There’s no money? Then how can there be $10 trillion for financiers in two years?

Noting that there is always money to be thrown at the finance industry but little for social needs is by now about as startling as noting the Sun rose in the east this morning. But what is eye-opening is the truly gargantuan amounts of money handed out to benefit the wealthy.

We’re not talking billions here. We are talking trillions.

For example, the amount of money created by the central banks of five of the world’s biggest economies for the purpose of artificially propping up financial markets since the beginning of the Covid-19 pandemic totals US$9.94 trillion (or, if you prefer, €8.76 trillion). And that total represents only one program of the many used by the U.S. Federal Reserve, the European Central Bank, Bank of Japan, Bank of England and Bank of Canada.

That is on top of the US$9.36 trillion (or €8.3 trillion at the early 2020 exchange rate) that was spent on propping up financial markets in the years following the 2008 global economic collapse.

So we’re talking approximately US$19.3 trillion (€17.1 trillion) in the span of 14 years for five central banks’ “quantitative easing” programs, the technical name for intervening in financial markets by creating vast sums of money specifically to be injected into them and thereby inflating stock-market bubbles. And that total doesn’t include various other programs that also come with price tags, nor the similar programs of other central banks, including those of Australia, Sweden and Switzerland. As just one example, the Paycheck Protection Program initiated by the U.S. Congress in 2020 sent most of its money into the grasping hands of business owners and shareholders rather than workers earning a paycheck.

Given these repeated massive subsidies, why are we supposed to believe that the capitalist economic system “works”? And why do working people always have to pay for financiers’ ever more imaginative speculations?

“Greed” (Nicholas Kwok)

Imagine all the public good that could have been done with even a fraction of that money. Fixing infrastructure, proper funding of social programs, upgrading health coverage, adequately funding hospitals, canceling student debt, strengthening education systems and more — all of this could have been done.

For example, the consultancy firm Aecom estimates that Britain’s infrastructure needs are underfunded by a total less than what the Bank of England spent on its quantitative-easing scheme for the past two years. Parallel to that, the U.S. could wipe out all student debt, fix all schools, rebuild aging water and sewer systems, clean up contaminated industrial sites and repair dams for less than what the Federal Reserve spent on quantitative easing since the pandemic began. As for Canada, one estimate is that the country needs to spend an additional C$60 billion per year on technologies that would enable Canada to meet its carbon neutral targets by mid-century — a total that is a fraction of what the Bank of Canada has thrown at the financial industry.

Spending big to inflate a stock-market bubble

What is quantitative easing and why does it matter? Quantitative easing is the technical name for central banks buying their own government’s debt in massive amounts and, generally in lesser amounts, corporate bonds. In the case of the Federal Reserve, it also buys mortgage-backed securities as part of its QE programs.

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 of the resulting distortion in demand for them, enabling bond sellers to offer lower interest rates and making them less appealing to speculators. Seeking assets with a better potential payoff, speculators buy stock instead, driving up stock prices and inflating a stock-market bubble. Money also goes into real estate speculation, forcing up the price of housing. 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. And the strategy of governments to lower the value of their currencies — a widespread tactic in the years following the 2008 collapse — can’t succeed everywhere because if someone’s currency devalues, someone else’s concurrently rises in value.

In other words, these programs, along with most everything else central banks in capitalist countries do, are to benefit the wealthy, at the expense of everybody else. Although we wouldn’t reasonably expect capitalist government agencies to act differently, central banks are particularly one-sided in their policies, which they can do because they are “independent” of their governments. Thus they openly serve the wealthy without democratic control.

A trillion here, a trillion there but not for you

Figuring out what central banks are up to and how much money they are creating for financiers is difficult because they don’t provide totals; at best there are monthly targets for spending and, even then, targets are not listed for all programs. And some, such as the Bank of Canada, are particularly reluctant to share money figures. Most often, banks’ websites and press releases proudly list the many programs designed to benefit financiers but without putting price tags on them. Thus the figures below may not be precisely accurate, but they are in the ballpark. To the biggest financial corporations, what’s a hundred billion more or less?

Having provided the caveats, my best calculations of what some of the world’s most prominent central banks have spent on quantitative easing are as follows (figures in U.S. dollars):

  • U.S. Federal Reserve $4.04 trillion
  • European Central Bank $3.4 trillion
  • Bank of Japan $1.6 trillion
  • Bank of England $600 billion
  • Bank of Canada $300 billion

That’s a total of US$9.94 trillion. Imagine the height of the stack of bills that such a sum would reach — maybe it would be so high that orbiting spacecraft would ram into it, scattering the money across wide areas. At least that way, more people might benefit.

