Eight people own as much as half the world

Just when it seemed we might be running out of superlatives to demonstrate the monstrous inequality of today’s capitalism, Oxfam has provided the most dramatic example yet: Eight individuals, all men, possess as much wealth as the poorest 50 percent of humanity.

Eight people have as much as 3.7 billion people.

How could this be? Oxfam calculated that 85 people had as much wealth as the poorest half of humanity in 2014, a staggering finding that researchers with the anti-poverty organization discovered through crunching numbers provided by Forbes magazine in its rich list and by the investment bank Credit Suisse in its global wealth distribution report. Oxfam found wealth distribution to be even more unequal than did Credit Suisse, which calculated that the top one percent equaled the bottom 50 percent. Oxfam, in its report, “An Economy for the 99%,” released this month, explains:

“This year we find that the wealth of the bottom 50% of the global population was lower than previously estimated, and it takes just eight individuals to equal their total wealth holdings. Every year, Credit Suisse acquires new and better data sources with which to estimate the global wealth distribution: its latest report shows both that there is more debt in the very poorest group and fewer assets in the 30–50% percentiles of the global population. Last year it was estimated that the cumulative share of wealth of the poorest 50% was 0.7%; this year it is 0.2%.” [page 11]

 

The "wealth pyramid" as calculated by Credit Suisse. Oxfam's findings are that even this is an under-estimation of inequality.

The “wealth pyramid” as calculated by Credit Suisse. Oxfam’s findings are that even this is an under-estimation of inequality.

Because Oxfam includes among the bottom 50 percent people in the advanced capitalist countries of the Global North who have a net worth of less than zero due to debt, some critics might argue that these people are nonetheless “income-rich” because they have credit available to them and thus distort the inequality outcome. Oxfam, however, says that almost three-quarters of those among the bottom 50 percent live in low-income countries, and excluding those from the North with negative wealth would make little difference in aggregate inequality. That total debt is equal to only 0.4 percent of overall global wealth. The Oxfam report says:

“At the very top, this year’s data finds that collectively the richest eight individuals have a net wealth of $426 bn, which is the same as the net wealth of the bottom half of humanity. …  [E]stimates from Credit Suisse find that collectively the poorest 50% of people have less than a quarter of 1% of global net wealth. Nine percent of the people in this group have negative wealth, and most of these people live in richer countries where student debt and other credit facilities are available. But even if we discount the debts of people living in Europe and North America, the total wealth of the bottom 50% is still less than 1%.” [page 10]

Profiting from cheap labor and forced labor

We are accustomed to hearing that chief executive officers in U.S.-based corporations earn hundreds of times more than their average employee, but this dynamic can be found in the developing world as well. No matter where the CEO lives, brutal and relenting exploitation of working people is the motor force of inequality. Oxfam reports:

“The CEO of India’s top information firm earns 416 times the salary of a typical employee in his company. In the 1980s, cocoa farmers received 18% of the value of a chocolate bar — today they get just 6%. In extreme cases, forced labour or slavery can be used to keep corporate costs down. The International Labour Organization estimates that 21 million people are forced labourers, generating an estimated $150 bn in profits each year. The world’s largest garment companies have all been linked to cotton-spinning mills in India, which routinely use the forced labour of girls.” [page 3]

appleoxfam-graphicPeople become sweatshop workers out of desperation; often these are men and women driven off the land their families had farmed for generations. Land, even small plots that provide only subsidence for those who work it, represents wealth taken away when those subsidence farmers are forced into migrating into urban slums. Displacement from global warming is also a factor.

“[M]any people experiencing poverty around the world are seeing an erosion of their main source of wealth — namely land, natural resources and homes — as a consequence of insecure land rights, land grabbing, land fragmentation and erosion, climate change, urban eviction and forced displacement. While total farmland has increased globally, small family farms operate a declining share of this land. Ownership of land among the poorest wealth quintile fell by 7.3% between the 1990s and 2000s. Change in land ownership in developing countries is commonly driven by large-scale acquisitions, which see the transfer of land from small-scale farmers to large investors and the conversion of land from subsistence to commercial use. Up to 59% of land deals cover communal lands claimed by indigenous peoples and small communities, which translates to the potential displacement of millions of people. Yet only 14% of deals have involved a proper process to obtain ‘free prior and informed consent.’ Distribution of land is most unequal in Latin America, where 64% of the total wealth is related to non-financial assets like land and housing and 1% of ‘super farms’ in Latin America now control more productive land than the other 99%.” [page 10]

As entire areas of the world like Latin America have been plundered for the benefit of multi-national corporations based in the Global North, with those benefits flowing to the executives and financiers who control those corporations, it is no surprise that most of the wealth remains concentrated in the advanced capitalist countries. Although steering well clear of so much as a hint of the imperial nature of uneven development, the Credit Suisse report that Oxfam drew upon does note that North America and Europe together account for 65% of total household wealth with only 18% of the world’s adult population.

The sociologist James Petras estimates that the corporations and banks of the North took US$950 billion of wealth out of Latin America for the period 1975 to 2005. Thus it is no surprise that global inequality, when measured by the standard statistical measure of income distribution, the gini coefficient, is greater than inequality in any single country.

More programs on the way to make inequality still worse

Few countries of the Global North are more unequal than the United States, the imperial center of the world capitalist system that seeks to impose its ways and culture on the rest of the world. The new Trump administration is determined to make U.S. inequality even more extreme. Not only through intentions of cutting taxes on the wealthy and corporations, but via many less obvious routes.

For example, the Center on Budget and Policy Priorities reports that the repeal of Barack Obama’s Affordable Care Act, a process already in motion, would result in tax cuts of $2.8 billion per year for the country’s 400 highest-income taxpayers. Special Medicare taxes that fund subsidies for low-income United Statesians to buy insurance under the act are assessed only on those with annual incomes higher than $200,000. Conversely, the loss of tax credits to buy health insurance would lead to a tax increase for about seven million low- and moderate-income families.

Through the end of 2016, the central banks of Britain, the European Union, Japan and the United States have shoveled a colossal total of US$8 trillion (€7.4 trillion) into their “quantitative easing” programs — that is, programs that buy government bonds and other debt in an effort to boost the economy but in reality does little other than fuel stock-market bubbles and, secondarily, real estate bubbles. Vast rebuilding of crumbling infrastructure — a program that would actually put people to work — would have cost less.

CEO-to-worker ratioStandard economic ideology insists that the real problem is that wages have not fallen enough! Consistent with that, the Federal Reserve released a paper in 2015 claiming that “rigidities” “prevent businesses from reducing wages as much as they would like” during economic downturns.

Oh yes, falling wages instead of stagnant wages will bring happy times! Never mind that productivity has soared over the past four decades, while wages have consistently not kept pace. The average Canadian and U.S. household would earn hundreds of dollars per week more if wages had kept up with rising productivity, while wages in Britain and many other countries are also lagging.

