to banks in Germany, France and Italy alone.

The troika has not been propping up the Greek government, it has been propping up Europe’s banks and financial houses.

That derives from the neoliberal concept is that people exist to serve markets rather than markets existing to serve people. Entire countries have been harnessed to the dictates of “markets.” This has long been the pattern imposed by the global North on the South through institutions like the IMF; now the stronger countries of the North are imposing it on their weaker neighbors. Taxpayers in those stronger countries are on the hook, also, as some of their taxes go toward the bailout funds, for which bailed-out countries are merely a conduit to pass the money to financiers, often from their own country.

If it looks like a depression, talks like a depression …

What has Greece received from the troika’s loans? Greek gross domestic product has contracted by 25 percent, unemployment is above 25 percent, real wages have fallen by 30 percent and industrial output has declined by 35 percent. The country’s foreign debt has actually risen, to 175 percent of GDP from approximately 130 percent in 2009. This is what the International Monetary Fund hailed as “progress” two years ago!

Just as “the market” dictates a race to the bottom for labor, the harshest terms that can be imposed are mandated for debtors, always wrapped in a hypocritical, sanctimonious “morality.” German Chancellor Angela Merkel is not stubborn nor obsessed with Weimar-era inflation, as she is sometimes portrayed; she is simply reminding other national political leaders that economic harmonization will conform to the tightest policy among them and Germany so happens to have that tightest policy. This is the will of the “market” to which they chained themselves.

None of the eurozone’s national leaders are reducible to “puppets,” but their perceived national interests are distorted by whatever consensus their industrialist and financiers arrive at. Big industrialists and financiers dominate their societies through control of the mass media and a range of other institutions to the point that their preferred policies become, through repetition, the dominant ideas across society and the ideas adopted by the political leaders who become dependent on them. Their aggregate interests constitute the “market.”

Greece can not be a socialist island in a capitalist Europe, nor can any other country; that understanding is reflected in Syriza’s program. What might a different Europe look like? Various non-orthodox economists have proposed programs, some envisioning Greece remaining in the eurozone and some envisioning Greece dropping the euro and returning to the drachma. What these programs have in common is a vision of a European-wide economic restructuring.

To summarize some of these ideas: The E.U. should be leveraged to internationalize the resistance of working people; full employment demanded as an explicit goal; banks should become publicly owned and democratically controlled so that capital is directed toward socially useful investment instead of speculation; a highly progressive taxation system should be coordinated at the E.U. level; wages raised to account for improved productivity that has, for three decades, gone to capitalists; governments should default at least some of their debts to banks; bank deposits should be guaranteed; and there should be more investment in education to enhance future productivity.

Impossible? In a capitalist Europe, yes. But in a better world, these kinds of ideas would simply be common sense. Why shouldn’t they be?

Please make your comment after we make our decision

Taking a page from their United States counterparts, European Union trade negotiators apparently interpret the word “consultation” as a synonym for “ignore.” Fresh evidence for this attitude toward the public was provided thanks to a leak of the final text of the proposed “free trade” agreement between Canada and the EU.

Although the E.U. trade office, the European Commission Directorate General for Trade, promotes a process of public consultation on its web site, it isn’t the public who gets listened to. The final text of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) includes language mirroring corporate wish lists unchanged from previous drafts despite the fact that the E.U. trade office has not had time to analyze comments submitted by the public.

This farce of a “consultation” process mirrors the secretive negotiations in the better known Trans-Pacific and Transatlantic trade agreements. Corporate lobbyists are well represented in these talks, but the public, watchdog groups and even parliamentarians and legislators are barred from seeing the text. The CETA text is also secret, but was leaked by the German television news program Tagesschau, which published the entire 521-page document on its web site. Yep, 521 pages.

The Rideau Canal in Ottawa (photo by John Talbot)

The Rideau Canal in Ottawa (photo by John Talbot)

Critical to understanding the CETA text is Section 33, the portion simply labeled “dispute settlement.” Under that bland heading a reader finds the muscle — what is known as an “investor-state dispute mechanism.” These “mechanisms,” found in many bilateral and multilateral trade deals, are corporate-dominated secret tribunals that hand down one-sided decisions with no oversight, no public notice and no appeals. Governments that agree to these mechanisms legally bind themselves to mandatory arbitration with “investors” in these secret tribunals on which most of the judges are corporate lawyers who represent the “investors” in other legal proceedings.