The European Central Bank in Frankfurt (photo by DXR)

The above of course are not the only central banks to join the party. The Reserve Bank of Australia has spent an estimated A$320 billion in the past two years, although, according to Reuters, it is “considering how and when to wind up its A$4 billion ($2.84 billion) in weekly bond buying given the economic pick up.” Sweden’s Riksbank and the Swiss National Bank also indulge in quantitative easing; Switzerland’s central bank has done so much of it that it owns assets valued at more than the country’s gross domestic product. Similar to Australia’s, central banks, the Bank of Japan excepted, also are indicating they’d like to wind down their latest QE programs, but doing so is a delicate operation given that speculators have become drunk on the spending and cutting off the money could lead to sudden downturns in stock prices, in turn triggering disruptions in the economy.

Nothing like free money to make the party fun. But, on a less humorous note, how is it that deficit scolds and ideologues of austerity, who never miss an opportunity to shoot down legislation intended to give working people assistance, are silent about these gargantuan piles of money thrown at financial markets? The later version of the Build Back Better plan pushed by President Joe Biden, originally estimated to cost about $3.5 trillion before being reduced to less than $2 trillion, would have cost less than half of what was spent on quantitative easing. And, however flawed, would have provided vastly better relief.

And remember, the nearly $10 trillion and counting in two years of QE programs are only a portion of the money rained on business and the wealthy who benefit from these policies.

One sure outcome of all this is that inequality will increase, as exemplified by the dramatic increases in the wealth of billionaires. A report published last month by Oxfam, appropriately titled “Inequality Kills,” found that the wealth of the world’s 10 richest people has doubled since the pandemic began while “99% of humanity are worse off because of COVID-19,” a situation Oxfam calls “economic violence.” The wealth of the world’s 2,755 billionaires has increased by $5 trillion in less than a year — from $8.6 trillion in March 2021 to $13.8 trillion in January 2022.

And although increasing inequality is nothing new, the pace is accelerating. The Oxfam report states:

“This is the biggest annual increase in billionaire wealth since records began. It is taking place on every continent. It is enabled by skyrocketing stock market prices, a boom in unregulated entities, a surge in monopoly power, and privatization, alongside the erosion of individual corporate tax rates and regulations, and workers’ rights and wages—all aided by the weaponization of racism.”

Unlimited money for U.S. financiers, a little money for workers

In addition to quantitative easing, the Federal Reserve has instituted nine lending programs; three of these are “unlimited” and the other six authorized for $2.9 trillion. (This is all in addition to the $4 trillion spent on QE.) Of this additional $2.9 trillion, just $500 billion is earmarked for revenue-strapped state and local governments; the remainder are for businesses, including those in the financial industry. About $450 billion per day for several weeks during spring 2020 was dedicated to dollar swaps with other central banks — an agreement between two central banks to exchange currencies, most often to enable central banks to provide foreign currencies to domestic commercial banks.

Is there anyone who actually knows how much money the Federal Reserve is spending to keep capitalism running?

And even when money is supposed to go to working people, it mostly doesn’t go to them. A prime example of this not terribly surprising phenomenon is the U.S. Paycheck Protection Program (PPP). Multiple studies over the past year have shown that most PPP money flowed upward, regardless of what the intentions of Congress members who designed the program may have been.

The New York Stock Exchange (photo by Elisa Rolle)

The most recent and likely most comprehensive of these studies, a National Bureau of Economic Research “working paper” issued in January 2022 by 10 authors led by David Autor of the Massachusetts Institute of Technology, found the PPP to be “highly regressive.” About three-quarters of PPP money wound up in the hands of the top 20 percent of households. The paper estimates that 23 to 34 percent of PPP dollars went directly to workers who would otherwise have lost jobs. The majority of the funds flowed to business owners and shareholders. The study focused on 2020 results; the paper’s authors believe that 2021 loans did not boost employment, a result that implies the share of PPP money going to workers would actually reduce the 23 to 34 percent estimate.

The paper calculates that for every $1 in wages saved by the PPP, $3.13 went somewhere else. To put it another way, the cost of saving a job for a year was $170,000 to $257,000, three to five times the average compensation for affected jobs. “This program was highly, highly regressive,” Dr. Autor told The New York Times.

Three papers published earlier came to similar conclusions. A study by Michael Dalton, a research economist for the Bureau of Labor Statistics, that was issued in November 2021, found that “a range of $20,000 to $34,000 of PPP spent per employee-month retained, with about 24% of the PPP money going towards wage retention in the baseline model.” To put it another way, $4.13 were spent for each $1 of wages saved. Finding still worse results, a separate National Bureau of Economic Research working paper, with Raj Chetty as lead author, found that so little of PPP spending flowed to businesses most affected by the pandemic that employment at small businesses increased by only 2%, “implying a cost of $377,000 per job saved.” Finally, a paper published by Amanda Fischer, then the Policy Director at the Washington Center for Equitable Growth, concluded that PPP funding did not have a statistically significant impact on preventing avoidable layoffs among employees and that PPP money was not geographically directed at the worst-hit areas, further reducing effectiveness.

Class warfare in action, pandemic style. A little bit for working people, lots for those who already have more. The PPP did provide benefits, including saving jobs, and surely played a role in the unprecedented reversal of the high unemployment rate of 2020, but at a price far higher than necessary — no help for working people without more going to the wealthy.

