As production is moved to ever more distant locales, with ever lower labor and environmental standards, the corporations behind these moves want all barriers to the movement of raw materials and finished products removed. Thus the era of so-called “free trade” agreements. These agreements, which are written to elevate corporations to the level of national governments (and in practice, actually above governments), have become so unpopular thanks to the efforts of grassroots activists to expose them to public scrutiny that governments have become cautious about embracing new ones.
How to get around this impasse? The U.S. government has evidently believed it has found a solution: Claim a “free trade” agreement is not a “free trade” agreement. Not only as an attempt to avoid public scrutiny but to totally bypass Congress.
This latest offensive on behalf of multi-national corporations is the Indo-Pacific Economic Framework. Haven’t heard of it? That’s because the Biden administration, which has cooked up this scheme, would much prefer you didn’t. So far, the 13 other governments that have entered negotiations, including Australia, India, Japan and New Zealand, aren’t eager for their own citizens to know about it, either, and have agreed, whether explicitly or tacitly, to keeping quiet.
The countries negotiating the Indo-Pacific Economic Framework (graphic by JohnEditor132)
Make no mistake, however. The Indo-Pacific Economic Framework (IPEF) is a straightforward initiative to deepen U.S. domination in the Asia-Pacific and Indian Ocean regions. Activists across those regions have taken notice and have already spoken out against the IPEF. Interestingly, some of the governments of those countries, in particular Australia and New Zealand, are quite open in acknowledging the IPEF is a U.S. initiative designed to keep them firmly under the U.S. umbrella and away from China — and are supporting this in their limited public statements. So those social-movement groups sounding alarms are on firm ground, to which we will return below.
So what is this “free trade” deal that is allegedly not a “free trade” deal? A White House “fact sheet” issued by the Biden administration in May 2022, upon the announcement of the IPEF at the Quadrilateral Security Dialogue meeting in Tokyo, declared that the “IPEF will enable the United States and our allies to decide on rules of the road that ensure American workers, small businesses, and ranchers can compete in the Indo-Pacific.” And how might this stated goal be achieved? Negotiations are to focus on “four key pillars to establish high-standard commitments that will deepen our economic engagement in the region.”
Those four pillars announced by the Biden administration are a “connected economy” that will harmonize standards on cross-border data flows and data localization; a “resilient economy” that seeks to “better anticipate and prevent disruptions in supply chains … [and] guard against price spikes that increase costs for American families”; a “clean economy” that “will seek first-of-their-kind commitments on clean energy, decarbonization, and infrastructure that promote good-paying jobs”; and a “fair economy” under which “tax, anti-money laundering, and anti-bribery” standards are used “to promote a fair economy. “
The same lies packaged for new consumption
Does this list sound familiar? Perhaps it does, as these are the sort of goals repeatedly promised in “free trade” agreements of the past, goals that never materialize because the draconian rules designed to unilaterally overturn health, safety, labor and environmental regulations always have words like “must” and “shall” attached to them in trade agreement texts, but any language purporting to safeguard such standards use words like “may” and “can.” And as disputes are settled in secret tribunals in which the lawyers who represent corporations against governments in these tribunals on one day switch hats and sit as judges on another day, the interpretation of what appears to be dry, technical, neutral-sounding language almost invariably is adjudicated in favor of the complaining corporation, without any appeal being possible.
Attempting to sidestep this history, the U.S. government is trying to claim the IPEF is not a trade deal at all, and thus can be approved by the White House unilaterally with no input by Congress. The Biden administration asserts that IPEF talks do not cover tariff liberalization or provisions that would require changes to key U.S. laws that Congress would have to approve and therefore has no intention of submitting the agreement for approval. Senators disagree, with 21 members of the Senate’s Finance Committee, including its Democratic (Ron Wyden of Oregon) and Republican (Mike Crapo of Idaho) leaders, sending the White House a letter telling the administration it must submit IPEF to Congress for approval.
Discussions during Indo-Pacific Economic Framework negotiations (photo via Prime Minister’s Office of Japan)
Washington is far from the only seat of government slapping happy faces on this subterfuge. Let’s start our survey with Australia and New Zealand, where the governments seem quite pleased at this opportunity to be sidekicks to U.S. imperial designs. And perhaps believe a sub-imperialist slice of the action could come their way given there are several developing countries taking part in negotiations. The full list of countries taking part in IPEF talks are Australia, Brunei, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, the United States and Vietnam, although India is taking part in only some of the “pillars.”
The Australia Department of Foreign Affairs and Trade claims that the IPEF “Supports the promotion of clean energy technologies and renewables to help address climate change impacts and the region’s energy transition” and will “accelerate growth in the digital economy, unlock green trade and investment opportunities, and improve labour and environment standards across the region.” The department also said the IPEF “Improves regional trade and investment conditions.” Unfortunately, Canberra does not specify how the IPEF will miraculously bring about those results, and any text circulating or positions taken in negotiations are unknown because the entire process is being kept secret from the public and legislators.
That the IPEF is a back-door attempt to resurrect the Trans-Pacific Partnership was broadly hinted in December 2022, when Foreign Minister Penny Wong “praised Washington’s commitment to Indo-Pacific security but said its departure from a regional trade pact was still being felt and that enhanced U.S. economic engagement with the region should be a priority,” according to a Reuters report.
Corporate interests already lining up in support
A clue to who will benefit comes courtesy of the Australian Strategic Policy Institute, which claims to be an “independent, non-partisan think tank” despite being established by the government, receiving some of its funding from the Australian military and says it reflects the opinions of Australian government officials and industry leaders. A report the Institute published is, like corporate interests in general, favorable toward the proposed pact. “The IPEF is viewed as a potentially innovative way to boost regional investment rather than as a mechanism to strengthen the usual substance of trade agreements, such as market access into the US,” the report said. This corporate vision appears to be to position Australia as a regional assistant to U.S. corporations. The report’s first recommendation: “The US, as the convener of the IPEF, should lean into Australia’s capacity-building expertise in the region” because “Australia has a long history of organising capacity building and training exercises in Southeast Asia and the South Pacific.” In other words, Australia should position itself firmer as a junior imperialist country.
Canberra has been a good pupil, if you want to look at it that way, as symbolized in its decision earlier this year to spend up to $368 billion to buy nuclear submarines from the United States after the U.S. strong-armed the Australian government to cancel a previous cheaper deal to buy conventional submarines from France. The deal also will have U.S. and British submarines stationed on Australia’s Indian Ocean coast.
Much the same comes from Wellington. The New Zealand Foreign Affairs & Trade Ministry has declared, “The Indo-Pacific Economic Framework for Prosperity is an opportunity to strengthen economic cooperation with the United States and across our wider home region. The IPEF will provide an open and inclusive platform for the US to engage more deeply in the economic architecture of the Indo-Pacific, which we think is valuable for both New Zealand and the wider region.” Considering that when the Trans-Pacific Partnership was being negotiated, a key initiative for the United States was to weaken New Zealand’s health care system, it is reasonable to wonder why again negotiating a surrender to U.S. corporate interests would be a good idea.
The architecture of Melbourne (photo by Diliff)
U.S. government negotiators, on behalf of the pharmaceutical industry and its obscene profits, took direct aim at New Zealand’s Pharmaceutical Management Agency program that makes thousands of medicines, medical devices and related products available at subsidized costs in Trans-Pacific talks. The agency’s cutting down the industry’s exorbitant profit-gouging was openly called by the U.S. corporate lobby group Pharmaceutical Research and Manufacturers of America an “egregious example” to be eliminated because of its “focus on driving down costs.” Can New Zealand expect anything better this time?
Other participating governments have issued similar statements, with South Korea Trade Minister Ahn Duk-geun stating that “creating practical outcomes in areas like supply chain and clean energy is imperative.” Malaysian Trade Minister Mohamed Azmin Ali, discussing the supply chain talks, said “Malaysia believes that it is crucial to outline the tangible benefits of this trade and multilateral economic framework.”