Kenneth Haar, a spokesman for the watchdog group Corporate Europe Observatory, in an interview with the EurActiv news site, called the dispute mechanism “an outright danger to democracy,” and said:

“The Commission is not really serious about its own consultation. It’s more about image than substance. … I think those who chose to respond to the Commission’s consultation are being ridiculed.”

Decisions will be final and unaccountable

Employing the standard sweeping language, CETA’s Article 14.2 (the articles here are numbered “14” even though they are found in Section 33) states: “[T]his Chapter applies to any dispute concerning the interpretation or application of the provisions of this Agreement” [page 472]. Article 14.10 goes on to declare, “The ruling of the arbitration panel shall be binding on the Parties. … The panel shall interpret the provisions referred to in Article 14.2 in accordance with customary rules of interpretation of public international law” [page 476].

“Customary” international law is whatever one of these secret tribunals says it is. Environmental regulations, “buy local” laws or any other government action that a corporation claims will hurt its profits can be, and frequently are, ruled illegal by these tribunals when adjudicating disputes under existing trade agreements. Such rulings set precedents that become “customary” international law.

In case these “customary” laws are not clear, on page 480 of the CETA text is Article 14.16, which would supersede national law:

“No Party may provide for a right of action under its domestic law against the other Party on the ground that a measure of the other Party is inconsistent with this Agreement.”

Your law was passed in a democratic process? Too bad — it will be overruled if an “investor” doesn’t like it.

CETA’s proposed rules are consistent with what is being secretly negotiated in the Transatlantic Trade and Investment Partnership between the U.S. and E.U., and in the Trans-Pacific Partnership being negotiated among 12 Pacific Rim countries. A majority of the world’s economy would be removed from any possibility of democratic control should these three trade deals come into effect.

The watchdog group Council of Canadians warns:

“The Harper government has thrown Canadian municipalities under the bus, forever banning ‘buy local’ and other sustainable purchasing policies that help create jobs, protect the environment and support local farmers and businesses. The Harper government has also agreed to lengthen patents and give new monopoly protections to already profitable brand name drug companies, which will needlessly add hundreds of millions to the cost of prescription drugs in Canada.”

Not even water would be exempt. If a water system is privatized and a local government chooses to re-municipalize it because rates have risen while service declines (as has routinely occurred on both sides of the Atlantic), the investor would be able to hold out for an extra windfall under the terms of the trade deal.

Only corporate lobbyists need apply

Although the public, and public-interest groups, are not heard, corporate lobbyists are. For example, there are 605 “advisers” with access to the text of the Trans-Pacific Partnership and who shape U.S. negotiating positions. Virtually every one is an executive of a multi-national corporation or a corporate lobbyist working for an industry association.

It is little different in Europe. Corporate Europe Observatory reports that 92 percent of the closed-doors meetings of the E.U. trade office have been with corporate lobbyists, while only four percent have been with public-interest groups. The trade office has gone so far as to actively solicit the involvement of corporate lobbyists. That perspectives other than those of multi-national capital are not considered can be inferred from the very way public input is solicited, the Observatory said:

“How would the average citizen respond to questions such as: ‘If you are concerned by barriers to investment, what are the estimated additional costs for your business (in percentage of the investment) resulting from the barriers?’ So, clearly, the close involvement of business lobbyists in drawing up the EU’s position for the [Transatlantic Trade and Investment Partnership] talks is a result of the privileged access granted to them.”

It’s no different for CETA, and the same dynamic exists across the Atlantic. Former U.S. Trade Representative Ron Kirk once admitted that if people knew what was in the Trans-Pacific Partnership, it would never pass. It is important to remember that these massive “free trade” deals are not simply business as usual — they go well beyond even the draconian rules of the North American Free Trade Agreement.

So although the competitive pressures of each country attempting to give an advantage to its multi-national corporations does mean that maneuvering through differing interests requires lengthy negotiations — not to mention the sometimes conflicting interests of various industries — at bottom there is a unifying class interest in the overall project. It is true that the U.S. adopts the hardest line in the trade negotiations it participates in (before we even get to the military muscle it applies to force open Southern countries), yet the absence of the U.S. from a Canada-European Union trade deal has made no practical difference to its outcome.

That different countries, different administrations, reach similar one-sided “free trade” agreements in which “investors” are allowed to overrule national laws, and labor, safety and environmental regulations are “harmonized” at the lowest level, is a product of capitalist competition. The rigors of that structural competition mandate expansion and growth — as local markets mature, capital has no choice, if it is to survive relentless pressure from competitors, other than opening new markets and relentlessly cutting costs to maintain profit levels. “Free trade” agreements represent one of the most effective ways to accomplish that.