Class warfare in Europe

In addition to its quantitative easing, the European Central Bank is increasing borrowing limits and easing borrowing rules for banks; it is also reducing required capital holdings for banks. The ECB has upped its QE spending to €40 billion per month and will reduce that to €20 billion by October 2022. A December 2021 announcement implied it intends to eventually end the program altogether, “shortly before it starts raising the key ECB interest rates.”

Remember all the finger-pointing and scapegoating of Greeks when the ECB and the European Commission imposed punishing austerity on Greece? There was no money and people had to be punished. Yet there are virtually unlimited funds to benefit financial speculators. These disparate responses aren’t completely inconsistent — Greeks had to be punished because the ECB and European Commission, leading institutions of the European Union, were determined that big banks, particularly French and German banks, had to be repaid in full, no matter the cost to working people or the Greek economy — the ECB even cut off Greek banks from routine financial flows in 2015 to enforce their diktats.

Britons recently received a fresh lesson in who the Bank of England serves when the bank’s governor, Andrew Bailey, declared that employees should not be given raises. It was sufficiently embarrassing that this open class-warfare statement, the sort of policy that is supposed to be kept behind closed doors, was said in public that the British government actually issued a rebuke. Noting that British household disposable incomes are expected to fall by 2 percent this year and that inflation-adjusted pay remains below the pre-2008 financial crisis peak, The Guardian reported:

“The governor of the Bank of England has come under fire from unions and earned a rebuke from 10 Downing Street for suggesting workers should not ask for big pay rises to help control inflation. Andrew Bailey said he wanted to see ‘quite clear restraint’ in the annual wage-bargaining process between staff and their employers to help prevent an upward spiral taking hold. However, his comments drew a furious response from union leaders, as households face the worst hit to their living standards in three decades as soaring energy prices cause inflation to outstrip wage growth. … Bailey was paid £575,538, including pension, in his first year as the Bank’s governor from March 2020, more than 18 times the UK average for a full-time employee.”

The average full-time employee is not who the Bank of England, or any other central bank in the capitalist world, has in mind when setting policy. What this episode nicely illustrates is that profits increase when wages are held down. Profit, it can’t be said too often, comes from paying employees only a small fraction of the value of what they produce. The drive by the corporations of the advanced capitalist countries to move production to low-wage, low-regulation havens around the world, continually in search of the next stop on a race to the bottom, is why so-called “free trade” agreements contain ever more extreme rules to benefit multi-national capital.

Class warfare in Canada and Japan

Getting precise figures on what the Bank of Canada is up to is impossible as it is particularly coy in announcing money figures. Bloomberg, for example, could only say that “hundreds of billions of dollars” has been spent in the bank’s QE program. My calculation on what the bank may have spent on quantitative easing is based on the C$376 billion differential on the amount of assets held by the bank between the end of 2019 and on February 2, 2022.

Like the other central banks, the Bank of Canada has several other programs to benefit the financial industry. In the first weeks of the Covid-19 pandemic, it announced multiple programs. The bank implemented several QE programs for buying corporate bonds, federal and provincial government bonds, mortgage bonds and commercial paper (short-term debt issued by corporations), as well as programs to provide credit and “support the stability of the Canadian financial system.” The bank was not forthcoming about the total cost of these programs at the time; it committed to spending C$5.5 billion per week, with no cutoff date, on just two programs, the purchases of federal government bonds and mortgage bonds.

The amount of “direct aid to households and firms” was only a small fraction of what was committed to helping the financial industry. No different, of course, than the response of other central banks.

Ottawa from the McKenzie Bridge (photo by Siqbal)

The Bank of Japan, which had never ended the quantitative easing it began after the 2008 economic collapse, has committed to unlimited government bond buying. In a September 2021 announcement in which it committed to buying ¥20 trillion worth of corporate bonds, the central bank said it “will purchase a necessary amount of Japanese government bonds (JGBs) without setting an upper limit so that 10-year JGB yields will remain at around zero percent.” So large has the bank’s purchases been that it owns assets worth almost 130 percent of Japan’s gross domestic product. The bank doubled the pace of its bond purchases at the beginning of the pandemic.

Since March 2020, the benchmark index of the Tokyo Stock Exchange, the Nikkei 225, has increased 51 percent. In contrast, Japanese wages are “about at the same level as two decades ago,” The New York Times reports. Wages actually fell by around one percent in both 2020 and 2021, Reuters reports, with wage declines accelerating at the end of 2021. Working people have not done well from the world’s longest experiment in quantitative easing.

Circling back to the (admittedly rhetorical) questions asked in the opening paragraphs of this article, it depends on what is meant by “works.” If we mean by that word, as most people likely would, that an economic system functions for the benefit of all, then the scope of money required to keep it functioning forces a conclusion that it does not work in any meaningful sense. If, however, we mean “works” in the meaning given that word by financiers, industrialists and those who serve them and/or interpenetrate with them, most certainly including central bank officials, then all is well because it facilitates the accumulation of capital. Working people around the world pay to maintain financiers and industrialists in their accustomed wealth and power because that is how capitalism is supposed to work. How else would absurd “theories” like trickle down still be implemented after 40 years of failing to do what they are publicly advertised to do?