With eyes open, grassroots opposition has already begun
Activist groups across the region and around the Pacific Ocean have already begun organizing opposition. This is a drill, after all, that groups organizing in opposition to always one-sided “free trade” agreements have had to repeatedly conduct.
A strong voice of opposition is that of Jane Kelsey, the University of Auckland law professor who long sounded the alarm on the Trans-Pacific Partnership from New Zealand.
Once again taking up the challenge, Professor Kelsey, in a May 2022 article in The Conversation, wrote, “[D]espite the high-profile launch, the IPEF remains an enigma, a high-level idea in search of substance.” She questions why the Australia and New Zealand governments are in these talks at all. “Realistically, the IPEF is a ‘pig in a poke’. Aotearoa New Zealand and Australia need to take a deep breath and realistically assess the opportunities and threats from such an arrangement. … Then they must weigh up the options: stand aside from the negotiations, pursue alternative arrangements, or establish a clear, public negotiating mandate that would truly maximise the nations’ interests for the century ahead.”
That commentary was written at the time of the IPEF’s creation. More recently, in December 2022, Professor Kelsey wrote more forcefully on the imperial nature of this trade deal, intended to reinforce U.S. dominance. Note that, in the U.S. government’s “fact sheet” quoted above that the purpose is to “ensure American workers, small businesses, and ranchers can compete in the Indo-Pacific.” Not even a pretense that working people in the other 13 negotiating countries might benefit. Writing in Bilaterals.org, Professor Kelsey said:
Lupin field, New Zealand (photo by Michael Button)
“It is extraordinary how quickly states across ‘the region’ (whatever we name it) have fallen into line. Old imperial powers have embraced the US’s re-assertion of its regional presence: Australia, with its increasingly strident anti-China stance; Canada, welcoming a new hybridised North-South version of the old Western hegemony; France, wary of its remaining colonies being seduced by China. … Predictably, New Zealand has also fallen into line.”
What we have here is a replay of the Trans-Pacific Partnership, and the TPP agenda of dismantling national protections against the depredations of U.S. multi-national capital. Professor Kelsey wrote:
“Barack Obama famously and unsuccessfully tried to sell the TPPA to the American people, and the US Congress, as the vehicle for America to write the rules and call the shots in the 21st century, not China. Those power politics remain the same. As with the TPPA, the US initiated the negotiation and will set the agenda, dictate the script and approve the outcome, with other states attempting to influence at margins. Even when Trump withdrew the US from the TPPA, many of the US-driven texts were retained by the remaining eleven countries. We also expect parts of the TPPA to form the starting point for US demands. …
‘The prosperity’ promised by IPEF is principally for the US on terms it can manage politically. The Biden administration is determined to bypass the messy problem of securing approval in the Congress. An ‘executive agreement’ that does not contain market access commitments and does not require the US to change any of its laws avoids that problem. So, unlike the TPPA, IPEF will not include negotiations for other parties to access the US market, removing the most obvious means for other countries to point to any commercial gains. The pro-corporate regulatory settings will reflect the status quo in the US. Add to that the penchant for the US to invoke ‘national security’ exceptions to justify breaching its trade obligations, which makes a mockery of an ‘open rules-based system’ and any pretence that IPEF will be a reciprocal exchange of benefits by all the participating countries.”
Opposing a policy of total subservience
Such goals have not gone unnoticed in Australia. Writing in Green Left Weekly, William Briggs noted how fast the new Labor government of Anthony Albanese fell in line. “The first action of a new government is always steeped in symbolism,” he wrote. “The Anthony Albanese Labor government’s reaffirmation of Australia’s unswerving loyalty to the United States at the Quadrilateral Security Dialogue (Quad) meeting was just so. … The new Labor government is facing almost impossible tasks. No capitalist economy can hope to overcome global crises. Any reform, any tinkering at the edges, is to be supported and welcomed, but a policy of total subservience to the interests of the US is hardly the way forward.”
The Indo-Pacific Economic Framework will be detrimental to the developing countries as well. The president of the Malaysian civil society organization Consumers’ Association of Penang, Mohideen Abdul Kader, said:
“US multinational companies are openly pushing for provisions that would prevent the Malaysian government from preferentially purchasing from our local companies. This undermines domestic manufacturing especially in current times. It also adversely affects the need for small and medium sized firms to recover from the effects of Covid-19. The US industry is also demanding stronger intellectual property protection that would, among others, make medicines, textbooks, agricultural and manufacturing inputs and climate change technology more expensive. The digital economy provisions sought by US big tech companies would undermine Malaysia’s privacy, consumer protection, health, environmental, financial, tax and other crucial regulations, while the privately held global food company Cargill wants provisions that allow foreign investors to sue the government in international tribunals.”
Tokyo at night (photo by Basile Morin)
And from the Philippines, Joms Salvador of Gabriela Philippines, in a statement issued through the Asia Pacific Forum on Women, Law and Development, a network of feminist organizations, sees through the attempt to promote the IPEF as benefiting women:
“The IPEF is not, and never will be, just about economic trade, but a link in the chain of US hegemonic dominance in Asia-Pacific, where it has maintained strategic military presence and client relations with its neocolonies in the region, often to the detriment of national sovereignty and the human rights of Asian women and peoples. Women must resist the IPEF and stand our ground in the face of intensifying US-China rivalry and its encroachment on our lives as sovereign peoples.”
Helping women? No, women have seen this movie before
Filipino women are far from alone in rejecting an attempt at whitewashing the corporate-oriented nature of the IPEF. In a statement titled “Statement Rejecting Pinkwashing in the Indo-Pacific Economic Framework,” more than 60 women’s rights organizations, labor unions and civil society organizations firmly rejected an “upskilling” program that is promoted as a way for young women to gain employment in technical fields but it seen as another initiative actually designed to deepen the dominance of U.S.-based Big Tech companies. The coalition of groups, in their statement, said:
“The Upskilling Initiative for Women and Girls promises training by fourteen US Big Tech companies to women in IPEF countries. However, it appears that much of the promise is simply re-packaged training that is already available, and primarily designed as a tool to increase market presence and profits. The initiative is designed to encourage developing countries to agree to ‘high-standard commitments’ on the ‘promotion of cross-border data flows’ which translates to the adoption of rules that have been included in other trade agreements at the behest of Big Tech. Rules that a) restrict governments being able to effectively regulate Big Tech, b) inhibit governments from implementing rights-enhancing data policies for political sovereignty and economic self-determination, c) enable algorithms to be kept secret, d) constrain governments from requiring tech companies to have a local presence, and e) stop governments from pro-actively developing digital industrial policies, including autonomous digital public infrastructure. All of these can be extremely harmful to women’s human rights.
The initiative involves companies that have undermined labour rights, refused to recognise workers as employees, have used tax havens to avoid making tax contributions to public services essential for gender equality. Previous trade agreements have included commitments to gender equality, but those agreements have instead harmed women’s human rights by liberalising services, promoting the privatisation of public services essential in addressing discrimination and exclusion, deregulating the labour market, and promoting a race to the bottom in wages and conditions, and denying governments the policy space required for people to progressively realise their economic rights.”
Opposition also arises in the imperial center
Opposition has begun to be organized across the Pacific, in the United States itself. A letter initiated by Citizens Trade Campaign, a national coalition including unions, community groups and other organizations, released on March 2023 a petition signed by more than 400 labor, environmental, community and religious groups calling for the Biden administration to include strong labor rights based on International Labour Organization standards, binding commitments to combat global warming and digital standards to protect consumer rights and privacy while reining in Big Tech abuses. The letter also asks for transparency during IPEF negotiations: “A more transparent and participatory negotiating process for IPEF would allow for a wider set of interests to provide informed input and ensure equitable treatment of communities which are not part of the official U.S. trade advisor system most representing corporations who now have access to U.S. proposals and other confidential IPEF texts.”
A separate U.S. effort, by a group of consumer advocates, calls on the Biden administration to eliminate IPEF language that they say could undermine efforts to hold Big Tech accountable for their privacy practices. The consumer advocates have not seen any IPEF text because it remains secret from the public, but in their letter they said they “understand from policymakers and others who have reviewed the draft” that its digital trade section could help let U.S. tech companies off the hook when it comes to privacy safeguards, The Washington Post reports. The letter adds that the IPEF contains “problematic terms” giving “Big Tech firms control of our personal data” while limiting other countries from applying regulations.