What to do? The Oxfam report, in its conclusions, advocates a switch to a “human economy,” one in which governments are “accountable to the 99%,” businesses would be oriented toward policies that “increase prosperity for all,” and sustainability and equality would be paramount.

“Oxfam firmly believes humanity can do better,” its report concludes. Surely we can do better. But not under capitalism. Does anyone believe that the world’s elites, who profit so enormously and believe they can build a wall high enough to keep the world’s environmental and social problems away, are going to suddenly accept business as usual can no longer go on and willingly give up their enormous privileges?

Any way you calculate it, income inequality is getting worse

A flurry of new reports have provided yet more data demonstrating that inequality is getting worse. All right, this does not qualify as a shock. But it really isn’t your imagination.

The economic crisis, nearly a decade on now, has been global in scope — working people most everywhere continue to suffer while the one percent are doing just fine. One measure of this is wages. A newly released report by the Organisation for Economic Co-operation and Development finds that median wages in the OECD’s 35 member countries are still below where they were in 2007. For the bottom 10 percent of wage earners, the news is worse; wages for this bottom decile have declined 3.6 percent since 2007. But wages have risen for the top 10 percent.

Graphic via the Institute for Policy Studies

Graphic via the Institute for Policy Studies

The report on wage inequality by the OECD, the club of the world’s advanced capitalist countries and a few of the biggest developing countries, also found that inequality has increased in most of those countries. No part of the world has been immune. The report, “Income inequality remains high in the face of weak recovery,” states:

“The crisis has not only heavily affected the number of jobs but also their quality. … Even in countries where labour market slack has been re-absorbed, low-quality jobs and high disparities among workers in terms of work contracts or job security weigh heavily on low-earning households and contribute to maintaining high levels of income inequality. Wages have stalled in most countries, including those that were largely spared by the recession (e.g. Japan) and fallen in those hard hit (e.g. Greece, Portugal, Spain, and the United Kingdom).”

Chile and Mexico are the most unequal countries among the OECD members, followed by the United States, as measured by the gini coefficient. Iceland, Norway and Denmark are the least unequal. (The gini coefficient, the standard statistical measure of income distribution, is equal to zero if everybody has the same income and to one if a single person takes all income.) To put that scale into some tangible form, Iceland’s gini coefficient is 0.24 and Chile’s is 0.46.

Global inequality worse than any country’s

The world’s most unequal country is South Africa at 0.65. Calculating this scale on a global basis gives a better idea of the scale of inequality but is a difficult statistic to find. One measure, as calculated for a United Nations Food and Agricultural Organization paper, estimates the world gini coefficient in 2005 was 0.68, significantly higher than in the 19th century but a bit lower than it had been in 1981. That’s higher than South Africa. The Economist, crunching data from several sources, estimates a global gini coefficient of 0.65 in 2008, a very slight dip from the 1980s peak.

Global inequality has very likely worsened since but no more recent statistics appear to be available.

Rising inequality has been particularly acute in the global center of world capitalism, the United States, and a quick examination of trends there are useful as capitalists elsewhere seek to emulate the new U.S. gilded age. Those at the top of the pyramid are grabbing ever more. The Economist reports:

“Including capital gains, the share of national income going to the richest 1% of Americans has doubled since 1980, from 10% to 20%, roughly where it was a century ago. Even more striking, the share going to the top 0.01%—some 16,000 families with an average income of $24m—has quadrupled, from just over 1% to almost 5%. That is a bigger slice of the national pie than the top 0.01% received 100 years ago.”

Another new study, by economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman, found that the average pre-tax income of the bottom 50 percent of U.S. adults is flat since 1980 in inflation-adjusted dollars — and this includes government transfers, other public spending and the value of job-derived fringe benefits — and thus the share of national income going to the bottom half of United Statesians declined to 12 percent in 2014 from 20 percent in 1980. The top one percent, meanwhile, hauled in 20 percent of income in 2014. Another way of looking at this inequality, the authors write, is that the top one percent of U.S. adults earned on average 81 times more than an adult in the bottom 50 percent. This ratio was 27 times in 1980.

The top of the pyramid does well around the world

To zero in on the tip of the pyramid, the U.S. Internal Revenue Service released a report this month on the 400 tax returns showing the highest incomes reported to it. Those 400 taxpayers reported an aggregate income of $127 billion in 2014 — a fourfold increase in inflation-adjusted dollars since 1980. Those 400 taxpayers by themselves accounted for 6 percent of all interest income and 11 percent of all capital gains (profits from financial assets such as stocks and bonds). To put that in perspective, 149 million tax returns were filed in the U.S. in 2014. Stock-market bubbles and other forms of financial speculation truly are the province of the super-wealthy.

In Canada, Statistics Canada reports that, in 2013, the top one percent grabbed 10.3 percent of income; the average Canadian in this grouping received $450,000 that year. In Britain, the top one percent have doubled their income since 2005, collectively adding another £250 billion to their wealth. Meanwhile, a fifth of Britons live below the poverty line and life expectancy in some areas is lower than in many developing countries, The Independent reports. Australian inequality has not yet reached the above levels, but is getting wider — the percentage of total Australian income grabbed by the top 0.1 percent there has more than doubled since 1980.

Again, nothing here is going to make you fall off your chair in shock. The question becomes: What will we do about all this? This is the internally logical result of the development of capitalism — the upward distribution of income as exploitation accelerates through work speedups, layoffs, movement of production to low-wage havens and the panoply of deregulatory measures resulting from corporate capture of governments.

So-called “free trade” agreements, with their use of clauses enabling multi-national corporations to use secret private tribunals controlled by their lawyers to overturn laws they don’t like, are an exemplary example of the processes used to ratchet up inequality, even if but one of many manifestations. Capital is international and our resistance to it must be international as well. The rise of far right and even fascist movements across Europe and in the United States, decked in the cloaks of nationalism and fake populism, is all the more dangerous because the scapegoating that is always front and center in such movements deflects attention from the real problems.

If the beginning of the end of capitalism is upon us — admittedly something that none of us can yet be certain of — then the need to build movements that can move societies toward a better world is all the more a necessity. Even if the final decay of capitalism has arrived, that decay is likely to unfold over decades unless a global Left movement, uniting the variety of social and environmental movements and struggles across borders, can speed up the process. The only alternative is for inequality to get worse and the repression necessary to impose that inequality to get still more severe.

A basic income is less than meets the eye

A basic income — the concept of everybody getting a regular check from the government regardless of circumstance — is one of those ideas that sound wonderful on the surface but proves to be much less so once we examine the details.