Another reminder that capitalist markets are simply the aggregate interests of the most powerful financiers and industrialists, and those interests are diametrically opposed to the interests of the vast majority of humanity. It cannot be otherwise.

Far from a change, RCEP agreement is more capitalism as usual

The Regional Comprehensive Economic Partnership is being called a new model of trade agreements. Such paeans appear to be premature, and we might better hold off on uncorking the champagne.

It is best to remember that so-called “free trade” agreements are products of neoliberal assaults on any and all efforts to protect people and the environment from the rapacious effort of corporations to profit to the maximum extent and without regard to external cost. “Free trade” agreements are not the cause of neoliberalism; they are a product of neoliberalism.

It is true that the RCEP is less draconian than recent trade deals, and less one-sided in advancing corporate profiteering above all other human concerns than the Trans-Pacific Partnership was when the United States was involved and pushing for the harshest rules. But is that the standard we wish to uphold? “It’s not as bad as the worst agreements out there” really shouldn’t be a cause for celebration.

Much of the same language commonly found in “free trade” agreements is in the RCEP, and what appears to be the most promising development, the lack of the usual “investor-state dispute settlement” process that uses corporate-dominated tribunals that consistently overturn health, safety and environmental regulations, is much less than it appears once we look into the details. And there are no labor or environmental provisions. What we have here is more capitalism as usual, including a dispute process still weighted toward corporate interests.

Tokyo at night (photo by Basile Morin)

For readers not familiar with the RCEP, it is a trade deal reached by 15 countries across East Asia and Oceania. Although some commentators believe that China has been the impetus behind the RCEP, in fact it is the 10 countries of the Association of Southeast Asian Nations (ASEAN) that were the driving force. Australia, New Zealand, Japan and South Korea join China and the ASEAN countries — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — in a deal that encompasses nearly one-third of the world’s economy. India was originally a negotiating country, but dropped out, expressing concerns that the RCEP would be dominated by China.

As would be expected, mainstream economists, who as a group act as cheerleaders for capitalism rather than seriously analyze capitalist economies, are cheering the agreement. The Financial Times, for example, breathlessly reported that the RCEP “could add almost $200bn annually to the global economy by 2030,” a number repeated by signatory governments. That despite the fact that Australia, China, New Zealand, Japan and South Korea each already has a trade agreement in place with ASEAN.

Signatory countries were also enthusiastic. China’s prime minister, Li Keqiang, said the agreement is “a victory of multilateralism and free trade.” The New Zealand Ministry of Foreign Affairs and Trade said, “The agreement will help ensure New Zealand is in the best possible position to recover from the impacts of COVID-19 and seize new opportunities for exports and investment.” The Australia Department of Foreign Affairs and Trade said, “Australian farmers and businesses are set to benefit from better export opportunities.”

Unions fear working people face a race to the bottom

Once we turn our attention to those not highly placed, a rather different picture emerges. A bloc of seven trade union federations strongly condemned the RCEP after its signing. Those federations, covering workers in construction, manufacturing, agriculture, transportation, services and education, said, “Instead of furthering a free trade project, countries should be collaborating on reviving their economies and expanding public goods. … RCEP and other trade agreements that protect intellectual property rights threaten the ability to secure a globally accessible [Covid-19] vaccine. … [W]hile [corporate executives] traveling for business will benefit from facilitation of procedures for entry and temporary stay, workers face deteriorating working conditions in a race to the bottom under heightened competition in which migrant workers are facing the worse consequences. Regional cooperation based on a collective intent to promote decent work, quality public services and sustainable and inclusive development are a better solution.”

The seven trade union federations also pointed out that RCEP was shrouded in secrecy throughout its eight years of negotiations, with the text released to the public only after the agreement was signed. (All 15 countries must still formally ratify it.) The intellectual property chapter was leaked in 2015, prompting the Electronic Frontier Foundation to characterize the IP text as “a carbon copy” of the Trans-Pacific Partnership then also in negotiation. “South Korea is channeling the [U.S. trade representative] at its worst here,” the Foundation said in its commentary, speculating that Seoul was pushing draconian IP rules because accepting unfavorable rules in its bilateral trade agreement with the U.S. would put it at a disadvantage otherwise. We’ll return to the intellectual property text, always a key chapter in any trade pact, below.

There are also fears that trade deficits for less developed countries will increase and pressures for privatizations will increase.

The skyline of Bangkok (photo by kallerna)

A senior economist with the United Nations Conference on Trade and Development, Rashmi Banga, expects that, assuming tariffs are removed on all products trading among RCEP countries, most ASEAN countries will see their imports rise faster than their exports, believing that those countries won’t be able to compete with China.