Popular revolts against these agreements must be continued, and strengthened, but there will be no end to them as long as economic and social decisions are allowed to be made by “markets,” which are not disembodied entities sitting dispassionately on an Olympian throne but rather are the aggregate interests of the most powerful industrialists and financiers.

How long will Europeans accept austerity?

Europe is not ready to revolt. Or, possibly more accurately, given the 43 percent participation rate, Europeans simply see the European Parliament as irrelevant. Given the little power it has, and the anti-democratic structure of European Union institutions, many saw the election as simply as an opportunity to cast a protest vote.

Yet despite the hand-wringing over the advance of far Right parties (and I am not suggesting that is not worrisome), Europeans continued the general pattern of voters in the global North of alternating between their mainstream parties. The two main blocs, the E.U.’s center-right and center-left groupings, comprising almost all of the major parties, combined for almost 54 percent of the vote, and if we throw in the more than eight percent won by the third-place liberal grouping (for North American readers, European liberals are roughly equivalent to libertarians), the parties of austerity won a solid majority.

The combined total is about ten percentage points less than than won by the three largest groupings in the previous election in 2009, but still a comfortable majority.

Strasbourg, France

Strasbourg, France

The Left made some advances, too, albeit falling short of some expectations.

The fourth-place Green alliance and sixth-place European United Left combined for 13 percent of the vote, considerably more than far Right parties garnered, despite the strong showings of the United Kingdom Independence Party, France’s National Front and the Danish People’s Party. In Greece, Syriza (the Coalition of the Radical Left) came in first place. In Spain the United Left and Podemos — a four-month-old party organized by the “Indignados,” Spain’s Occupy movement — combined for 18 percent of the vote, and Left parties in Portugal did about as well.

Keeping the devil you know

Nonetheless, those who did not bother to vote formed a majority of the E.U. electorate. And those who did vote voted for more of the same, even if in most countries the one major party was swapped for the other major party. More of the same surely isn’t appealing, as the E.U. unemployment rate is 11.8 percent, barely off the 12 percent peak of March 2013. Inequality, although less severe than in the United States, has been rising for three decades. Moreover, the three largest blocs, plus a small right-wing bloc that includes Britain’s Conservative Party, are committed to the Transatlantic Trade and Investment Partnership, a “free trade” agreement being negotiated in secret between the U.S. and the E.U. with the warm approval of multi-national corporations on both sides of the Atlantic.

The lack of democracy in E.U. institutions is not a happenstance; the intention of them is imposition of a U.S.-style régime. There was and is no vote on the mandatory budget constraints national governments must abide by nor the policies of the European Central Bank. When loans are made to Greece by E.U. institutions, the money does not go to Greeks, it passes right through the Greek government and into the hands of French and German banks.

Thus it is no surprise to hear that of E.U. negotiators’ 127 closed meetings concerning the Transatlantic Partnership talks, at least 119 were with large corporations and their lobbyists, information known only because of investigatory work done by a public-interest group, Corporate Europe Observatory.

European food safety and privacy laws are squarely in the crosshairs of U.S.-based multinational corporations. European capitalists are one with their U.S. counterparts that trade rules should be “harmonized” — which means “harmonized” with the lowest standards. This is only one aspect of the larger project of neoliberal austerity to which Europe’s center-left parties are as committed as its center-right parties, as the French voters who put François Hollande into office have found. In Germany it was none other than the Social Democratic Party, through its “Agenda 2010” legislation, that instituted austerity there. The so-called German “miracle” rests on a decade of wage cuts for German workers.

You can only do so much in a voting booth

The large number of abstentions and decreased vote totals for major parties are symptomatic of Europeans becoming fed up with economic stagnation, high unemployment and the relentless austerity being imposed on them by unaccountable, undemocratic supranational institutions. But only in a handful of countries, where austerity has pushed down the hardest, have sizable opposition movements coalesced.

Those voters who could be bothered to vote for the European Parliament are not yet exhausted with their political and economic systems, mostly remaining content to alternate between major parties. Although the vote totals for the extreme Right were, overall, not as dramatic as press reports have portrayed them, nonetheless the strong increase in those votes is cause for concern, especially as Britain’s Conservative leadership increasingly appears inclined to adopt UKIP talking points and France’s Union for a Popular Movement does the same with National Front talking points.