An idea that seems to have gained more traction recently, a basic income is a liberal utopia. It even has its proponents on the Right, including Chicago School godfather Milton Friedman. That alone ought to require us to pause for thought.

A basic income, also sometimes called a universal income, can be defined as a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirements, paid on a regular schedule. Everybody gets this money, on top of their regular earnings.

Northern lights in Suomussalmi region, Finland (photo by Damon Beckford)

Northern lights in Suomussalmi region, Finland (photo by Damon Beckford)

That sounds good, doesn’t it? The devil, of course, is in the details. And, as just noted, a basic income has support from Friedman and hard-line libertarian outfits like the Cato Institute. Friedman gave a talk on this topic (he called his version a “negative income tax”) in 1968, in which he said:

“The proposal for a negative income tax is a proposal to help poor people by giving them money, which is what they need. Rather than as now by requiring them to come before a governmental official, detail all their assets and their liabilities and be told that you may spend x dollars on rent, y dollars on food, etc., and then be given a handout.”

Conservative economists, and certainly Friedman, who remains an icon of the hard Right, are hardly known for wanting government to help anybody (except capitalists). So what is behind this? We are talking here about the economist who helped military dictator Augusto Pinochet implement “shock therapy” in Chile, the result of which was the poverty rate skyrocketing to 40 percent while real wages declined by a third. One-third of Chileans were unemployed during the last years of the dictatorship and the privatized social security system was so bad for Chilean working people that someone retiring in 2005 received less than half of what he or she would have received had they been in the old government system.

And let us not forget the extreme violence that was required to implement Friedman’s neoliberal dreams, with the total of those killed, jailed, “disappeared” or forced into exile totaling tens if not hundreds of thousands. Friedman claimed that he gave only “technical economic advice” and that Chile’s economic and political policies were totally separate, but also wrote that people who demonstrated in favor of human rights at his speeches were “fanatics.”

A back door to cutting services and wages

A basic income is popular among some right-wing economists because such an income would replace social services and provide a subsidy to employers who pay wages below a living level. The Marxist economist Michael Roberts puts this plainly:

“[P]aying each person a ‘basic’ income rather than wages and social benefits is seen as a way of ‘saving money,’ reducing the size of the state and public services — in other words lowering the value of labour power and raising the rate of surplus value (in Marxist terms). It would be a ‘wage subsidy’ to employers with those workers who get no top-up in income from social benefits under pressure to accept wages no higher than the ‘basic income’ which would be much lower than their average salary.”

Although it would likely be difficult for capitalists to force down wages on current employees remaining in their jobs in the short term, a basic income would enable bosses to cut pay to new hires. A prospective employer could easily offer reduced wages on the basis that the prospective employee already has financial support via the basic income. Few interviewers would likely say that so blatantly, but “market pressure” would cut the price of labor, which would remain a commodity in a fully capitalist economy. With starting wages offered to new employees reduced, eventually pressure would build on longer-term employees to accept wage cuts, too.

A Wal-Mart protester is led away during a Black Friday action in Sacramento, California. (Photo via Making Change at Walmart.)

A Wal-Mart protester is led away during a Black Friday action in Sacramento, California. (Photo via Making Change at Walmart.)

Already, low-wage employers like Wal-Mart receive massive subsidies that enable it both to rack up gigantic profits and pay its workers wages below subsistence levels. The spectacle of Wal-Mart workers holding food drives so they can eat might well be replicated on a much larger scale when the basic income proves to be worth less than the value of unemployment benefits and other social-welfare programs, combined with downward pressure on wages.

The Socialist Party of Great Britain notes that unions would not be able to counteract such downward pressure on wages:

“Unions do have some power, but it is limited to working with favourable labour market forces to get higher wages and better working conditions. When, however, labour market conditions are against them the most they can do is to slow down the worsening of wages and working conditions. If all workers got a basic income from the state of £5000, let alone £10,000, a year, this would change labour market conditions in favour of employers. In pay negotiations they would point to the state payment as evidence that they did not need to pay so much in wages or salaries to maintain their employees’ accustomed standard of living. The workers and their unions would realise this and the negotiations would be about what the reduction in wages and salaries should be.”

It won’t make capitalism kinder or gentler

Bargaining over wages in the best of times is no more than negotiating the terms of your exploitation. “Market forces” — which are nothing more than the aggregate interests of the largest industrialists and financiers — will operate just as pitilessly with a basic income because neither a basic income nor collective bargaining over wages touches in any way the social relations of capitalism. A capitalist’s profit derives from paying employees a fraction of the value of what they produce; the inequality that results from that (and the relentless competitive pressure on capitalists to expand on pain of dying) will exist as long as capitalism exists. A basic income would have no effect on this.

A basic income bears some resemblance to the concept of “block grants,” a particular obsession with right-wing politicians in the United States. Block grants are money that would be handed to lower levels of government by the federal government to be dispersed as local officials wish with no accountability as a substitution for money that is ear-marked for specific social programs. These are continually proposed as a back door to dismantling social programs. Similarly, a basic income would be a cash transfer for recipients to pay for whatever services or needs they might have in a private market system, assuming they have adequate total income to obtain it, rather than having services provided for free or at subsidized cost as a public service on the basis of need, as a civilized society ought to do.

The use of the “market” to determine social outcomes would only increase. In other words, more neoliberalism! More people being unable to meet their basic needs would result as wealth would become more of a determinant of results.

Demonstration for a basic income in Berlin, November 2010 (photo by "PD")

Demonstration for a basic income in Berlin, November 2010 (photo by “PD”)

It is also argued that a basic income could disproportionally affect women. The feminist economist Barbara Bergmann countered advocates of basic income who argue that such payments would enable parents to stay home with young children by pointing out that women disproportionally are the stay-at-home parents, to the detriment of their long-term earning potential. Thus a basic income would make women more dependent, not less, she wrote:

“Many if not most employers have come to see women as likely to be continuous labor force participants, not inevitably destined to leave the work force, and therefore as people worth training, worth putting into jobs leading to promotion, worth considering for promotion. This kind of progress would be reversed if a higher proportion of women withdrew from the labor force when their first child was born. For this reason, the full-blown implementation of Basic Income schemes in the near future should not appeal to those for whom gender equality is an important goal.”

Nor would the weakening of health care systems that would be a likely result of cutting social services do any better in fostering equality. Professor Bergmann wrote:

“Both the welfare state and Basic Income reduce inequality of condition. But the welfare state does so with greater efficiency, because it takes better account of inequalities due to differences in needs. If I need an expensive operation and you don’t, giving both of us a Basic Income grant will not go far to make our situations more equal. Only the provision of health services has the chance of doing that.”

Would governments really increase spending?

Those who advocate for a basic or universal income do so on the basis of affordability — there would not be a strain on the treasury, presumably because a spur to consumer spending would boost the economy. But is this so? A hard look at the numbers is not encouraging.