A third negotiating round is scheduled for May in Singapore. The first round of talks, in Brisbane in December 2022, ended without a status report by participants but reportedly negotiators set aside more challenging issues. The second round, in Bali, Indonesia, ended with a commitment “to an aggressive negotiating schedule throughout 2023,” with nothing of substance revealed.
Activists on both sides of the Pacific had to organize a years-long campaign to defeat the Trans-Pacific Partnership, an effort that can only be said, at best, to be partially successful because most of the countries involved did eventually sign it, albeit with somewhat less draconian rules because the most hard-line government, that of the United States, dropped out due to intense domestic pressure. As with the TPP, and the many other “free trade” agreements that have been implemented, the purported benefits for working people are illusions. Fanaticism and fantasy have long driven government propaganda in promoting these deals. Once the TPP text was released, it could readily be seen why it had been secret throughout the negotiations.
“Free trade” agreements — even when falsely advertised as something else — have very little to do with trade and much to do with imposing corporate wish lists, including sweeping away health, safety, labor and environmental standards that can’t be eliminated through democratic means. As with all “free trade” agreements, the fault lines are along class, not national, interests. Industrialists and financiers around the world understand their class interests and are united to promote their interests. Working people uniting across borders, in a broad movement, is the only path toward reversing corporate agendas that accelerate races to the bottom.
Every so often, the World Bank puts out a paper that calls for better social protection or at least a somewhat better deal for working people. The public relations people there evidently believe we have very short memories.
No, dear reader, the World Bank has not changed its function, nor have elephants begun to fly. Without any hint of irony, the World Bank’s latest attempt at selective amnesia is what it calls its “Social Protection and Jobs” strategy, in which it purports to advocate that the world’s national governments “greatly expand effective coverage of social protection programs” and “significantly increase the scale and quality of economic inclusion and labor market programs.” Hilariously, the World Bank titles its 136-page report fleshing out this strategy “Charting a Course Towards Universal Social Protection: Resilience, Equity, and Opportunity for All.”
In that report, the World Bank, with a straight face, writes that it “recognizes that the progressive realization of universal social protection (USP), which ensures access to social protection for all whenever and however they need it, is critical for effectively reducing poverty and boosting shared prosperity.” Furthermore, the report builds on a previous document that allegedly offers “an overarching framework for understanding the value of investing in social protection programs and outlined how the World Bank would work with client countries to further develop their social protection programs and systems.” The report asserts goals of achieving equity, resilience and opportunity for all people, especially the developing world’s most vulnerable, and “to create opportunity by building human capital and helping men and women to access productive income-earning opportunities.”
A demonstration in Oslo during the World Bank conference in June 2002 (photo by Vindheim)
We arrive at that favorite set of code words, “human capital.” We’ll return to that shortly. But before we highlight the actual record of the World Bank and its role in imposing devastating austerity on countries around the world, at enormous human cost, let’s take a brief look at the International Trade Union Confederation response. The ITUC, which represents 200 million workers in 163 countries and has 338 national affiliates, says its “primary mission is the promotion and defence of workers’ rights and interests.” Readers may recall that the ITUC issues a yearly report on the state of labor, consistently finding that not a single country fully upholds workers’ rights.
In its four-page summary of the World Bank declaration, the ITUC said it agrees with the World Bank’s stated goals, and “agrees with the Bank that the lack of social protection for the majority of the world’s workers in the informal economy is a challenge that needs to be urgently addressed.” Nonetheless, the ITUC “has a number of considerable reservations to some of the policy messages” and disputes “the rigor of the analysis underpinning some of the policies proposed.”
The ITUC writes: “The Bank’s vision of universal social protection appears to prioritise the extension of targeted non-contributory social assistance at the expense of social security, when both forms of support serve distinct and complementary functions.” Further, it “disagrees with the Bank’s critique of social security schemes, especially pensions, as an undue burden on public finances and ‘regressive’ in nature.” The World Bank’s “solution” to make pension and social security systems sustainable “mainly involve reducing public subsidies to social security, strengthening the link from contributions to entitlements through defined-contribution schemes [retirement plans in which you pay into but have no guarantees as to payout], as well as strengthening the role of voluntary and private pensions.”
In other words, it’s work until you drop! That is already a long-term goal of right-wing ideologues and corporate interests not only in the United States but around the world.
Underneath the rhetoric, the usual right-wing prescriptions
And, true to right-wing form, the World Bank places the onus for unemployment squarely on individuals. The ITUC critique says: “the onus of addressing unemployment appears to focus on the individual, rather than on the broader structural forces at play. The [bank report] disregards in particular the measures that governments can take to create new, quality jobs, such as proactive industry planning, public sector job creation, and public investment – including in labour intensive sectors with strong social and environmental dividends, such as infrastructure, care and the green economy.” Finally, the World Bank claims that labor regulations are “excessive” and threaten employment, and advocates lowering already meager worker protections.
Once again, the World Bank has not forgotten its raison d’être; it has not suddenly changed its stripes. Elephants will continue to not fly.
Did we really expect otherwise? A look at the World Bank’s record provides all the evidence anyone could want of it being one of the world’s most destructive agencies, an organization dedicated to enhancing corporate plunder and imposing punishing austerity. A one-two punch with the International Monetary Fund. Both organizations do the bidding of the Global North’s multi-national corporations through playing complementary roles.
Three Gorges Dam, a project funded by the World Bank that displaced 1.3 million people (photo by Christoph Filnkössl)
When I last checked in at the World Bank, in 2018, the bank was in the process of completing its “World Development Report 2019: The Changing Nature of Work,” which opened with quotes from Karl Marx and John Maynard Keynes. That was merely a feint. What we soon read in examining the report is that the problem is “domestic bias towards state-owned or politically connected firms, the slow pace of technology adoption, or stifling regulation.” Sure, jobs are disappearing, but that’s no problem because “the rise in the manufacturing sector in China has more than compensated for this loss.” Essentially, the World Bank was advocating that we become sweatshop workers in China. What else to do? “Early investment in human capital” — in other words, pay lots of money for advanced degrees you won’t be able to use — and “more dynamic labor markets,” which is code for gutting labor protections and making it easier to fire workers.
Elephants didn’t, after all, fly five years ago, either.
The World Bank has even declared itself above the law. Unfortunately, at least one U.S. court agrees. A lawsuit filed in federal court in Washington on behalf of Indian farmers and fisherpeople ended with a ruling that the World Bank is immune from legal challenge. The bank provided $450 million for a power plant that the plaintiffs said degraded the environment and destroyed livelihoods. The court agreed with the World Bank’s contention that it has immunity under the International Organizations Immunities Act. The World Bank thus was declared the equivalent of a sovereign state, and in this context is placed above any law as if it possesses diplomatic immunity. Another suit, however, also filed by EarthRights International against the World Bank for its role in turning a blind eye to alleged systematic human rights violations by a palm oil company in Honduras for a project it financed, was allowed to proceed by the U.S. Supreme Court in 2019. That case, however, appears to yet be decided by the trial court. So the World Bank can sometimes be sued in the United States legal system but it remains to be seen if it will have to shoulder any responsibility.
The World Bank has a long history of ignoring the human cost of the projects it funds. The World Development Movement, a coalition of local campaign groups in Britain, reports that the World Bank has provided more than US$6.7 billion in grants to projects that are destructive to the environment and undermine human rights, a total likely conservative. To cite merely three of the many examples, the World Bank:
Loaned an energy company in India more than $550 million to finance the construction of two coal-fired power plants. Local people, excluded from discussions, were beaten, their homes bulldozed and reported reduced food security and deteriorating health as a result of the power stations.
An Indonesian dam, made possible by the World Bank’s $156 million loan, resulted in the forcible evictions of some 24,000 villagers, who were subject to a campaign of violence and intimidation.