When there is not an active Left to provide an alternative to institutional decay, the Right will fill the vacuum with scapegoating, programs to weaken anything that counters corporate power, paeans for a return to a mythological past, and the potential for nationalistic violence, a threshold already trampled by Greece’s Golden Dawn. But change in capitalist systems does not derive from parliamentary maneuvers, it comes from organized, militant popular movements.

We do not yet live in dictatorships; there remain cracks, seams and fissures in political systems that enable reforms. These can be significant reforms such as those won in the 1960s and, in the United States, in the 1930s. But those democratic spaces are closing — the ever more powerful spying apparatuses, militarized police, top-down rules imposed through “free trade” agreements and subsidies lavished on the already wealthy do not fall out of the sky. Moreover, reforms can and are taken back and are better seen as means to larger goals, not ends in themselves.

An intensified race to the bottom is all that is on offer by the governments and institutions of the world’s mature capitalist countries. There is no tweak of policy, nor exchange of one corporate party for another corporate party, that can solve the structural crisis of the global economic system. The European Parliament elections are interesting as a barometer of public opinion, but not for much else. An increasing number of people (although hardly a decisive number as yet) are signaling discontent but also that while they are beginning to decide what they don’t want, what they do want is much more inchoate. Nature abhors a vacuum.

Scotland can be independent from London, but not capitalist markets

Independence for a country that is a dependent capitalist entity is illusory. Scotland, although a core capitalist nation whether or not it remains a part of the United Kingdom, will not prove to be an exception.

The governing Scottish National Party (SNP) promises the people of Scotland that they would hold their fates solely in their own hands should they vote for independence, yet Scotland just showed itself to be at the mercy of the world’s 12th largest petrochemical company. If so, how is Scotland to stride boldly into its future free of London financiers and global capitalist markets when a single multinational corporation successfully issues diktats?

Some of the contradictions inherent in Scotland’s independence bid are reflected in the SNP’s white paper, Scotland’s Future, in which it promises a host of progressive policies to reverse London-dictated austerity while flatly stating that an independent Scotland would continue to use the British pound as its currency and recognize Queen Elizabeth II as its head of state. In part these promises are borne from the SNP’s desire to retain the advantages of being a part of Britain while formally separating. Intended or not, retaining the pound ensures fiscal policy will be decided in London and not Edinburgh.

Scottish parliament during 'Make poverty history' day in 2002 (Photo by Russ McGinn)

Scottish parliament during ‘Make poverty history’ day in 2002 (Photo by Russ McGinn)

SNP leader and Scottish First Minister Alex Salmond doesn’t appear to see the significance of this, telling The Guardian that “The Bank of England and sterling are as much Scotland’s assets as London’s assets. They are certainly not [Chancellor] George Osborne’s assets. We put forward in this paper our willingness to accept liabilities. We are also entitled to the share of assets.”

Although an opponent of independence, former Prime Minister Gordon Brown is closer to the mark, declaring a currency union “self-imposed colonialism.”

It should be noted that the question of Scottish independence is strictly a matter for the Scottish people. If formal independence is their desire, that is that. But there is formal independence, and there is actual independence in a globalized world dominated by markets that tilt heavily in favor of industrialists and financiers.

Swiss company, not London, decides fate of industrial complex

In its white paper, the SNP declares “Independence means that Scotland’s future will be in our own hands. Decisions currently taken for Scotland at Westminster will instead be taken by the people of Scotland.”

Yet a recent decision, with significant consequences for the health of Scotland’s economy, was taken not in the British parliament but by a single corporate leader in Switzerland. That leader, Jim Ratcliffe, is the chairman of Ineos, the petrochemical company alluded to above. Ineos had been locked in a bitter negotiation with the union representing workers at its oil refinery and petrochemical complex in the city of Grangemouth; this is the only refinery in Scotland and processes 70 percent of Scotland’s fuel.

The Unite union had balked at Ineos’ demands for significant cuts. In response, Chairman Ratcliffe shut down the complex. Unite quickly reversed itself, agreeing to the demands. The complex was re-opened and Ineos announced it would invest £300 million and commit to keeping the complex open. In return, the union accepted a three-year pay freeze, cuts to pensions and a three-year moratorium on any strikes.