In all types of capitalist societies, from the neoliberalism of the United States to the social democracy of Sweden, the costs of a basic income would far outstrip current spending on social welfare programs.

In the U.S. an annual figure of $10,000 is often bandied about as the appropriate level for a basic income. If this sum were paid out to every U.S. adult, it would cost about $2.4 trillion. That total vastly outstrips current spending on social programs. A Wall Street Journal analysis (hostile to a basic income for the expected conservative reasons) suggests that scrapping income support for the poor, disabled and unemployed, and eliminating veterans’ benefits, Medicaid, Medicare and other health care subsidies would save a composite $1.5 trillion — and likely be quite unpopular.

It could be argued, as the Journal wouldn’t, that money for a basic income could come instead from other sources, such as eliminating massive corporate subsidies, drastically cutting the military budget and even printing money to go toward people instead of the trillions of dollars conjured out of thin air by central banks for “quantitative easing” programs that do little other than fuel stock-market bubbles and inflate speculators’ assets. But for that to happen an immense popular movement would be required, and the enormous effort that would be poured into such a movement would better direct its energies to much more thorough-going changes.

Thus, realistically, a basic income that could hardly be lived on (likely far less than $10,000 annually for United Statesians if it actually came into existence) would be paid for by an effective elimination of the remaining social safety net. Hardly a desirable outcome.

No better prospects where the safety net is stronger

This dynamic would hold in countries with better safety nets. In Canada, a basic income of $10,000 per person would cost 17 percent of Canadian gross domestic product, more than twice what all levels of government in Canada spend on social benefits. Toby Sanger, a Canadian economist who works with unions, argues that any basic income, due to its expense, would soon cease to be universal. He writes:

“Any fiscally sustainable basic income program with an adequate level of benefits would need to be income tested or subject to relatively high clawback or tax rates and so wouldn’t end up being universal and unconditional.  While such a program would be fiscally feasible, it would be subject to many of the same problems with the existing social assistance system that many basic income advocates want to escape.”

Simply instituting a basic income, even if it were fiscally possible, in itself doesn’t address the structural causes of poverty. Mr. Sanger writes:

“While lack of financial resources is of course a primary aspect of poverty, simply providing more money won’t eliminate poverty alone. Social exclusion, inadequate access to education, public goods, opportunities, networks, lack of political influence and many other factors contribute to a persistent of poverty. Systemic racial, gender, class, and ability-based discrimination have resulted in higher rates and a persistent of poverty among women, racialized Canadians, Aboriginal peoples, differentially abled and among those whose families were poor.”

Even a country with generous social-welfare programs like Sweden would find the institution of a basic income difficult. Professor Bergmann calculated that sending a basic-income check equal to a poverty-line income to all Swedes not already recipients of government programs would require about 15 percent of gross domestic product. Doing that, while retaining current benefits, would require higher taxes. As a result:

“[I]f an extra 15 percent of GDP were added to cash payments by government to households, those extra funds would have to be taxed away from households’ wage and property income now devoted to buying consumer goods, now 32 percent of GDP, leaving households just 17 percent of GDP as their net reward for their participation in the production of the entire GDP. That could hardly be tolerated.”

A previous experiment in Canada

Advocates of a basic income often point to the experiment conducted in Dauphin, Manitoba, in the 1970s. A University of Manitoba economist, Evelyn Forget, recently studied the results (a new Conservative government ended the program and the intended government study was never performed) and found positive results. Hospitalization rates declined, more adolescents stayed in school and workforce participation remained steady.

But the experiment in Dauphin, a town of about 12,000 people, wasn’t actually a basic income. There was an income eligibility rate, meaning that only about 30 percent of the town residents actually got a check. A family of four could receive $15,000 per year on top of whatever benefits were already in place. So this was a case of living in a lucky spot.

Mount Meager volcanic complex, British Columbia (photo by Dave Steers)

Mount Meager volcanic complex, British Columbia (photo by Dave Steers)

The province of Ontario, under a Liberal administration, announced this year that it would conduct an experiment in a basic income, to be conducted in selected towns to be determined. But the provincial government has hinted this may be intended as a way of reducing benefits. Its explanation in the budget for this proposal states: “The pilot would also test whether a basic income would provide a more efficient way of delivering income support, strengthen the attachment to the labour force, and achieve savings in other areas, such as health care and housing supports.”

Finland is going forward with its own experiment. The Finnish Ministry of Social Affairs and Health is soliciting input on a program that would provide €560 per month tax-free to 2,000 people in a mandatory test case that would run in 2017 and 2018. The ministry, in a press release, first states it seeks to determine if a basic income would “promote employment,” but then hints at a desire to cut benefits:

“The basic income experiment is one of the activities aiming to reform social security so that it corresponds better to the changes of working life, to overhaul social security to encourage participation and employment, to reduce bureaucracy, and to simplify the complicated benefits system in a sustainable way regarding public finances.”

We live under capitalism, and we don’t get something for nothing, regardless of advocates issuing statements calling for a basic income without any cuts to existing benefits. The measures of democracy and social welfare that have been obtained are a direct result of social movements and the work of activists. They are not gifts handed down to us.

Liberals and social democrats ought to be careful for what they wish. Our energies can better go toward the creation of a sustainable economy that provides for human needs with jobs for all who need them, rather than begging for extra crumbs (that might turn out to be fewer crumbs) from capitalists’ tables.

The crises of neoliberalism won’t be solved by more neoliberalism

We’re in a world of trouble if we are unable to conceive of alternative economic models. We need not linger on the details of rising inequality, political instability, tightening corporate control of governments, looming environmental crisis, increasingly precarious employment (if even available) and the inability to meet the basic needs of billions of people around the world to see that capitalism is failing humanity.

To put this in a nutshell, on a global basis, about 200 million people are unemployed among 2.4 billion who have no stable employment.

Neoliberalism is not a virus foisted on the world by some secret cabal; it is merely the latest phase of capitalism, one that, from the standpoint of capitalists, is the logical outgrowth of the breakdown of mid-20th century Keynesianism. We’re not going back to Keynesianism, because that was a brief period dependent on an industrial base and market expansion. A repeat of history isn’t possible because the industrial base of the advanced capitalist countries has been hollowed out, transferred to low-wage developing countries, and there is almost no place remaining into which the capitalist system can expand.

What happens to rain forests when the market is allowed to decide. (Photo of Montane Rainforest in Ecuador by Gunnar Brehm)

What happens to rain forests when the market is allowed to decide. (Photo of Montane Rainforest in Ecuador by Gunnar Brehm)

So when I saw a paper titled “Industrial policy in the 21st century: merits, demerits and how can we make it work” in the latest issue of Real-World Economic Review, I was intrigued. As its title implies, Real-World Economic Review specializes in papers by economists who think far outside the orthodox box that serves industrial and financial elites very well; the very fact that a field requires a publication with such a title speaks for itself.