Kate Lappin, the Asia Pacific regional secretary of Public Services International, a federation of more than 700 trade unions representing 30 million workers in 154 countries, said “free trade” deals such as RCEP “also increase the pressure on governments to privatise, as public services need to be traded and compete on the market. This will have negative impacts on equality, including corrosive impacts on gender equality.” Noting that some measures governments are taking to combat the Covid-19 pandemic would be in violation of the RCEP or other trade agreements, Ms. Lappin said “RCEP will bind the hands of governments in taking measures in the public interest in crises to come, be it health or environmental.” 

There could also be problems for manufacturers in small countries because “rules of origin” rules mandate that parts from any signatory country must be treated the same as domestic production.

Bad news for farmers, good news for agricultural multi-nationals

The ability of farmers to maintain control of their seeds is in peril, according to GRAIN, which describes itself as an “international non-profit organisation that works to support small farmers and social movements in their struggles for community-controlled and biodiversity-based food systems.” GRAIN, in analyzing a separate leak of RCEP chapters, said the agreement was in danger of requiring all signatory governments to adopt a seed law designed to provide private property rights over new crop varieties, giving corporations like Monsanto or Syngenta a legal monopoly over seeds, including farm-saved seeds, for at least 20 years; require adherence to the Budapest Treaty, which enforces patents on microorganisms; and make violations of these corporate-friendly rules criminal violations. Australia, Japan and South Korea were described as the “hard-line camp” on these issues.

Those fears remain in place. Article 11.9 of the final text indeed mandates that RCEP governments not already signed onto the Budapest Treaty do so. Adherence to several other international treaties are also mandated. Language concerning adoption of the seed law described in the preceding paragraph (the Act of International Convention for the Protection of New Varieties of Plants, amended in Geneva in 1991) is at Article 11.9, but the language is ambiguous, encouraging governments to sign the Convention and “cooperate” with other signatory governments “to support its ratification.” Also worrisome is Article 11.36, which mandates patents on plants: “[E]ach Party shall provide for the protection of plant varieties either by patents or by an effective sui generis system or by any combination thereof.”

There is also concern about the availability of medicines. A key goal of the United States when it was negotiating the Trans-Pacific Partnership was to undermine government procurement of medicines that reduced the cost of health care and to extend patents and data exclusivity periods for brand-name drugs, impede trade in generic medicines, and place new limits on how drug prices are set or regulated, all in the service of pharmaceutical company profits.

Canberra at night (photo by Ryan Wick)

Croakey Health Media, an Australian “not-for-profit public interest journalism organisation,” in a commentary on the RCEP’s potential impact on medicines, feared some of those goals could find their way into the final text. “Early in the negotiations, leaked texts indicated that Japan and South Korea had proposed rules for the RCEP intellectual property chapter that would extend and expand monopolies on new medicines in countries like Cambodia, Indonesia and Thailand,” Croakey said. “These types of rules can delay the availability of generic medicines.”

It appears there is at least some backing off of the worst provisions that had been under discussion. Article 11.8 of the final RCEP text says “The Parties reaffirm the Doha Declaration on the TRIPS Agreement and Public Health” adopted in 2001. The Doha Declaration is an ambiguous document that “affirms” intellectual property rights but also “should not prevent members from taking measures to protect public health.” How the text will be interpreted will likely determine how far it will be possible to go in attacking government health care systems.

It should be stressed that grassroots organizations had no chance to affect any aspect of the RCEP text as the negotiations were secret throughout.

Lots of language customarily found in trade agreements

The text of “free trade” agreements is always dry and technical, even neutral-sounding. It is in the interpretation, and what certain phrases actually mean, that determine their outcome. So let’s take a very brief look at some of the text, and what it might mean.

Chapter 10, covering investments, is crucial to understanding the similarities to existing deals. Article 10.1 on “covered investments” contains the standard list of what is covered typically found in “free trade” agreements, including “claims to money or to any contractual performance related to a business and having financial value” and “intellectual property rights and goodwill.” There is an important exception, however — the chapter does not apply to government procurement, “subsidies or grants provided by a Party” or “services supplied in the exercise of governmental authority.” What that means is that the RCEP theoretically reduces the ability to attack or force privatization of government-owned enterprises, a consistent goal of U.S. trade negotiators in agreements the U.S. is involved in, and a goal generally shared by multi-national corporations seeking new markets. But this clause could potentially be negated by the heavier market pressures that could lead to privatizations, as discussed above, and once a government enterprise is privatized, the clause is no longer relevant.

The investment chapter contains the standard clause that “Each Party shall accord to investors of another Party treatment no less favourable than that it accords, in like circumstances, to investors of any other Party or non-Party.” Article 10.5 follows up with language that is also typical: “Each Party shall accord to covered investments fair and equitable treatment and full protection and security, in accordance with the customary international law minimum standard of treatment of aliens.” Although these passages are bland, neutral-sounding phrases, this language has often been used as key points of attack for multi-national corporations seeking to eliminate government health, safety, labor or environmental regulations. As always, “customary international law” has been established by a series of rulings by the corporate-dominated secret tribunals that hand down unappealable decisions, decisions that are used as precedent for further such decisions. The expectation of profits by a corporation as a “right” superseding health and environmental regulations has been repeatedly handed down.