Scotland may claim 90 percent of Britain’s North Sea oil reserves, but without knuckling under to the demands of Ineos, would have been reduced to importing refined oil. First Minister Salmond called the deal “a great team effort from all concerned,” as if workers and employers were somehow equal, while a Scottish trade union official, Graham Smith, more realistically told the BBC that Ineos had “tried to impose its will on the workforce with a take it or leave it ultimatum.” For his part, Chairman Ratcliffe said he sought “to bring the site into the modern world.”

Reduced wages and living standards is “modernization,” the corporate media tells us; the Ineos chairman said more than perhaps he meant. Scotland’s independence would have had no effect whatsoever on this outcome.

Independence from Britain while staying in British grasp

The policies the SNP intends to implement, should independence be granted and it remain the governing party, certainly represent a sharp break with austerity and neoliberalism, and if realized would represent real gains for Scottish working people. The SNP white paper calls for universal child care, universal “high-quality early learning” programs, reductions in income inequality, reversing the cuts in social services imposed by the British government, provide more support for small farmers, and writing a constitution that would enshrine equal opportunity and “certain social and economic rights” such as a right to education.

On the other hand, the white paper also said it would remain in the Nato military alliance, retain the British currency and queen, and work closely with British security and intelligence agencies. The SNP also intends to focus the Scottish economy on exports while “emphasising innovation, technology and manufacturing.”

Capitalist market competition, which drives production to low-wage locales, will have much more to say concerning Scotland’s ability to become a successful exporter than the SNP. Moreover, Scotland would not be independent of London under the SNP’s formulation. The Bank of England is not likely to consider the needs of an independent Scotland when setting monetary policy. The U.S. Federal Reserve quite likely does not weigh the impact on Panama, which uses the U.S. dollar, when setting its monetary policy. Central banks, in general, are sensitive to the needs of financiers, from whose ranks their personnel come from, not to the needs of working people.

With a population of 5.3 million, Scotland would have no more ability to significantly deviate from the dictates of core capitalist heavyweights like the United States and Germany than other small countries. The interests of big capitalists in Scotland align with the interests of big capitalists elsewhere — maintaining the system in which they operate, at any cost to employees, not at sacrificing themselves to build a better Scotland.

There is nothing new here; the current era of corporate globalization has merely intensified what has long been true. As Rosa Luxemburg wrote a century ago:

“Apart from a few of the most powerful nations, the leaders in capitalist development, which possess the spiritual and material resources necessary to maintain their political and economic independence, the ‘self-determination,’ the independent existence of smaller and petit nations, is an illusion, and will become even more so.”

Even within the European Union, smaller countries like Greece and Ireland have little independence although they long ago broke free of colonial masters. The “troika” of the European Commission, European Central Bank and International Monetary Fund demand brutal cuts to wages, pensions and social services — and none of these bureaucracies are subject to election. The European Central Bank dictates financial policy across the continent on behalf of the financial industry. There is also less political independence than meets the eye — recall that in late 2011 Nicolas Sarkozy and Angela Merkel “summoned” the Greek prime minister to a meeting to curtly inform him there would be no referendum on the latest round of austerity. There was not.

No more living under unrepresentative governments

The foregoing does not deny that the Scottish people could be better off constituting a separate country. They have had to often endure the unpopular rule of the Conservative Party, which wins few votes outside of England, and thus subject to a government not of their choosing. (One of Scotland’s 59 members of parliament is a Conservative.) The Scottish Socialist Party, for example, readily acknowledges the progressive elements among the SNP proposals while arguing that the white paper should have gone much further.

Party officials, in the December issue of Scottish Socialist Voice, write that the SNP white paper did not have any commitment “to repeal the worst antiunion laws in Europe,” mention of a progressive tax system, guarantee of affordable housing, guaranteed right to union membership nor right to strike. Moreover, the white paper’s call for a minimum wage is based on the “good will” of employers rather than legal enforcements.

Scottish Socialist Party national co-spokesperson Colin Fox writes:

“I would also have liked to have seen a commitment to take the renewable energy industry into public ownership — just as the Scottish government did recently with Prestwick Airport — and return our gas and electricity supply industry to public hands. Both measures are concomitant with pledges to achieve greater economic prosperity, social democracy and fairness. … [T]he [party] prefers the very successful Norwegian approach to its oil and gas resources where it took them both into public ownership rather than privatising them as Britain did. As a result of this decision Norway has now accrued £840 billion in a state ‘Oil Fund’ with which to benefit its citizens and future generations.”