The disappointing prescriptions offered in the paper, however, might at best be described as “neoliberal lite.” The author of “Industrial policy in the 21st century,” Mohammad Muaz Jalil of the NGO Swiss Foundation for Technical Cooperation, is well-intentioned, but advocates the same export-oriented policies that have led to sweatshops and dangerous working conditions across the developing world. It also implies endless growth, a dangerous illusion.

More of the same hardly seems a likely escape, and that is before we contemplate the mathematical impossibility of every country exporting its way out of economic difficulty. For every country that achieves an trade surplus, some other country has to have a trade deficit.

What works for a few doesn’t work for all

Mr. Jalil begins by noting that East Asian countries used industrial policies, including protectionist policies, to build their economies, most notably Japan, South Korea, Taiwan and Singapore. He uses the Organisation for Economic Co-operation and Development (OECD) definition of industrial policy:

“Industrial Policy is any type of intervention or government policy that attempts to improve the business environment or to alter the structure of economic activity toward sectors, technologies or tasks that are expected to offer better prospects for economic growth or societal welfare than would occur in the absence of such intervention.”

The above East Asian countries used various mixes of export-oriented growth strategies and protection for young industries. Favored corporations received export subsidies, reduced interest rates and preferential allocation of foreign exchange with the goal of these enterprises becoming competitive globally. Manufacturing in these countries started at a low level but steadily moved up the “value chain” — that is, they were able to produce increasingly sophisticated products.

Mr. Jalil does acknowledge some criticisms of this type of policy, noting the difficulty in foreseeing who or what will be the winners in the future, the much stiffer international competition of today, that international supply chains have become dominant, and that today’s severe global trade regime restricts the ability of governments to intervene. Governments today nonetheless use industrial policies, albeit within the so-called “Washington consensus” (which is really the “Washington diktat”) that imposes neoliberal policies around the world through the World Trade Organization and international lending banks controlled by the United States and to a lesser degree the European Union.

When we get to specific examples, the paper’s prescriptions rapidly break down. Mr. Jalil presents Brazil and South Africa as examples. Brazil is one of the world’s most unequal societies, and one with severe economic problems not likely to improve in the wake of the Brazilian Right’s soft coup against former President Dilma Rousseff. A weak currency, lack of growth, continuing inflation, huge piles of debt owed in dollars and euros, and local corporations saddled with debt and low credit ratings seems not a rosy picture. Poverty is widespread, and activists who challenge land owners who clear-cut rain forests are not infrequently killed.

South Africa has the most inequality of any country in the world. The African National Congress threw away its moral authority to implement its “Freedom Charter” upon taking power by negotiating away its economic control. The ANC took office handcuffed, and having tied themselves to financial markets, those markets applied further “discipline” by attacking the South African economy at the first sign of anything that displeased them.

South African workers, especially miners, are subjected to violence at the hands of the ANC government, abetted by ANC-aligned unions. More than half of South Africans live in poverty and the unemployment rate is 26.6 percent. This is an example to emulate?

Sweatshop advocates don’t have to work in them

Next up, the author promotes the Bangladesh garment industry as a success story! Well, for Wal-Mart and other global retailers who rack up enormous profits on the backs of sweatshop workers being paid starvation wages this is undoubtedly a success. But as a development strategy beneficial to working people? Let’s look at the evidence.

Bangladeshi garment workers can work 14 to 16 hours a day, some seven days a week. The minimum wage is little more than half of the minimum required to provide a family with shelter, food and education, according to the activist group War on Want. The Institute for Global Labour and Human Rights estimates that a worker in Bangladesh would have to labor 15 1/2 hours to buy a gallon of milk. In 2014, the Wal-Mart chief executive officer earned 24,500 times more than a Bangladeshi sweatshop worker. Yet despite repeated accidents resulting in mass deaths, little has changed.

The shipbuilding industry is also promoted as a route to prosperity for Bangladeshis. A key component of this industry is “ship-breaking,” whereby ships are driven onto land to be disassembled. The Institute for Global Labour and Human Rights reports that ship-breakers work 12-hour shifts, seven days a week, and are paid 30 to 45 cents an hour to perform a job “in which it is common for workers to be maimed or killed.” The ship-breakers are reported to live in crowded hovels, sleeping on concrete floors.

Ship-breaking in Chittagong, Bangladesh (photo by Naquib Hossain)

Ship-breaking in Chittagong, Bangladesh (photo by Naquib Hossain)

Nobody would choose to do such things except under the most dire deprivation. That such work is a route to sustainable development is a common trope of neoliberal apologists, but defies common sense in any humanistic context.

The author points to the increasing number of developing-country corporations among the world’s biggest, but those numbers are nonetheless still minuscule. In fact, the corporations of the Global North remain overwhelmingly dominant. A study by Sean Starrs in New Left Review found that, when the world’s industries are grouped into 25 broad categories, U.S. firms led in 18 and in 10 of those U.S. corporations hauled in at least 40 percent of the aggregate profits. Germany and Japan hold the lead in two other sectors.

In support of these prescriptions, Mr. Jalil argues that as countries move up the value chain, the next country can “take over” “entry” industries and begin its own ascent. But there is only so much productive capacity that the world can absorb — the idea that every country can become a manufacturer of the same high-end electronics equipment, for example, defies reality. It also ignores, again, that every country can’t be a net exporter. It also sidesteps the fact that China’s growth threatens to “crowd out” other competitors due to its massive size.

Minqi Li, in his book The Rise of China and the Demise of the Capitalist World Economy, argues that the huge mass of low-wage Chinese workers will drag down wage levels globally; the increase of industrialization in developing countries will lead to exhaustion of energy sources; and that ecological limits will force a halt to growth, fatal to a system dependent on growth. Professor Li argues that an upward convergence of wages around the world in present-day low-wage havens would significantly reduce capitalists’ profits.

In this scenario, capitalists would seek to cut wages in core countries to make up the difference, which in turn would trigger reductions in demand. Reduced demand would spell trouble for any export-oriented economy, especially as the ultra-low wages suppress domestic consumption.

Nor can sufficient jobs be created for the expanding population of farmers and others dispossessed from the countryside — Samir Amin calculates that even with an increase of seven percent in gross domestic product for the next 50 years, no more than a third of this population could find regular work. No such growth has ever occurred for such sustained periods.

Where is the second Earth going to come from?

Finally, all this imagined explosion of industry is predicated on endless growth. We live on a finite planet, and thus infinite growth is impossible. Consumption is already growing beyond Earth’s carrying capacity and the anthropogenic changes to the atmosphere have us dangerously close to the point of no return in terms of global warming. Humanity is currently consuming the equivalent of 1.6 Earths, and at current rates of consumption trends, that will rise to two Earths by the 2030s.