In Laos, a hydropower project made possible by World Bank guarantees displaced at least 6,000 Indigenous people and disrupted the livelihoods of around 120,000 people living downstream of the dam who can no longer depend on the rivers for fish, drinking water and agriculture.
“Drawing on Bank studies, project evaluations and sectoral reviews, it is shown that the World Bank still suffers from a pervasive ‘loan approval culture’ driven by a perverse incentive system that pressures staff and managers to make large loans to governments and corporations without adequate attention to environmental, governance and social issues. In 2013, Bank Staff who highlight social risks and seek to slow down project processing still risk ‘career suicide.’ … [The bank] has continued to binge on enormous loans to oil and gas extraction, coal-fired power stations and large-scale mining generating environmental damage, forest loss and massive carbon emissions.”
Destroying the environment in the service of short-term profits
Want more? The World Bank has provided nearly $15 billion in financing for fossil fuel projects since the 2015 signing of the Paris Climate Accords. An October 2022 report by Big Shift Global, a coalition of 50 environmental organizations across the Global North and South, notes that despite World Bank claims that it would end financing for upstream oil and gas production, it has other avenues to promote fossil fuels. One of these methods is to send funds to a financial institution, which in turns sends the money to the fossil fuel project. Another is to provide non-earmarked funds but make the money conditional on instituting reforms encouraging fossil fuels.
The biggest fossil fuel funding, according to the Big Shift Global report, is $1.1 billion for the Trans-Anatolian Pipeline, a gas distribution project in Azerbaijan. Another $600 million went toward a gas storage project in Turkey and another eight projects were given at least $100 million by the World Bank. Projects that the World Bank has financed include expansion of coal. Other work by the World Bank includes $2.8 billion so that Ghana could move its energy mix from mostly hydropower to majority fossil fuels, and pressured Ghana to enter into gas contracts that causes it to pay $1.2 billion annually for gas it doesn’t use, which also has put a greater debt burden on the country.
The World Bank also encouraged Guyana to use a Texas law firm that has Exxon as a major client to rewrite its petroleum laws, while providing money for oil and gas development in Guyana. That development will benefit Exxon as the fossil fuel multinational snagged a contract under which Guyana doesn’t receive any of the profits until the costs of the field are paid off. In other words, the Big Shift Global report says, “Exxon can continue to charge Guyana for every newly developed oil field. It could take decades before the money trickles down to the people.”
Protest at the World Bank (photo by “Jenene from Chinatown,” New York City)
The World Bank attempted the same whitewashing stunt with its fossil fuel funding, once issuing a report lamenting global warming while completely ignoring its role in worsening global warming. At the time of that whitewashing report, the bank was providing billions of dollars to finance new coal plants around the world. By any reasonable standard, the World Bank is a key organization in the concatenation of processes that has brought the world to the brink of catastrophic climate change. The policies of the World Bank and its sibling, the International Monetary Fund, have constituted non-stop efforts to impose multi-national corporate control, dismantle local democratic institutions and place decision-making power into the hands of corporate executives and financiers, the very people and institutions that profit from the destruction of the environment.
A trail of evictions, displacements, gross human rights violations (including rape, murder and torture), widespread destruction of forests, financing of greenhouse-gas-belching fossil-fuel projects, and destruction of water and food sources has followed the World Bank. It works in conjunction with the International Monetary Fund, whose loans, earmarked for loans to governments to pay debts or stabilize currencies, always come with the same requirements to privatize public assets (which can be sold far below market value to multi-national corporations waiting to pounce); cut social safety nets; drastically reduce the scope of government services; eliminate regulations; and open economies wide to multi-national capital, even if that means the destruction of local industry and agriculture. This results in more debt, which then gives multi-national corporations and the IMF, which enforces those corporate interests, still more leverage to impose more control, including heightened ability to weaken environmental and labor laws.
The World Bank compliments this by funding massive infrastructure projects that tend to enormously profit deep-pocketed international investors but ignore the effects on local people and the environment. The two institutions are working as intended, to facilitate the upward distribution of wealth, regardless of human and environmental cost.
There is no respite from class warfare. Past annual Global Rights Index reports issued by the International Trade Union Confederation have invariably shown that there is no country on Earth that fully protects workers’ rights and the 2022 edition is not only not an exception but finds that repression of labor organizing is increasing.
The best any country scored for the 2022 ITUC Global Rights Index was “sporadic violations of rights,” and only nine countries, all in Europe, managed that. That’s down from the dozen classified at this rating two years ago. Capitalism, and its neoliberal variant now four decades old, is not becoming more gentle. It is doing what it must do, what the holders of capital must do to keep their party going.
Let’s take a look at a few general highlights before we highlight individual countries. Or should we say lowlights? Then again, they are “highlights” for industrialists and financiers.
87% of countries violated the right to strike.
79% of countries violated the right to collective bargaining.
77% of countries excluded workers from the right to establish or join a trade union.
74% of countries impeded the registration of unions.
In its executive summary, the Global Rights Index report says:
“Workers are on the front lines as they face the impact of multiple areas of crisis: historic levels of inequality, the climate emergency, the loss of lives and livelihoods from the pandemic, and the devastating impact of conflict. And workplaces are the front line in the fight for democracy. Brutal governments know how much this matters when four out of five countries block collective bargaining and one third of countries violently attack workers. Trade unionists have been murdered on every continent. Where people stand up for rights and social justice they are silenced with brutal repression.”
Lest we think these are problems only in undeveloped countries, there are Global North countries that score poorly in the index, including Australia, Belgium, Britain, Canada and the United States. Almost all trends are getting worse, in all parts of the world. Several indicators — including the right to strike, the right to establish and join a trade union, the right to trade union activities and the right to civil liberties — have steadily worsened since the survey’s annual reports began being issued in 2014. “The number of countries which exclude workers from their right to establish or join a trade union increased from 106 in 2021 to 113 in 2022,” the report said.
The Global Rights Index ranks the world’s countries from 1 to 5, with 1 the best category, denoting “sporadic violations of rights,” defined as where “Violations against workers are not absent but do not occur on a regular basis.” The nine countries given a rating of 1 are Austria, Denmark, Finland, Germany, Iceland, Ireland, Italy, Norway and Sweden. (These are green on the report’s maps.)
Rating 2 countries are those with “repeated violations of rights,” defined as where “Certain rights have come under repeated attacks by governments and/or companies and have undermined the struggle for better working conditions.” Countries with this rating include the Czech Republic, France, Japan, Netherlands, New Zealand and Spain. (These are yellow on the report’s maps.)
Rating 3 countries are those with “regular violations of rights,” defined as where “Governments and/or companies are regularly interfering in collective labour rights or are failing to fully guarantee important aspects of these rights” due to legal deficiencies “which make frequent violations possible.” Countries with this rating include Argentina, Britain, Canada, Mexico and South Africa. (These are light orange on the report’s maps.)
Rating 4 countries are those with “systematic violations of rights,” defined as where “The government and/or companies are engaged in serious efforts to crush the collective voice of workers, putting fundamental rights under threat.” Countries with this rating include Australia, Chile, Greece, Peru, Senegal and the United States. (These are dark orange on the report’s maps.)
Rating 5 countries are those with “no guarantees of rights,” defined as “workers have effectively no access to these rights [spelled out in legislation] and are therefore exposed to autocratic regimes and unfair labour practices.” Countries with this rating include Brazil, China, Colombia, South Korea and Turkey. (These are red on the report’s maps.) In addition, there are countries with a 5+ rating, those with “No guarantee of rights due to the breakdown of the rule of law.” Afghanistan, Libya, Syria and Yemen are among the 10 counties listed in this category, and are colored deep red.
The ITUC says it represents 200 million workers in 163 countries and has 332 national affiliates. It determines its ratings by checking adherence to a list of 97 standards derived from International Labour Organization conventions. Those 97 standards pertain to civil liberties, the right to establish or join unions, trade union activities, the right to collective bargaining and the right to strike.