The skyline of Beijing (photo by Picrazy2)

Further language routinely found in “free trade” agreements stipulate that capital controls are prohibited, and, in Article 10.13 of the RCEP, “No Party shall expropriate or nationalise a covered investment either directly or through measures equivalent to expropriation or nationalisation.” What will constitute an illegal “expropriation”? How this clause will be interpreted is crucial. In existing “free trade” agreements, government regulations protecting health or the environment are frequently overturned because complying with such regulations would reduce profits, and thus constitute “expropriation” because corporate profits are presumed to be an entitlement by the tribunals sitting in judgment. Will the repeated examples of such rulings in, inter alia, the North American Free Trade Agreement, be replicated here?

In Chapter 11, covering intellectual property rights, there is no mandatory schedule for when those rights expire; this constitutes a small victory. The chapter also states that signatory governments “may establish appropriate measures to protect genetic resources, traditional knowledge, and folklore,” a right not ordinarily granted in “free trade” agreements.

But in the Financial Services Annex of Chapter 8, language similar to that found in other trade pacts requires that foreign financial services firms be given free reign to operate, even to take over a country’s banking system. Specifically, “Each host Party shall endeavour to permit financial institutions of another Party established in the territory of the host Party to supply a new financial service in the territory of the host Party that the host Party would permit its own financial institutions, in like circumstances.” Again, what seems neutral-sounding on the surface has specific meanings when interpreted by a tribunal in the context of “customary international law.”

Corporations will continue to be elevated above governments

And that brings us to Chapter 19, covering dispute settlement. Article 19.4 leaves us little doubt, reiterating that “This Agreement shall be interpreted in accordance with the customary rules of interpretation of public international law” and that adjudicators “shall also consider relevant interpretations in reports of WTO [World Trade Organization] panels and the WTO Appellate Body, adopted by the WTO Dispute Settlement Body.” No specific tribunal for the settlement of disputes is mandated, and the intent appears to be to have ad hoc panels rather than panels seated by one of the tribunals ordinarily used in trade disputes in existing trade agreements. Nonetheless, Article 19.5 gives right of forum selection to the complaining party — i.e., the corporations that will be suing governments — so the use of the tribunals can’t necessarily be ruled out. When seating an ad hoc panel, the complaining corporation and the respondent government are supposed to mutually agree on the three members of a panel but if they can’t agree, the WTO director-general will complete the panel — given the role of the WTO in imposing draconian pro-corporate rules, this clause can hardly be considered neutral.

And so who will sit on the panel and adjudicate the case? Article 19.11 designates those who “have expertise or experience in law, international trade, other matters covered by this Agreement, or the resolution of disputes arising under international trade agreements.” In other words, the same corporate lawyers who sit as judges on the tribunals that adjudicate cases brought under existing “free trade” agreements. If the WTO director-general seats panelists, those must not only meet the requirements stated above but additionally “be a well-qualified governmental or non-governmental individual including an individual who has served on a WTO panel or the WTO Appellate Body or in the WTO Secretariat, taught or published on international trade law or policy, or served as a senior trade policy official of a WTO Member.”

Under most existing “free trade” agreements, one of three tribunals is used, most commonly the International Centre for Settlement of Investment Disputes (ICSID), an arm of the World Bank. ICSID is the forum that was used in NAFTA and is used to adjudicate disputes under dozens of bilateral trade agreements, and is responsible for a long list of outrages declaring environmental and health regulations illegal. Conflicts of interest are blatant in these tribunals — corporate lawyers who specialize in defending multinational corporations in trade disputes alternate between appearing as counsel for corporations and as judges handing down the decisions.

This process is summed up well on a Bilaterals.org page answering “frequently asked questions”:

“In effect, ISDS creates a parallel business-friendly judicial system exclusively for transnational corporations. The power rests upon for-profit arbitrators who come from the corporate sector and face unverifiable conflicts of interest. They have no sovereign legitimacy and are not accountable to the public. The decisions they make can be inconsistent between one another and cannot be appealed. Plus, the arbitrators effectively serve as judge and party, because the same appointed arbitrators who plead the case for the parties make the decision. Imagine a football match where the referee plays for one of the teams! With ISDS, this becomes a possible scenario. So much for justice.”

RCEP rules not mandating ICSID or one of the other tribunals is a cosmetic change. Governments continue to tie themselves to rules and precedents that elevate multi-national corporations above national governments, and thus elevate corporate profiteering above all other human considerations. There will still be panels seated to adjudicate disputes, but instead of using ICSID or another permanent forum, there will be ad hoc panels, which will, as noted above, have the exact same criteria for seating judges. The Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union pioneered this cosmetic change, intended to make the one-sidedness of ISDS appear somewhat less blatant, and will also be used in some disputes covered by NAFTA 2, the U.S.-Mexico-Canada agreement.