Another party writer, Richie Venton, argues that Scottish working people face a choice of going either forward or backward:

“So trade unionists don’t even face a choice between the status quo and independence, but between a further clawing back of gains won by past generations of trade unionists and socialists in struggle — or a chance to improve our lot as workers by voting for the right to get whatever government the Scottish people elect!”

We come back here to the question of reforms or a change to a better world. Welcome as reforms are — and the Scottish National Party proposals are significant and meaningful reforms — they are always subject to being taken back when political conditions change. The era of neoliberalism that dawned in the 1970s and continues to intensify is a concentrated attack on the gains won in prior decades, much of which has been lost.

Socialist changes, such as workers’ control of enterprises and public ownership of key industries such as energy and banking, codified in a constitution, would be the product of a struggle intended to go well beyond reforms and instead seek to create a better world. But no single country can be a socialist island in a sea of capitalism. A Socialist independent Scotland would face the ferocious hostility of the capitalist world, not excepting London bankers and bond traders, and Scottish capitalists.

That a small country could defy the power of capitalist markets — the product of the aggregate interests of the world’s most powerful industrialists and financiers — is not realistic. Those markets are expressed through a variety of means, financial and political, through multilateral institutions and imperialist governments, through webs of debt and military pressure.

A socialist Scotland could only flourish within a socialist Europe designed to maximize human need and potential rather than private profit. Otherwise, London, Brussels and Wall Street will continue to call the tune on behalf of the wealthiest, regardless of the formal political power residing in Edinburgh.

One small step for French workers but no giant leap

France appears on the verge of advancing the rights of workers, and although such a victory will be slight, even a tentative step forward is welcome. But it is no more than that: Once we get past the comedy of business leaders wailing that the sky is falling, do we really have anything other than a small reform that leaves the system intact?

It would seem not. The French National Assembly, on September 30, passed a bill that would grant employees a voice when their company is the target of a takeover attempt and require owners of companies with at least 1,000 employees to seek a buyer for a plant intended to be closed. The French Senate must also approve the bill before President François Hollande can sign it into law.

Marching in Paris against pension reformShould the bill be passed, a committee of workers would be organized inside a company being targeted for a takeover, which would be empowered to appoint an accountant to assess the bid. The board of the target company would be required to take the assessment under consideration before making its final decision. Although it is unclear what legal force this workers’ assessment would have, the company’s “works council” (an employee oversight body larger French companies are required to have) could ask a judge to intervene if it believes the board has not responded adequately to its queries, potentially delaying any deal.

The bill would also put a temporary roadblock in the path of a company that intends to shut a plant or some portion of its operations. Enterprises with more than 1,000 employees that intend to shut a facility with more than 50 workers would be required to seek a buyer for three months. Judge would be authorized to impose a fine if the company fails conduct a search or turns down a serious offer.

The French Senate has a narrow majority bloc of Socialists, Communists, Greens and other Left-leaning members, so it would appear that the bill is likely to pass the Senate, enabling President Hollande to fulfill a campaign pledge to give workers more say in the running of their enterprises.

A tiny change, a giant rage

In reality, these new powers, should they enter into law, would do nothing to alter existing relations within the workplace. Nonetheless the principal of the bill — that workers are entitled to a modicum of control over their working lives, at least in theory — has driven business leaders and the corporate media that loves them into fits of rage.

A Bloomberg report on the bill quotes a series of speculators in full indignation, including a Paris investment banker:

“In the M&A [mergers-and-acquisitions] world, the image of France viewed from outside is deplorable, and this law is adding extra complexity.”

Quelle horreur! Bloomberg itself grumbles:

“Foreign companies have spent $14.8 billion on French targets this year, putting 2013 on track to be the weakest for such deals in at least a decade, according to data compiled by Bloomberg. The new rules may further dissuade potential buyers. France hasn’t seen a major hostile takeover since Mittal Steel Co. bought Arcelor SA in 2006 in a transaction then valued at about $36 billion.”

Oh, the humanity! Seven long years of only relatively smaller takeovers. How is a poor investment bank supposed to keep its speculators in the style in which they are accustomed? Although the underlying imperative of capitalist competition — expand or die — propels the frenzy of corporate mergers and acquisitions, the proximate cause is to enable enormous profits for corporate executives, investment bankers and partners at corporate law firms. The bigger the deal, the bigger the payday for those on the inside.