Worth noting is the poor rating of the United States and Britain, the two countries that most like to scold other governments and present themselves as democratic beacons that the world should emulate (or else). The United States has consistently been given a 4 rating, including in 2020 and 2019. The 2022 report notes a myriad of union-busting offensives used by employers there. The United Kingdom, which has had 3 and 4 ratings in past years, has seen workers summarily sacked and replaced with agency workers at below minimum wage.
Conditions are not appreciably better in those countries most eager to follow U.S. and British leads. In Canada, failures to comply with collective-bargaining agreements are a “common occurrence,” union leaders are prosecuted for participating in strikes and workers participating in strikes are fired. In Australia, criminal charges are filed against unions and union leaders as intimidation tactics, and governments not only allow employers to refuse to bargain with unions but intervene in disputes on the side of employers. Both countries are ranked worse than where they had been two years ago.
And so it goes, to channel Kurt Vonnegut. In its latest report on “the world of work,” the International Labour Organization (ILO) said “three out of five workers lived in countries where labour incomes had not yet recovered to their level prior to the crisis,” while inequality and the gender gap in pay remain large. A separate ILO report said “a return to pre-pandemic performance is likely to remain elusive for much of the world over the coming years,” with a global deficit of 52 million full-time equivalent jobs. Tens of millions of adults fell into extreme poverty during the Covid-19 pandemic.
These dismal results aren’t any surprise to anyone paying attention. The wealthy, and especially billionaires, have only gotten richer at everyone else’s expense during the pandemic. In just the first year of the pandemic, 2020, the world’s billionaires accumulated an additional trillion dollars. At the same time, corporations across the Global North enrich speculators and their top executives with trillions of dollars in dividend payments and stock buybacks and the world’s governments, through their central banks, handed out an astounding $10 trillion in free money to the financial industry through “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. Despite these incredible sums of money, there is never more than crumbs for working people. It’s always austerity for those whose work actually creates the wealth that industrialists and financiers divvy up between themselves.
But central bank interventions are profitable for the financial industry, and that’s all that matters. The object of capitalism is to make the biggest possible profit, regardless of cost to employees, consumers, anybody else, the environment or the community; providing a useful product or service is incidental to the goal. Forcing down wages and working conditions through legal manipulation and outright force and violence is always prominent among capitalists’ methodologies to accomplish their goals. The International Trade Union Confederation’s sad results are not the result of some mysterious failure; they come standard with the system.
The size of the financial industry bears no relation to the economy. Self-mythological panegyrics aside, the finance industry confiscates money; it doesn’t create it. How much? Get out your calculators, and maybe you’ll have to find a way to add a couple of digits to what your screen can hold.
Perhaps the total amount of money extracted by financiers (or, more to the point, speculators) is not quite as large as Douglas Adams’ description of space in the, yes, increasingly inaccurately named Hitchhikers’ Trilogy, as “Really big. You just won’t believe how vastly hugely mind-bogglingly big it is.” But it’s close.
OK, let’s put down a couple of numbers here. The numbers on their own are so absurd as to defy easy comprehension, so let’s try to find a way to situate them.
Total amount of debt outstanding: US$305 trillion (€304 trillion).
Total amount of financial instruments traded, on average, per day: US$9.68 trillion (€9.65 trillion).
Yep, that’s a whole lot of money. So big that the imagination struggles to grasp such numbers. One way to put those numbers in perspective is that the size of the world economy (global gross domestic product for all the world’s countries) was US$96.1 trillion (€95.8 trillion) in 2021.
Commodities futures trading (photo by Lars Plougmann)
In other words, the volume of currency trading (foreign exchange), stocks, bonds and their derivatives exceeds the size of the global economy in 10 business days. (The period is almost certainly a little less, as that US$9.68 trillion in average daily trading doesn’t include most government bonds, trading figures for which are difficult to come by.) To create another comparison, the amount of debt owed by the world’s governments, businesses and households (the $305 trillion total above) is more than three and a half times of the value of all economic activity produced in a year.
Still another way to look at this activity is that foreign exchange trading (including swaps, options, spot transactions and outright forwards) in one day is bigger than the economies of all countries other than the United States and China. Given that the U.S. dollar, the world’s reserve currency, is involved in 88 percent of foreign exchange trades, trading in the dollar by itself totals more than a year’s production of all countries other than itself and China.
A multi-headed monster that is never satiated
Rolling Stone magazine once memorably described Goldman Sachs as a “great vampire squid wrapped around the face of humanity.” That makes finance capital as a whole a multi-headed monster with the attributes of a tyrannosaurus rex, killer whale, giant squid and elephant that can swallow ships at sea whole, fly through the air at supersonic speed and never stops eating. Or something like that. Perhaps some planet-eating monster in a science fiction potboiler? Maybe we can fall back on Douglas Adams after all, and just consider the financial industry vastly hugely mind-bogglingly big.
And getting bigger. When I last did this exercise 10 years ago, it took about 11 business days for speculators to trade financial instruments and contracts valued at all the products and services produced by the entire world in one year. Now it’s 10 days. There’s progress for you.
There is no rational economic reason for a financial industry — and “bloated” would be woefully inadequate to describe it — even a fraction of this size. Most of the action on stock exchanges is simply speculation. Greed is certainly a part of the picture, but by no means the entire picture. Because there are insufficient opportunities for investment, more money is diverted into speculation. As ever bigger piles of money are diverted into speculation, the size of the financial industry and the percentage of corporate profits claimed by the financial industry steadily grows. This capital is a function of the amount of money flowing upward to the rich becoming larger than they can use for personal luxury consumption or investment; these torrents of money are diverted into increasingly risky pure speculation.
“Greed” (Nicholas Kwok)
Too much money comes to chase too few assets, rapidly bidding up prices until there is no possible revenue stream that can sustain the price of assets bought at inflated levels. Not altogether different from those Warner Brothers cartoons in which the character walks off a cliff, takes several steps suspended in air before looking down, sees there is nothing but air below and then falls, at some point speculators look down and notice they have no support, mass panic commences and prices collapse, bringing on another economic downturn. One that working people, not speculators, will pay for.
The very size of financial markets is a major contributing cause of economic instability. Financial companies, having extracted immense sums of bailout money after the 2008 collapse, have leveraged their power to become even bigger through consolidation, thereby enabling them to divert more capital from productive use. But even during the “boom” portion of business cycles financiers are destructive to an economy by rewarding manufacturers for mass layoffs, moving production to low-wage developing countries with few or no effective labor or environmental laws, and setting up subsidiaries overseas and using creative accounting to shift profits offshore to avoid paying taxes. Financiers provide rewards for such behavior in the form of rising stock prices, and those stock prices in turn provide top executives a rationale to give themselves stratospheric pay packages because they “enhanced shareholder value.”
In turn, there is continual downward pressure on wages — an increasing share of corporate revenues go toward executive pay and profits as the share going toward wages declines. And much of those corporate profits are quickly funneled into dividends and stock buybacks, yet more ways for money to move upward into the ever grasping hands of super-wealthy speculators.
As I wrote back in June, the corporations of North America, Europe and Japan handed out an astounding US$2.75 trillion (€2.63 trillion at then exchange rates) to shareholders in 2021 through dividend payments and stock buybacks. By February 2022, 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 totaled US$9.94 trillion (€8.76 trillion). That is on top of the US$9.36 trillion (€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. That’s US$19.3 trillion (€17.1 trillion) in the span of 14 years, and this astounding sum of subsidies and handouts 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.
Crash to crash, but it’s you who is supposed to fall down
How could a parasitic industry grow to such gargantuan proportions? In theory, stock markets exist to distribute investment capital to where it is needed and to enable corporations to raise money for investment or other purposes. In real life, neither is really true. A corporation with stock traded on an exchange can use that status to issue new shares, raising money without the burden of dealing with lenders and paying them interest. But large corporations can raise money in a variety of ways, for example by issuing bonds or other interest-bearing debt, or by selling shares directly to private investors. Nor do corporations necessarily wish to float new stock — doing so is disliked by investors because profits are diluted when spread among more shares. Instead, it is more common for large companies to buy back shares of their stock (at a premium to the trading price), which means less sharing of distributed profits. And thus the steady increase in buybacks, which combined with dividends, in some years exceeds the total of profits!