Thus the “investor-state dispute settlement” (ISDS) process is very much in place in the RCEP. That should not come as a surprise. “Free trade” agreements arise because multi-national corporations scour the globe searching for the places with the lowest wages and least regulations in order to maximize their profits over all other considerations. As capitalist competition intensifies, corporations must match the moves their competitors make in order to remain in business, and adopt still more harsh policies to stay ahead. Once production is moved overseas, and supply chains are spread into ever more locales, tariffs and rules protecting domestic production are barriers to be removed. Trade deals at first mainly dealt with technical issues or tariffs, but as the relentless grasping for profits becomes ever more intense, regulations safeguarding health, labor, the environment or safety are seen as barriers to profit-making, and corporations seek to sweep them away, too.

Later trade agreements had much more to do with erasing regulations than with actual trade rules, which was reflected in the draconian rules the U.S., often assisted by Japan, sought to impose in the Trans-Pacific Partnership. That the RCEP has less draconian rules is not a cause for celebration — the rules are still plenty tilted in favor of multi-national capital and will inevitably be wielded as a cudgel by those beneficiaries. A rational trading system requires a rational, democratic economic system, not the dictatorship of capital.

Providing low-cost banking by saving the post office

The struggle to save the United States Postal Service is emblematic of the larger struggle against corporate plundering of public resources. Reversing the intentional bankrupting of the post office requires not only a movement of allies that a new union leadership has begun to assemble, it potentially also merges with creating a public banking option.

What does banking have to do with delivering the mail? Nothing, today. But in the future? A Postal Service bank — a model that is successful in several countries around the world — would not only provide the post office with a reliable source of income, it would provide badly needed basic, inexpensive banking services for under-served populations.

Such an idea is not necessarily controversial. Despite the management of the U.S. Postal Service supporting privatization measures for many years, its office of the inspector general quietly issued a paper a year ago in which it said offering financial services could provide almost US$9 billion per year in new revenue while providing badly needed services to tens of millions of under-served people who are currently at the mercy of predatory “pay-day lenders” and other high-interest usurers.

The basis for this estimate is that “people trying to make it paycheck to paycheck” spend an estimated $89 billion per year on interest and fees on alternative financial services; the paper’s revenue estimate is based on the Postal Service, by offering low-cost services, capturing 10 percent of what is currently spent on those businesses. But the Postal Service inspector general’s office went out of its way not to upset bankers, watering down its proposal to a “partner[ship] with banks and other [mainstream] financial institutions” to “create a ‘win-win’ situation.”

Lupin field, New Zealand (photo by Michael Button)

Lupin field, New Zealand (photo by Michael Button)

If big commercial banks are winning, the rest of us will be losing. Rather than floating fantasies of swimming with ever-hungry financial sharks who are never satiated, thereby disemboweling your own idea, why not set up an independent postal bank? Doing so is precisely what the new president of the American Postal Workers Union, Mark Dimondstein, proposes. He says:

“Services such as basic, non-profit banking would be a great and real benefit to the people of this country, and a good answer to what I call ‘the Wall Street Banksters,’ who devastated the economy and with it the lives of millions of people.”

More than one-third of U.S. post offices are located in ZIP codes where no bank is located; another 20 percent are located in areas with only one bank. Providing low-cost services would help tens of millions struggling to survive financially avoid the trap of “pay-day lenders” who charge an effective annual interest rate of 391 percent, according to the inspector general paper. A typical “pay-day” loan of $395 costs the borrower an average of $520 in interest and fees on top of the principal.

Postal banking already a success

Countries as varied as Germany, Japan and New Zealand have successful postal banking services. The Japan Post Bank is the country’s largest holder of personal savings.

For more than a century, what is now known as the Japan Post Bank accepted deposits but did not lend, instead handing deposits to the Ministry of Finance, which used the funds to finance public-works projects. In 2001, the bank began direct lending instead of sending its deposits to the ministry. But this was accompanied by a privatization scheme. That scheme was halted in 2009, and has not been re-instituted despite the return of the conservative Liberal Democratic Party that originally pushed for the privatization. The bank would be a huge prize for private bankers, as it reported net income of ¥355 billion (US$3.0 billion) for its fiscal year 2014.

Germany’s Postbank is also highly profitable, reporting fiscal-year 2014 earnings of €431 million (US$473 million). The bank specializes in providing “simple, low-cost products for day-to-day needs,” and says it has 14 million clients, including more than 300,000 small and mid-sized companies.

New Zealand’s Kiwibank was founded in 2002. Big Australian banks had controlled 80 percent of New Zealand’s retail banking, and those multi-nationals were quick to close less profitable branches. To provide financial services to underserved communities, and keep capital at home for local investment, the New Zealand government established Kiwibank as a subsidiary of New Zealand Post, putting its branches in post offices. The results were swift, reports public-banking advocate Ellen Brown:

“Suddenly, New Zealanders had a choice in banking. In an early ‘move your money’ campaign, they voted with their feet. In an island nation of only 4 million people, in its first five years Kiwibank attracted 500,000 customers away from the big banks. It consistently earns the nation’s highest customer satisfaction ratings, forcing the Australia-owned banks to improve their service in order to compete.”