Not a substitute for Earth (Image created by NASA via Hubble Space Telescope)

Not a substitute for Earth (Image created by NASA via Hubble Space Telescope)

Ramping up ever more production, even assuming that markets could be found for it, can not be a long-term solution for poverty. Managers of corporations are answerable to private owners and shareholders, not to society, and thus do all they can to externalize environmental and other costs onto society. Alas, renewable energy is not a short cut to reversing global warming. Renewable energy is not necessarily clean nor without contributions to climate change (the production of wind turbines and electric cars lead to plenty of pollution), and the limits that living on a finite planet with finite resources presents are all the more acute in an economic system that requires endless growth.

Finally, the belief that industrial policy can create prosperity is predicated on developing countries having the independence to implement protectionist measures. Mr. Jalil argues that the poorest countries have temporary reprieves from World Trade Organization rules until the end of this decade, but that they have room for maneuver is questionable at best. Not only WTO rules, but the bilateral and multilateral “free trade” agreements render such protections illegal. The Trans-Pacific Partnership, which includes several developing countries, would further restrict any ability to protect local industries — and the TPP is intended to be a model for other countries. (Although wounded, TPP is not dead yet because a two-year window has yet to expire.)

In a world where “free trade” agreements strongly constrict the ability of governments to enact laws and regulations, and which grant multi-national corporations the right to sue to eliminate any law they don’t like — in essence, a requirement that corporate profits trump any labor, safety, environmental or health measure — the road to becoming a net exporter will begin and end with sweatshops for most countries.

Low wages and a lack of enforceable regulations are precisely why multi-national capital is invested in developing countries like Bangladesh. The global “free trade” regime is nothing more than a mechanism for the most powerful industrialists and financiers of the Global North to accelerate a race to the bottom and increase their exploitation to the maximum humanly possible. That developing countries can win at this — or that the advanced capitalist countries will allow more competitors to arise — is fantasy. A neoliberal fantasy.

Mr. Jalil concludes with a call for private-sector funding able to “respond to diversity and dynamism inherent in markets.” Huh? Markets in the capitalist world are nothing more than the aggregate interests of the largest industrialists and financiers — allowing markets to make an ever wider range of social decisions is what has led the world to its impasse and ever harsher austerity for working people. Neoliberal capitalism may teach that people exist to serve markets, but we don’t have to accept that.

The belief that private funding — which, after all, is done to extract profit regardless of social or environmental cost — will make us live happily ever after should be left to the realm of fairy tales. As the saying goes, insanity is believing that doing the same thing over and over again will produce different results.

Work harder so speculators can get more

Class warfare is poised to reach a new milestone as this year’s combined total of dividends and stock buybacks by 500 of the world’s largest corporations will exceed US$1 trillion.

So large is that figure that, for the second year in a row, the companies comprising the S&P 500 Index (a list of many of the world’s biggest corporations) will pay out more money in dividends and stock buybacks than the total of their profits. Yes, times are indeed good for speculators. Not so good for employees — you know, the people who do the actual work — whose pay is stagnant or declining so that those at the top can scoop up still more.

Although dividends, a quarterly payment to holders of stock, are steadily increasing, the increase in stock buybacks has been steeper. The total of these has tripled since 2009 as financiers and industrialists feverishly extract as much wealth as they can. This is part of why the “recovery” since the 2008 economic collapse has been a recovery only for those at the top.

Times have not changed as much as we think they have ("Baskaks" by Sergei Vasilyevich Ivanov)

Times have not changed as much as we think they have (“Baskaks” by Sergei Vasilyevich Ivanov)

In short, a buyback is when a corporation buys its own stock from its shareholders at a premium to the current price. Speculators love buybacks because it means extra profits for them. Corporate executives love them because, with fewer shares outstanding following a buyback program, their company’s “earnings per share” figure will rise for the same net income, making them look good in the eyes of Wall Street. Remaining shareholders love buybacks because the profits will now be shared among fewer shareholders.

Wall Street and corporate executives both win! Hurrah! Who could by hurt by this? Oh, yes, the employees. They’ll have to suffer through pay freezes, work speedups and layoffs because the money shoveled into executive pay and financial industry profits has to come from somewhere. This sort of activity helps buoy stock prices. So does the trillions of dollars the world’s central banks have printed to sustain their “quantitative easing” programs.

We’re not talking loose change here. The U.S. Federal Reserve pumped $4.1 trillion into its three rounds of quantitative easing; the Bank of England spent £375 billion; the European Central Bank has spent about €1.34 trillion; and the Bank of Japan has spent ¥220 trillion so far. That’s a total of US$8 trillion or €7.4 trillion. And the last two programs are ongoing.

Encouraging investment or inflating bubbles?

The supposed purpose of quantitative-easing programs is to stimulate the economy by encouraging investment. Under this theory, a reduction in long-term interest 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.

The practical effects of all this is to re-distribute income upward. That is the raison d’être of the financial industry.

What else could be done with the vast sums of money thrown at the financial industry? In the U.S. alone, home to a steadily crumbling infrastructure, the money needed to eliminate all student debt, fix all schools, rebuild aging water and sewer systems, clean up contaminated industrial sites and repair dams is estimated to be $3.4 trillion — in other words, $700 billion less than the Federal Reserve spent on its quantitative-easing program.

The British think tank Policy Exchange estimates Britain’s needs for investment in transportation, communication and water infrastructure to be a minimum of £170 billion, or less than half of what the Bank of England spent on its QE scheme.

Borrowing to give more to speculators

To return to the $1 trillion in dividends and buybacks, a research report by Barclays estimates that those payouts by S&P 500 corporations will total about $115 billion more than their combined net income. As a Zero Hedge analysis puts it:

“[C]ompanies will promptly send every single dollar in cash they create back to their shareholders, and then use up an additional $115 billion from cash on the balance sheet, sell equity or issue new debt, to fund the difference.”

Near-zero interest rates, another central bank policy that favors the financial industry, have enabled this accumulation of debt. Debt not for investment, but simply to shovel more money into the pockets of financiers and executives. But debt can’t increase forever, and someday, perhaps in the not too distant future, central banks will raise interest rates, making debt much less attractive. The Barclays report calculates that 2015 also saw buybacks and dividends total more than net income; the last time there was consecutive years in which this happened were 2007 and 2008.

payouts-of-divdends-and-buybacksIt would of course be too simplistic to interpret this metric as a signal that an economic collapse on the scale of 2008 is imminent, but is perhaps a sign that the latest stock market bubble may be close to bursting.