And what of distributing investment capital to where it is needed? That is saying, in so many words, that stock markets make finance more efficient — that capital will be put to use in the industries or companies in which a high profit is seen as a good bet because a company is filling a need with a product but lacks sufficient capital to take full advantage, or that the company already has a history of delivering profits. At bottom, buying stock is a gamble on the future profits of the company in which stock is bought. An investor is betting that profits will not only rise, but rise at a faster rate than in the past. I at one time worked on a financial news wire service, and one day was surprised when the stock price of a well-known technology company fell despite announcing it had earned a profit of $800 million for the previous three months, a higher profit than the same quarter in the previous year. On closer examination, the company was punished by speculators because the rate of the increase of the profit did not increase — this gigantic profit was lower than what stock market “analysts” had predicted.
What happens to rain forests when the market is allowed to decide. (Photo of Montane Rainforest in Ecuador by Gunnar Brehm)
This illustrates that trading is primarily done for speculation, not for any rational economic reason. The beginnings of the financial industry lie in the very slow rate of business in the early days of capitalism; it could take years for an investment made on the other side of the globe to pay off. Thus financiers stepped in to provide cash liquidity. But because financial speculation doesn’t have the physical limitations of the production of tangible goods, speculation would become prominent. Indeed, financial crashes long predate the crashes of 1929 and 2008. “Tulip mania” consumed the Dutch in the 1630s, speculation fueled by the first futures contracts; uncontrolled speculation in the 1710s in the English South Sea Company and the French Company of the Indies led to the collapse of stock in both, a bubble in which short selling was born; an 1830s bubble in U.S. real estate burst when banks stopped making payments; and an 1870s bubble inflated by speculation in railroads and construction in North America and Europe burst when the Vienna stock market crashed, followed by waves of bank failures, to note some of the more well-known examples.
The world’s billionaires and multi-national corporations profited enormously from the Covid-19 pandemic, enormously inflating their wealth. Not surprisingly, debt increased dramatically as well. The 2020 increase in debt was the biggest for any year since World War II, according to the International Monetary Fund.
Half of the 2020 increase in debt was governmental, again no surprise given the trillions handed out to financial institutions that year. According to the IMF, “Debt increases are particularly striking in advanced economies, where public debt rose from around 70 percent of GDP, in 2007, to 124 percent of GDP, in 2020. Private debt, on the other hand, rose at a more moderate pace from 164 to 178 percent of GDP, in the same period. … Public debt now accounts for almost 40 percent of total global debt, the highest share since the mid-1960s.”
Extracting money from those who work
It should always be remembered that profit comes from a capitalist paying to employees much less than the value of what they produce. In turn, the financial industry extracts money from the producers of tangible goods and services, and often from governments as well. Finance capital seeks to profit off any and all economic activity anywhere, regardless of cost to everybody else. It’s incredibly profitable — not only are investment banks among the most profitable corporations, but speculators can rake in hundreds of millions and even billions of dollars annually — and they pay less in taxes that you do!
Not even the biggest corporations are immune from financial industry pressure. Several years ago, DuPont, the chemical multi-national that produces many products that dominate their market, had racked up about US$17.8 billion in profits over five years, handed out $4 billion to shareholders from the proceeds of selling its performance chemicals business and boasted a one-year increase in its stock price of 20 percent. Yet a powerful hedge-fund manager declared war on DuPont management, demanding DuPont be broken up into two companies, under the theory that more profit could be extracted. The speculator did not get what he wanted, but DuPont did lay off workers to appease speculators despite its massive profitability. Ultimately, DuPont merged with Dow Chemical and then the combined conglomerate split into three companies, maneuvering done mainly to throw more cash at speculators.
Even Wal-Mart is not ruthless enough for Wall Street. After five years of massive profits (US$80 billion), speculators began driving down the price of Wal-Mart stock in part because the company had raised its minimum wage to $9 an hour. Wal-Mart did attempt to offset that news by also announcing a new $20 billion buyback of shares, but not even blowing that kiss to financiers served to lift speculator moods. Thus the company that is the most ruthless in accelerating the trend of moving manufacturing to the locations with the lowest wages, legendary for its relentless pressure on its suppliers to manufacture at such low cost that they have no choice but to move their production to China, or Bangladesh, or Vietnam, because the suppliers can’t pay more than starvation wages and remain in business, was deemed by financiers to be insufficiently brutal.
As always, it’s heads, Wall Street wins and tails, Wall Street wins. Those fantastic values of financial instruments traded don’t fall from the sky and aren’t because of some rare acumen of speculators. Those sums of money, which would put orbiting satellites at risk if they were stacked up, are the direct result of exploitation of those who work.
Many well-meaning people lament that our economic system is “not working.” But that isn’t true if we apply some historical context. What has capitalism wrought since its earliest days?
Capitalism is a totalizing system built on slavery, colonialism, imperialism, plunder, deeply uneven power relations and exploitation. It remains a system where “might makes right” is the “rule of law.” The “innocence” of early capitalism is a fantastical myth purporting the existence of an earlier, innocent capitalism not yet befouled by anti-social behavior and violence or by greed.
Such an innocent capitalism has never existed, and couldn’t. Horrific, state-directed violence in massive doses enabled capitalism to slowly establish itself, then methodically expand from its northwestern European beginnings. It is not for nothing that Karl Marx famously wrote, “If money … ‘comes into the world with a congenital blood-stain on one cheek,’ capital comes dripping from head to foot, from every pore, with blood and dirt.”
Mass movements can, and have, temporarily ameliorate the deep inequality. But always temporarily, as we can’t stay in the streets forever. Corporate globalization and the pervasive political apparatus that nurtures, sustains and expands it are ever intensifying. The holders and managers of multi-national capital accrue ever more power and wealth, which begets still more power and wealth, raising inequality to absurd levels.
Anti-austerity march in Dublin (photo by William Murphy from Dublin)
The object of capitalism is for capitalists to accumulate more. A macabre race: How could any human being spend billions, tens of billions, of dollars/euros/pounds? Why would an economic system that results in such mind-boggling inequality be further rigged to increase inequality? Could we soon see the world’s first trillionaire?
This is the backdrop for the latest series of reports highlighting the madness of capitalist inequality. Let’s take a quick look while we try to put those reports in some kind of context.
Trillions for speculators, crumbs for you
At the same time that wages are stagnant, living standards are falling, inflation is hurting purchasing power and labor laws are under attack, the corporations of North America, Europe and Japan handed out an astounding US$2.75 trillion (€2.63 trillion) to shareholders in 2021. At the same time, the average pay of U.S. chief executive officers is now approaching 700 times the median pay of their employees.
That massive largesse (although even “largesse” seems inadequate) for shareholders came in two forms: $1.5 trillion in dividends paid and $1.25 trillion in stock buybacks. Simultaneous with those payouts for speculators, which have fully rebounded from the temporary declines of 2020 due to the Covid-19 pandemic, companies are sitting on more cash than ever. Non-financial companies in the S&P 500 Index held US$1.3 trillion in cash and cash equivalents in the third quarter of 2021, compared to $909 billion at the beginning of 2020. So, yes, they can afford to give employees a raise.
Keep this in mind when financiers scream for more austerity and bigger corporate profits, and corporate executives claim they have no choice but to cut costs by eliminating jobs, holding down wages and shipping jobs to low-wage, weak-regulation havens.
And indications so far this year show that 2022 is likely to top 2021’s records for dividends and stock buybacks. Reuters, citing Goldman Sachs, estimates that “S&P 500 companies in 2022 will spend $1 trillion buying up their own shares.” Those giant corporations spent a record $882 billion buying back their stock in 2021, and combined with the dividends handed out, S&P 500 corporations ladled out almost $1.4 trillion last year. (The S&P 500 is a stock market index that comprises 500 of the largest companies listed on U.S. stock exchanges.)
Indeed, life is good if you are a financial speculator. Or parasite, to be more blunt about it.