Keeping score of the money but not the human cost

Definitive totals on the numbers of jobs lost to takeovers are extremely difficult to come by; this is not surprising when the corporate media reports on mergers and acquisitions in breathless terms of the size of the deal and with assurances that jobs will be sacrificed on the alter of “efficiency.” In other words, the human cost is not even an afterthought. To take just two examples, Washington Monthly, in a report detailing the increasing monopolization that characterizes most industries, wrote:

“Consider two recent deals in the drug industry. The first came in January 2009 when Pfizer, the world’s largest drug company, announced plans for a $68 billion takeover of Wyeth. The second came in March 2009, when executives at number two Merck said they planned to spend $41.1 billion to buy Schering-Plough. Managers all but bragged of the number of workers who would be rendered ‘redundant’ by the deal — the first killed off 19,000 jobs, the second 16,000.”

The money to pour into these deals has to come from somewhere. So can measures like those passed by the French National Assembly reverse this trend? Because the limited “voice” to be granted workers is connected to France’s “works councils,” a look at these councils will help us answer that question.

Although only a minority of workers in France are protected by a traditional labor union, all who work in enterprises with 50 or more employees are represented by a works council. French law proscribes fines and even jail terms for employers who interfere with the functioning of these bodies. In unionized companies, trade unions put forth the candidates for the works council, although if more than 50 percent of the eligible voters do not vote, a second election is organized in which any employee is eligible to run.

The works councils are required to be consulted on the management and general organization of the company; personnel decisions, including dismissals; and changes to equipment, working conditions, professional-training procedures, or hygiene and safety issues. The opinion of the works council is not legally binding, however, unlike a collective-bargaining agreement negotiated with a trade union. Works councils decisions are binding in only a small number of minor issues, such as the hiring or dismissal of the labor doctor.

As private-sector union membership in France is low, the works councils provide a modicum of enterprise participation for French workers. The bill that has passed the National Assembly represents a tiny incremental gain while leaving all the prerogatives of ownership firmly in the hands of capitalists. The wailing from capitalists and the corporate media is more of a reflection of their desire for total control than any actual change in labor relations.

Works councils as controllers rather than consultants

Although their consultative status currently makes them little more than a safety valve, France’s works councils could, in theory, form the nucleus of actual workers’ control. The concept of real workers’ councils, assuming control over the decision-making of an enterprise, has taken root at different times in several countries. All the workers collectively make strategic decisions, and elect a council to oversee the running of the enterprise (including supervising management) and to act as links with other enterprises.

Meetings to discuss, and vote on, the enterprise’s business would be a part of the regular workweek. All ownership would stay within the workforce — each would own one share and relinquish it upon leaving or retiring. Shares could not be transferred or sold, except to the collective. Management would be recallable and promoted from within.

Why should democracy stop at the entrance to the workplace? Cooperatives are already flourishing. There are the examples of the Mondragon collective and the recovered factories of Argentina, among others, in which assemblies of all the workers make the strategic decisions and elect supervisory boards that are responsible to the assemblies. Mondragon has been a planned enterprise from its foundation; Argentina’s recovered factories are the products of workers struggling to restart production while slowly gaining the confidence to be their own managers.

Cooperatives are as yet minuscule islands in a vast sea of capitalism. Several countries have works councils, including Germany, where employers must reach agreement with them in regards to rules covering, inter alia, smoking bans, dress codes, overtime, introduction of new technical equipment and policies on pay bonuses. Employees are also represented on corporate boards of directors in Germany, Sweden, Denmark, Norway and several other European countries.

Reforms should be taken whenever possible, but reforms can always be taken away. Instead of being the basis of minor tinkering, why shouldn’t works councils be one starting point for a complete transformation? Top-down authoritarian enterprises that give an elite dominating power over the overwhelming majority of humanity hasn’t been working out so great.

Greece’s depression is IMF’s idea of ‘progress’

The International Monetary Fund congratulated itself last week for the splendid job it is doing in Greece, declaring the country “is making progress in overcoming deep-seated problems.” With an unemployment rate of 27.2 percent, an economy that has shrunk by at least 20 percent and children going hungry, one has to shudder at the thought of what a lack of success might look like.

Temple of Zeus photo by Andreas Trepte (www.photo-natur.de)

Temple of Zeus photo by Andreas Trepte (www.photo-natur.de)

The depression in Greece is the logical conclusion of austerity, but while Greece is the first in Europe to arrive it is not alone — the composite eurozone unemployment rate reached a record 12.1 percent in March. The eurozone unemployment rate rose to 24 percent for men and women below the age of 25; the European Union-wide rate is nearly as high.