Another signal that trouble may be looming is that money is now being shoveled into bonds, a sign that confidence in the stock market is waning. A New York Times report suggests that European and Asian investors (the Times of course is much too genteel to use the word “speculator”) are pouring so much capital into U.S. bond markets that a bubble is being inflated there as well. These speculators are seeking higher returns from bonds floated by U.S. corporations than they can get at home. The Times reports:

“The surge in flows echoes a wave of investment in the years right before the financial crisis, when mostly European investors snapped up billions of dollars of mortgage-backed securities before the American housing market imploded.

The current numbers are also arresting. According to [former Treasury Department official Brad W.] Setser’s figures, about $750 billion of private money has poured into the United States in the last two years alone.”

Starved for investment

Setting aside the touch of xenophobia in it, the Times report does at least broach the subject of under-investment. And wealthy investors possessing far more money than can possibly be invested is hardly an unknown phenomenon. As an example, let us examine Wal-Mart, which racked up more than $16 billion in net income for 2015 and seems poised to better that this year.

The Walton family, heirs to founder Sam Walton, owns about half of Wal-Mart’s stock and receive a corresponding share of the billions of dollars in dividends the company pays yearly. It also spends billions more buying back stock annually, an indirect help to the Waltons. This is a company notorious for dodging taxes while paying its employees so little they require government assistance, and is the recipient of vast amounts of government handouts.

The Waltons make tens of thousands times what their ill-paid employees earn. They certainly don’t work tens of thousands harder — or even work at all, as the billions roll in just for being born into the right family. Wal-Mart is far from alone, but does provide an exemplary example of class warfare. An estimated $1 trillion a year goes to corporate profits that once went to wages, according to a PBS Newshour report.

The harder you work, the more the boss, and financiers, make. What sort of system is this?

Wages are so stagnant even the Federal Reserve has begun to notice

You are working harder while not making more. It isn’t your imagination. The latest research demonstrating this comes, interestingly, from the St. Louis branch of the United States Federal Reserve.

Perhaps the researchers examining the relation between wages and productivity hoped this work wouldn’t be noticed by the public, as it was published in an obscure publication, Economic Synopses, produced by the St. Louis Fed. Regardless, it is of interest. The two authors, B. Ravikumar and Lin Shao, not only found a divergence between rising productivity and stagnant wages in the current “recovery” from last decade’s economic collapse, but that this has been a consistent pattern.

The Economic Synopses paper found that labor productivity for U.S. workers has increased six percent since 2009, while wages have declined 0.5 percent. (The authors measure labor productivity as real total output divided by total hours worked and labor compensation as real total labor compensation divided by total hours worked.)

Looking back to the previous officially designated recession in the U.S., declared to have ended in 2001, the authors found that over the following five years productivity increased about 13 percent, while wages increased by about five percent. Overall, the authors summarize by demonstrating that wages have lagged productivity by a wide margin since 1950, with the gap beginning to widen in the 1970s. Productivity in 2016 is 3.8 times higher than it was in 1950, while wages are only 2.7 times greater.

Wages and productivity in the United States since 1950 (Graphic by the St. Louis Fed, based on Bureau of Labor Statistics data)

Wages and productivity in the United States since 1950 (Graphic by the St. Louis Fed, based on Bureau of Labor Statistics data)

We are talking about the Federal Reserve here, so Dr. Ravikumar and Mr. Shao are not offering any analysis. In about a tepid a conclusion as possible, they write:

“In conclusion, labor compensation failed to catch up with labor productivity after the 2007-09 recession. However, the driving force behind it is not unique to the recent recession but is part of a long-term trend of a widening productivity-compensation gap.”

Ideology in the service of inequality

Hmm, something mysterious? Or as natural as the tides of the ocean? Well, no, if we think for even a moment about the asymmetric class warfare that has raged for decades. Yet neoclassic economic ideology (and not only its extreme Chicago School variant) continues to insist that we get what we deserve and that labor is compensated for what it produces.

Neoclassical economics is an ideologically driven belief system based on mathematical formulae, divorced from the conditions of the actual, physical world, and which seeks to put human beings at the service of markets rather than using markets to provide for human needs. Economic activity is treated as a simple exchange of freely acting, mutually benefitting, equal firms and households in a market that automatically, through an “invisible hand,” self-adjusts and self-regulates to equilibrium.

Households and firms are considered only as market agents, never as part of a social system, and because the system is assumed to consistently revert to equilibrium, there is no conflict. Production is alleged to be independent of all social factors, the employees who do the work of production are in their jobs due to personal choice, and wages are based only on individual achievement independent of race, gender and other differences.

The real world does not actually work this way — the executives and financiers who reap fortunes from the huge multi-national corporations they control and who can bend governments to their will have rather more power than you do. Neoclassical economics does not adjust to the real world because it is, at bottom, an ideological construct to justify massive inequality, which is why two other Federal Reserve researchers declared that the reason for economic difficulty in recent years is that wages have not fallen enough!

Productivity gains outstrip wages around the world

Stagnant or declining wages, however, are quite noticeable in the real world. Independent studies have found that the lag of wages as compared to productivity costs the average U.S. and Canadian employee hundreds of dollars per week. That is by no means a trend limited to North America — employees in Britain, France, Germany, Italy and Japan have experienced differentials between wages and productivity, albeit not as severe as what is endured by U.S. workers.

Where is the extra money taken out of employees’ pockets going? Not necessarily to the bosses at the point of production — financiers are taking an increasingly large share of profits. Financialization is a response to declining rates of profits and that the one percent have more money flowing into their bank accounts than they can find useful outlets for investment. During periods of bubbles, financial speculation becomes more profitable than production, drawing still more money and thus increasing the already bloated size of the financial industry.

In turn, ultra-low interest rates help inflate stock-market bubbles, in effect acting as a subsidy for financial profits. The world’s central banks have flooded financial markets with more than US$6.5 trillion (€6 trillion) in “quantitative easing” programs, and all that has been accomplished is the inflation of a stock-market bubble because speculators have poured money into stock markets in the wake of low bond returns resulting from the quantitative easing. Concomitantly, corporate executives have borrowed money at low interest to fuel a binge of buying back stocks, adding to speculative fevers.

In an interesting article in the July-August 2016 issue of Monthly Review, “The Profits of Financialization,” Costas Lapavitsas and Ivan Mendieta-Muñoz calculate that the profits earned by the financial industry as a percentage of overall U.S. corporate profits increased steadily throughout the second half of the 20th century, more than tripling from 1950 to the early 2000s. Although now below the early 2000s peak, financial profits remain at historically high levels.

U.S. financial profits as percentage of corporate profits of domestic industries, 1955–2015 (Graphic by Monthly Review, based on U.S. Bureau of Economic Analysis data)

U.S. financial profits as percentage of corporate profits of domestic industries, 1955–2015 (Graphic by Monthly Review, based on U.S. Bureau of Economic Analysis data)

Because central banks have kept interest rates at extraordinarily low levels for years, the authors argue that high financial profits represent a “vast public subsidy to the financial system” and thus an “expropriation” that is “a hallmark of financialization.”