Financiers as whip and parasite
What is the point of a company using its profits to buy its own stock? To artificially boost how profits are reported. 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 profits for them. Corporate executives love them because, with fewer shares outstanding following a buyback program, their company’s “earnings per share” number will rise for the same net income, making them look good in the eyes of the financial industry. Remaining shareholders love buybacks because the profits will now be shared among fewer shareholders.
There is a downside to this financial manipulation. You have likely already guessed who loses: 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 is an unvarnished example of class warfare. A quite one-sided war.
The financial industry, and especially Wall Street, is both a whip and a parasite in relation to productive capital (producers and merchants of tangible goods and services). The financial industry is a “whip” because its institutions (firms that trade stocks, bonds, currencies, derivatives and other instruments on financial markets) bid up or drive down prices, and do so strictly according to their own short-term interests. The financial industry is also a “parasite” because its ownership of those securities enables it to skim off massive amounts of money as its share of the profits. People in the financial industry don’t make tangible products; they trade, buy and sell stocks, bonds, derivatives and other securities, continually inventing new instruments to profit off virtually every aspect of commercial activity.
(Artwork by Susana Anaya)
In the looking-glass world of finance, the biggest drivers of this insatiable process are “shareholder activists.” These so-called “activists” aren’t activists in any customary sense. In ordinary language, an activist is someone who advocates and organizes for social advancement. But in finance-speak, an “activist” is a shareholder who has bought stock in a company for the purpose of demanding the maximum possible short-term profit, regardless of cost to others or to the company itself. “Shareholder activists” are ultra-rich speculators who are particularly aggressive in demanding that profits be handed over to them and jobs be eliminated to extract more for themselves.
Financiers and industrialists fight over the money that workers produce — profits ultimately derive from the capitalist paying the employee much less than the value of what the employee produces — but they agree they should have all of it. You and your co-workers don’t get anything more than crumbs, even though it’s the work of you and your fellow employees who create the money that is converted into gargantuan corporate profits, multi-million salaries for top executives and towering piles of money funneled into speculator pockets. The financial industry does not create money or profit. It confiscates it. That confiscation is embodied in the massive amount of stock buybacks and dividends reported above — massive not only in the raw numbers, but in the very high percentage of overall net income directed into those buybacks and dividends.
If you consume all today, what will there be tomorrow?
How high a percentage? In some years more than 100 percent! For example, in 2015 and 2016, the companies comprising the S&P 500 paid out more money in dividends and stock buybacks than the total of their net income. In 2018, following sharp increases in U.S. corporate profit levels thanks to the Trump administration’s corporate tax cuts, stock buybacks and dividends again exceeded profits. Those years are not aberrations — for the 10-year period of 2009 to 2018, such payouts totaled more than 90 percent of net income for S&P 500 corporations.
These massive payouts to financial speculators aren’t good for employees but are also not good for the long-term health of the corporations handing out the money, something frequently discussed within industry circles. For example, the Harvard Business Review, hardly hostile to business, in a January 2020 article titled “Why Stock Buybacks Are Dangerous for the Economy,” wrote:
“When companies do these buybacks, they deprive themselves of the liquidity that might help them cope when sales and profits decline in an economic downturn. … Taking on debt to finance buybacks, however, is bad management, given that no revenue-generating investments are made that can allow the company to pay off the debt. Stock buybacks made as open-market repurchases make no contribution to the productive capabilities of the firm. Indeed, these distributions to shareholders, which generally come on top of dividends, disrupt the growth dynamic that links the productivity and pay of the labor force. The results are increased income inequity, employment instability, and anemic productivity.”
The Roosevelt Institution, a U.S. think tank that although liberal is far removed from hostility to capitalist institutions, also laments the runaway nature of these massive payouts of stock buybacks and dividends. The organization noted that these payouts are a choice. (Stock buybacks were illegal before neoliberalism took hold at the dawn of the 1980s). A Roosevelt Institute paper, “Regulating Stock Buybacks: The $6.3 Trillion Question,” had this to say:
“Total spending by all publicly traded companies on stock buybacks between 2010–2019 totaled $6.3 trillion, according to their 10-K and 10-Q public filings. Shareholder payments––stock buybacks plus dividends––have on average totaled 100 percent of nonfinancial corporations’ corporate profits over the last decade. Corporate stock is largely owned by wealthy households; the top 10 percent of US households by wealth own 85 percent of corporate equity. To allow this level of buyback activity is a clear policy choice: The Securities and Exchange Commission (SEC) has encouraged stock-price manipulation through SEC Rule 10b-18, which essentially lets companies conduct buybacks in any amount, despite purported limits, as it does not enforce its rules nor does it collect real-time data on stock buyback activity.”
With Canadian and European Union regulators lifting temporary restrictions on banks buying back stock and paying dividends in 2021, it is inevitable that we will see more of these. The European Central Bank, the anti-democratic institution that is the most powerful entity within the EU, called its lifting of restrictions “a vote of confidence in the sector’s resilience to the fallout from the coronavirus pandemic” while Canada’s “six largest banks could return a combined C$47 billion ([US]$38 billion) in cash to shareholders and still exceed regulators’ capital requirements.”
An altered version of a Depression-era image. (Image by Mike Licht, NotionsCapital.com)
Even Forbes magazine, the self-described “capitalist tool,” admits that dividend payouts are “immense.” And this is a global phenomenon. “In 2021, dividends from UK, Europe and Australian markets grew the fastest compared with 2020, thanks to a recovery in the mining and banking sectors,” Forbes reports. Oil and gas companies are also joining the party — the seven biggest energy companies, including BP, Shell, ExxonMobil and Chevron, will spend as much as US$41 billion (€39.2 billion) in stock buybacks this year, according to the Financial Times.
No wonder regulatory officials are bullish on banks. The central banks of five of the world’s biggest economies have spent about US$10 trillion since 2020 on “quantitative easing,” the technical name for central banks intervening in financial markets by creating vast sums of money specifically to be injected into them and thereby inflating stock-market bubbles. This artificial propping up of financial markets is done through central banks buying their own government’s debt and also buying corporate bonds and mortgage-backed securities. As of February 2022, the U.S. Federal Reserve, the European Central Bank, Bank of Japan, Bank of England and Bank of Canada spent a composite US$9.94 trillion (€8.76 trillion) from the beginning of the Covid-19 pandemic on quantitative easing. And that is not the only program in which central banks showered banks with limitless largesse.
Do executives really work 700 times harder than you do?
Not unrelated to the massive amounts of money siphoned to financiers is the extraordinarily bloated pay of top executives, exemplified by chief executive officer pay. A report just published by the Institute for Policy Studies reveals that the average gap between chief executive officer pay and median worker pay in the U.S. is now 670-to-1 at 300 large corporations studied. Forty-nine of those companies had CEO-to-worker ratios higher than 1,000-to-1. The Institute’s study found that “CEO pay at these 300 firms increased by $2.5 million to an average of $10.6 million, while median worker pay increased by only $3,556 to an average of $23,968,” compared to one year earlier. Worse still, of the more than 100 companies at which employee pay increased below the rate of inflation (and thus a net cut in pay), two-thirds of them spent money on buying back their stock.
How extreme does this inequality get? Here are merely two examples. The Institute’s study reports, “With the $13 billion Lowes alone spent on share repurchases, the company could have given each of its 325,000 employees a $40,000 raise. Instead, its median pay fell 7.6 percent to $22,697.” A previous Institute for Policy Studies report determined that had a proposed law, the Tax Excessive CEO Pay Act, been in effect, Wal-Mart “would’ve owed an extra $1 billion in federal taxes, enough to cover the cost of 13,502 clean energy jobs for a year.” Wal-Mart’s CEO-to-worker pay ratio is more than 1,000-to-1.
Not even extraordinarily ruthless Wal-Mart, the entity most responsible for production being moved to China to take advantage of low wages, is immune from pressure imposed by financial speculators. In 2015, Wal-Mart’s stock price was bid down by speculators for the “crime” of raising its minimum wage to the lordly sum of $9 an hour. Shed no tears for the cut-throat retailer, however, as it receives billions of dollars per year in subsidies and dodges at least $1 billion in taxes annually.