The IMF’s solution? Eliminate more jobs. In its latest report on Greece, issued on May 3 following its latest inspection visit, the IMF graciously mentioned that Greece’s wealthy don’t pay taxes:

“Very little progress has been made in tackling Greece’s notorious tax evasion. The rich and self-employed are simply not paying their fair share, which has forced an excessive reliance on across-the-board expenditure cuts and higher taxes on those earning a salary or a pension.”

But the IMF report quickly followed up by grumbling that:

“[T]he over-staffed public sector has been spared, because of a taboo against dismissals.”

Perhaps you will not fall off your chair in shock, but it is the latter of these two concerns that gets the attention when the IMF gave its verdict on what it expects the Greek government to do:

“A strong recovery will need to be built primarily on deepening structural reforms. … The government’s welcome public commitment to improving the business environment and accelerating privatization now needs to be matched with results.”

Diktats masquerading as democracy

Those bland-sounding words take on deeper meaning when we examine the “structural reforms” already imposed on Greece by the IMF, the European Commission and the European Central Bank, the “troika” that dictates Greek policy. In February 2012, for instance, the Greek government agreed to reduce the already low minimum wage by more than 20 percent, to freeze all public-sector wages until the unemployment rate falls below 10 percent and to deep cuts in pensions.

The Greek minimum wage is €751 per month (equivalent to US$990 or £636). How well could you live on such a sum?

Overall, wages have fallen 40 percent and health care spending has been cut 25 percent. Meanwhile, most of the money released by the troika goes straight back to lenders, not for internal relief. As a result of this austerity, it is no surprise that retail sales in Greece have declined by 30 percent over the past three years and an estimated 150,000 small businesses have closed. Poverty has become so widespread that an estimated 10 percent of Greek’s children go to school hungry.

All this in a country where its biggest and wealthiest industry, shipping, pays no taxes — its tax-free status guaranteed in the constitution. Greece’s wealthy pay little or no taxes, stashing their cash outside the country. Government employees are the people who can’t evade paying their taxes — yet they are the ones scapegoated for economic troubles. (A common pattern in many countries.)

The IMF made no mention of its own role in bringing about this depression in the May 3 report, instead blaming a “lack of confidence” for Greece’s struggles:

“Looking over the period 2010–2012, the much deeper than expected recession was overwhelmingly due to a progressive loss of confidence. … With fiscal adjustment set to remain a drag on GDP growth for several years to come, the key challenge is to generate the improvement in confidence needed for a recovery in investment to begin to more than offset this drag. This cannot happen unless Greece can secure broad domestic support for the program and the political stability that would come with this.”

Yes, if only Greeks would believe that hunger is a sign of progress, everything would be better! In lieu of a sudden spasm of optimism, generating “broad support” for bleeding the country dry to pay back financiers who made reckless gambles might be difficult.

Ideology masquerading as economics

Although it might be tempting to note that doing the same thing over and over while expecting different results is unreasonable, reasonableness is besides the point here: Austerity programs are designed with ideology in mind, not with economics based on the real world. One clue to this is that “structural re-adjustment” programs invariably demand sell-offs of public assets — holding fire sales of state enterprises means private capital can scoop them up at very low prices, and profit nicely from doing so at public expense.

The neoliberal concept is that people exist to serve markets rather than markets existing to serve people. Entire countries have been harnessed to the dictates of “markets.” This has long been the pattern imposed by the North on the South through institutions like the IMF; now the stronger countries of the North are imposing it on their weaker neighbors. Taxpayers in those stronger countries are on the hook, also, as some of their taxes go toward the bailout funds, for which bailed-out countries are merely a conduit to pass the money to financiers, often from their own country. Much of the money Europeans lent to Greece was used to bail out German and French speculators.

The race to the bottom, of which austerity programs and the continual shifting of production to locations with ever lower wages constitute crucial components, represents an intensification of market dominance over human life. It is also a result of a scramble to maintain profits, which have been under continual pressure from the economic crisis.

But neoliberalism is not the product of a cabal “hijacking” economies or governments; it is the natural progression of a system that insists “markets” should be the arbiter of all human problems and the model for social relations and institutions. Capitalist markets are not neutral abstractions perched loftily above the Earth; they are the aggregate interests of the wealthiest industrialists and financiers as expressed through the corporations and other institutions they control.

“Markets” dictate that school children faint at their desk due to hunger while billionaires grab ever more. We can do better than this.