Kiwibank reported net income of NZ$100 million (US$76 million) for its fiscal year 2014. The bank reports it now has 860,000 customers.

The Republican assault on the U.S. post office

Although offering basic banking services would boost revenue for the U.S. Postal Service, it would currently be on stable financial foundations were it not for a Republican plan signed into law in 2006 requiring the Postal Service to pre-fund its pension costs for the next 75 years in only 10 years. No private business could or would do such a thing. The results are what would be expected: In the last four years before the pre-funding requirement (2003 to 2006), the Postal Service had a composite profit of US$9.3 billion; it has had massive losses ever since.

It is true that the volume handled by the post office has declined in recent years with the rise of the Internet. Setting up a postal banking system would offset the resulting fall in revenue. But rather than expand services to provide a sounder foundation, corporate ideology, promoted by those with a vested interest, is instead causing a push for the dismantling of the Postal Service and the privatization of its delivery services.

For example, a study by a “think tank” calling itself the National Academy of Public Administration prepared a report that called for a near total privatization of the post office. Two of the four authors had direct interests in privatization and a third has worked for a series of Right-wing extremist “think tanks” that consistently demand the privatization of everything in the public domain. The major funder of the study was Pitney Bowes Inc., which stands to directly benefit; it already earns billions of dollars from its mail-processing facilities and would be in a good position to grab much of the Postal Service’s business.

FedEx Corp. and United Parcel Service Inc., the two largest U.S. private delivery services, also stand to benefit from the destruction of the Postal Service. Both companies employ large fleets of lobbyists and are heavy donors to members of Congress.

Heavy pressure to close post offices and mail-sorting facilities is part of the privatization drive. But the limited research done on closings indicates that closings actually cost more than the savings generated. A study conducted by University of Wisconsin students examined what would happen if one of the seven post offices in a rural Wisconsin county were closed. The study found that the Postal Service would save $560,000 over seven years by closing a post office but the added costs from residents forced to drive further to access a post office would be $1.3 million over seven years. Thus, the overall cost to the community would be more than $700,000.

Another example of the costs to small communities can be found in the small community of Prairie City, South Dakota. Closing the post office there saved $19,000. The nearest hospital and pharmacy is 40 miles away, and when medicine was needed in Prairie City, the pharmacist 40 miles away would hand it to the mail carrier for same-day delivery. Now medicine deliveries take two to three days, an article in Naked Capitalism reports. What is the price of a life that might be compromised because of this delay?

Vowing a new militancy

A slate of local officials pledged to mount much more militant tactics swept into the leadership of the American Postal Workers Union last fall, winning seven of nine contested seats. Union President Dimondstein, elected with this group, said he seeks a “cultural shift” to an organizing model of unionism from a service model. In an interview with Socialist Worker, he said:

“People are disengaged not because they don’t care but because they see their union dues as a premium to an insurance company or as lawyer’s fees. We need to retool, to retrain people to see the union as themselves. We need to encourage workers to take their grievances directly to the boss, in groups, not just file paperwork and wait for union officials to service them. We need more of a movement, a sense of connection to the larger community which will give postal workers hope and confidence.”

That postal workers are in a position to negotiate is because they defied their union leadership in 1970 to engage in an illegal strike that spread across the country to more than 30 major cities — an example praised by the new American Postal Workers Union leadership. The union, one of four that represent postal workers, began talks on a new contract in February, vowing to end a disastrous three-tiered contact negotiated by previous union leaders. That contract calls for reduced pay for new hires and allows people working only 30 hours a week to be considered “full time.”

At the opening session of the contract talks, the American Postal Workers Union leadership was joined by the president of the National Association of Letter Carriers, Fredic Rolando, in a signal that the postal workers won’t be divided by job description. (The APWU represents clerks, drivers and maintenance workers.) The APWU said it would not only negotiate better pay, but “will be putting forth proposals for maintaining overnight delivery standards, halting plant closings, expanding hours of service and staffing for the customers, and providing financial services such as postal banking.”

To back their new militancy, postal unions have formed an alliance with several dozen labor and advocacy groups called A Grand Alliance to Save Our Public Postal Service. The alliance vows that “The public good must not be sacrificed for the sake of private investment and profit.”

No one group or organization can turn the tide against neoliberalism, but an organized fightback must begin somewhere by someone. If there is going to be serious follow-through on all these initiatives, a dramatic departure from the methodologies of U.S. unions of recent decades would be a welcome start — although this can’t be effective without broad popular support and activity capable of solidarity work and overturning anti-union laws such as Taft-Hartley.

Reforms, however welcome, can only achieve so much and are always temporary. Struggles for reform will be fought again and again, becoming more difficult to sustain, as long as economic systems stress private profit rather than public good.