Federal Reserve researchers may have just discovered what has long been apparent to working people and “heterodox” economists, but aren’t going to offer any solutions, must less formulate critiques of the system that produces such results.

The harder you work, the richer the executives and bankers get. What if, instead, those who did the work reaped the rewards? That, however, will require a different system.

CETA’s specter of corporate dictatorship still haunts Canada, EU

The most tepid of blows for democracy was struck this week when the president of the European Commission, Jean-Claude Juncker, reversed himself and declared that the parliaments of the EU member states will vote on the “free trade” deal with Canada after all. Only a week earlier, President Juncker had dismissed the idea of any democratic input, insisting that the deal would be unilaterally approved by EU ministers.

The earlier intended diktat was no aberration, and the hasty reversal is much more a cosmetic exercise in public relations than a new-found respect for public opinion. The public has been excluded from the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union from the start. There are reasons for that, centering on CETA being indistinguishable from the various “free trade” deals under way and, like the Trans-Pacific Partnership, one that goes beyond even the North American Free Trade Agreement.

President Juncker first said on June 28 that there was no need for ratification by European parliaments — although he graciously conceded that EU governments  could “scrutinize” the CETA text. The problem, he said, was that “allowing national parliaments to have a say in the agreement will paralyze the process and put the bloc’s credibility at stake,” reported Deutsche Welle. Well, we can’t have messy democracy get in the way of corporate wish lists, can we?

Ottawa from the McKenzie Bridge (photo by Siqbal)

Ottawa from the McKenzie Bridge (photo by Siqbal)

Deutsche Welle reported on July 5 that Germany and France had insisted parliamentary votes be taken, with the German economy minister, Sigmar Gabriel, saying publicly that President Juncker’s comment was “incredibly stupid” and “would stoke opposition to other free trade deals.” No opposition to CETA here; merely discomfort that the lack of democracy had become too blatant. So it would be unrealistic to expect the Bundestag or any other parliamentary body to vote in the interest of their citizens without much more popular pressure being applied.

On the other side of the Atlantic, the Canadian government is putting a happy face on what will be a longer process than expected, saying the European reversal was “expected.” International Trade Minister Chrystia Freeland has has gone so far as to declare CETA a “gold-plated trade deal.” The government of Prime Minister Justin Trudeau has followed a path very similar to that of U.S. President Barack Obama, quickly making a couple of easy gestures, such as installing a gender-equal cabinet, but allowing almost all of Stephen Harper’s draconian laws to stay in place. Pushing for CETA’s passage, despite its being negotiated in secret by the Harper régime, is consistent with that path.

Consultation process is window-dressing

The European Commission’s antipathy to democracy is also par for the course. The EU trade office, the European Commission Directorate General for Trade, set up a process of public consultation, but seems to have not paid any attention to it. A spokesman for the watchdog group Corporate Europe Observatory said of this window-dressing “consultation”:

“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.”

The “consultation” that counted during negotiations was that of multi-national corporations. As is standard with “free trade” agreements, laws and regulations that protect health, workplace standards and the environment will be considered barriers to trade, and ordered removed by secret tribunals with no accountability. Here again we have a farce. Following the conclusion of CETA negotiations, the German and French governments wanted changes made to the investor-state dispute settlement mechanism that enables corporations to challenge governments (but not the other way around).

Grand Place, Brussels (photo by Wouter Hagens)

Grand Place, Brussels (photo by Wouter Hagens)

Did Berlin and Paris suddenly decide that ceding their sovereignty to secret tribunals, in which corporate lawyers who specialize in representing multi-national corporations sit in judgment, was maybe a bad idea? Not really. This was, like the entire process, a public relations problem. So instead of the traditional three-member tribunal picked from a roster created by an established corporate-aligned arbitration body, as is the case with complaints filed under NAFTA rules, CETA would have its own 15-member permanent tribunal. And, as an added bonus, there will even be an appeals tribunal. But who will sit on these two bodies? None other than the same corporate lawyers who would otherwise hear such cases.

Here’s the relevant passage, buried deep in the CETA text, at Article 8.26:

“The Members of the Tribunal … shall have demonstrated expertise in public international law. It is desirable that they have expertise in particular, in international investment law, in international trade law and the resolution of disputes arising under international investment or international trade agreements.”

Building on NAFTA’s anti-democratic principles

No different from the qualifications deemed necessary in existing “free trade” agreements or those proposed in the Trans-Pacific and Transatlantic partnerships. The wording guarantees that corporate lawyers or academics who specialize in existing tribunals and who have adopted the mindsets of their clients will adjudicate these decisions — in other words, a steady stream of decisions elevating the right of a corporation to make the maximum possible profit above all other human considerations. This dynamic has to led to NAFTA becoming a lose-lose-lose proposition for working people in Canada, the U.S. and Mexico, and CETA will accelerate this trend.

A report on the ramifications of CETA, prepared by Maude Barlow, says:

“With CETA and TTIP, for the first time, subnational governments (municipalities, provinces and states) will be subject to local procurement commitments that bar them from favouring local companies and local economic development. According to an analysis from the Canadian Centre for Policy Alternatives, this will substantially restrict the vast majority of local governments in North America and Europe from using public spending as a catalyst for achieving other societal goals — from creating good jobs, to supporting local farmers, to addressing the climate crisis.”

Regulations would be “harmonized,” meaning reduced to the lowest level of protection that can be found, and likely lower than that. Ms. Barlow writes:

“CETA commits to a process whereby any differences in regulations between Europe and Canada, be they labour rights, environmental protection standards, food safety rules or tax laws, could be considered an obstacle to trade and suppressed. Both parties agree to share information of contemplated or proposed future regulations with one another even before they share them with their own elected parliaments in order to ensure they are not trade distorting. That means the other party could make changes to a piece of legislation before it has been seen by its own elected officials or the public.”

Pressure will be brought to bear to privatize water systems and other public utilities, and pharmaceutical prices for Canadians will rise significantly — costing as much as C$1.6 billion per year. As is customary with “free trade” agreements, there are no limitations on who or what constitutes an “investor.” The rights of corporations are delineated over hundreds of pages, but the chapters that deal with labor, health, safety and environmental standards use the usual provisional language. For example, in Chapter 21.7, “The Parties endeavour to cooperate and to share information on a voluntary basis in the area of non-food product safety.” When it comes to corporate demands, however, “must” and “shall” are the words used.

CETA, like its cousins TTP and TTIP, would cement into place the right of multi-national corporations to dictate to governments without any democratic input. This would be irreversible. Worse, the approval of CETA would provide fresh momentum for TPP and TTIP. We have no time to waste.