Battle in Seattle photo by Steve Kaiser, Seattle
Having worked our way through the latest set of awful numbers demonstrating the severity of inequality, you can be forgiven if you ask yourself “What else is new?” Inequality is an inescapable feature of capitalism. A severely anti-democratic way of organizing an economy and society. Who would intentionally design such a system? Could you imagine, in a world with egalitarian distribution with sufficient resources for all, if somebody came along and said, “I’ve got a better idea. Let’s give a few people thousands of times more than everybody else and give those lucky few overwhelming political power so that they tilt the system even more in their favor.” Such a person, in such a society, would surely be deemed insane. Yet this is widely accepted as the best system that exists or can ever exist. A system that is destroying the livability of Earth while making life more precarious for billions.
Capitalism is a system that was founded on violence, was built on violence and sustains itself on violence. That force takes many forms. Horrific, state-directed violence in massive doses enabled capitalism to slowly establish itself, then methodically expand from its northwestern European beginnings. English feudal lords began throwing peasants off their land in the 16th century, a process put in motion, in part, by continuing peasant resistance. The rise of Flemish wool manufacturing — wool had become a desirable luxury item — and a corresponding rise in the price of wool in England induced the wholesale removal of peasants from the land. Lords wanted to transform arable land into sheep meadows, and began razing peasant cottages to clear the land. Peasants could either become beggars, risking draconian punishment (up to death) for doing so, or become laborers in the new factories at pitifully low wages and enduring inhuman conditions and working hours.
A process of intensifying exploitation enabled early factory owners to accumulate capital, thereby allowing them to expand and amass fortunes at the expense of their workforces; they were also able to drive artisans out of business, forcing artisans to sell off or abandon the ownership of their means of production and become wage laborers. As the Industrial Revolution took hold, the introduction of machinery was a tool for factory owners to bring workers under control — technological innovation required fewer employees be kept on and deskilled many of the remaining workers by automating processes.
The routine use of armies, private militias and police in violently putting down any attempt by working people to defend or organize themselves, and especially harsh, often lethal, measures against strikes, helped keep capitalists in the saddle. As markets at home became saturated, the endless growth required by capitalism induced industrialists to expand to new markets, encouraged all the way by financiers, and thereby expanding the reach of capitalism and subsuming more of the world under its hegemony as processes of dispossession and resource extraction accelerated.
Violence, including through military invasions and sanctions, remains a crucial means of maintaining capitalism and of keeping the leading powers of the Global North at the top of the pyramid. Other forms of force are readily used, however. The most important use of force is via financial markets. Financial power has always been a powerful lever used by the capitalist center as the apex of the financial system has moved over the centuries from Venice to Amsterdam to London to New York, with each move to a city contained within a militarily more powerful country able to project power over larger areas. Total control of the global financial system enables the United States to impose its will on other countries, even on its Global North allies, a concentrated force used to attack challenges to capitalism and to keep itself at the system’s center.
The task of transcending this is immense, but nonetheless it is the task that must be accomplished. Greed is a human characteristic but if we go to the roots, the problem is a system that facilitates and celebrates greed. Cooperation, after all, is a human characteristic as well, one that could be facilitated and celebrated in a different world.
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 Timesreports. 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.
It’s no secret that United Statesians are more ignorant of the world beyond their national borders than the peoples of other countries. That ignorance serves a purpose. How can you keep screaming “We’re Number One” and believing you have it better than the rest of the world if you are in possession of accurate information?
For example, most United Statesians remain blithely unaware that they have among the worst health care outcomes of any advanced capitalist country while paying by far the most money. A Commonwealth Fund report, for example, found that the U.S. “placed last among 16 high-income, industrialized nations when it comes to deaths that could potentially have been prevented by timely access to effective health care.” As one of the few countries on Earth without a national health care system, health care is a commodity for those who can afford it, not a right as it is almost anyplace else.
The U.S. also has one of the highest rates of inequality as measured by the Gini coefficient; among the countries of Europe only Bulgaria has worse inequality. The United States has the widest gap between pay and productivity gains among advanced capitalist countries and U.S. corporations haul in gigantic sums of money, sometimes millions of dollars per employee, but pay their employees minuscule percentages of their haul. Declining lifespans in the U.S. are considered a “silver lining” in corporate boardrooms because pension costs are lower. And thus it comes as no surprise that the Covid-19 pandemic has widened inequality still further, with the world’s industrialists and financiers adding literally trillions of dollars to their accumulated wealth during 2020.
That was a long introduction to yet more bad news. Not only are wages stagnant and living standards decaying, but working people in the U.S. are working longer hours. A study published in the peer-reviewed journal Socio-Economic Review found that, among 18 European and North American countries, the percentage of employees in the U.S. working at least 50 hours per week is the highest, at about 18 percent for the period 1990 to 2010. The paper, “Extreme work hours in Western Europe and North America: diverging trends since the 1970s” by Anna S. Burger, found that total rising — about 15 percent worked such hours for the period 1970-1989, a time frame in which the U.S. also had the highest rate.
(Author: CIPHR Connect)
Nonetheless, it is not only in the U.S. that more people are forced to work at least 50 hours per week. The study examined Canada, Switzerland and 15 members of the European Union (including Britain, then a member) and in only one country, France, did the percentage of people working excessive hours decline from 1970-1989 to 1990-2010. France, Sweden and Switzerland had the lowest rates, each less than 5 percent. Canada was second to the U.S. at 17 percent and also showed the largest jump, from about 6 percent in 1970-1989.
Work more or else
European Union law is supposed to prohibit working more than 48 hours per week, but the study by Dr. Burger noted that several countries have adopted opt-out clauses. Working beyond 48 hours, even with the exemptions, requires the employee consent. But given the one-sidedness of working relations, an employee could find it difficult to refuse consent. Dr. Burger wrote:
“[T]he choice whether to work long hours is not entirely, or even mainly, left to the preference of the individual but is guided by policy and collective socio-economic institutions. Contrary to conventional wisdom, the most relevant work time tendencies of the past decades are shaped by liberalizing trends in labour market policies, industrial relations arrangements and labour market structures not only in the Anglo-Saxon world but also on most parts of Continental Europe, rather than by regime-conform developments.” [page 3]
Some of the people working excessive hours are high-paid professionals such as lawyers or investment bankers. But low-wage workers are increasingly forced to work long hours because they can’t survive otherwise.
“At the bottom of the skills scale, an increasing number of workers are becoming labour market outsiders who are in atypical, or precarious, employment or unemployment. … The practice of very long hours is particularly wide-spread among outsiders for two reasons. First, due to a lack of regulatory protection and high replaceability, outsiders are in a vulnerable position vis-à-vis their employers. Not complying with an employer’s request for overtime might result in an outsider’s immediate dismissal and replacement. Secondly, in many cases, outsiders consent to, sometimes even initiate, working very long hours in order for their income to reach subsistence level. In today’s increasingly unequal economies, an ever-larger number of low-skilled workers must compensate for their relatively low hourly pay by allocating more time to work. While this decision is formally voluntary, in substance it is not because the choice is strongly shaped by the restrictive political economy environment.” [page 8]
Working conditions in the EU are deteriorating, but employees in the U.S. have less protection and more meager unemployment benefits. The pressure to work long hours is more intense there than in Europe, and employers often find it more profitable to squeeze extra hours out of employees rather than hire someone to lighten workloads. Another product of the extreme individualist ideology U.S. capitalism fosters.
And although overall working hours have actually declined over the past half-century, the rate of that decline has been far slower in the U.S. than in the European Union. A paper by Robert J. Gordon and Hassan Sayed, “The Industry Anatomy of the Transatlantic Productivity Growth Slowdown,” found that for the period 1950 to 2015, there was a decline of 37 percent in average employee working hours for the 10 largest EU countries (a drop from 2,250 hours to 1,560 hours) as compared to a decline of only 12 percent for U.S. employees (2,020 hours to 1,780 hours). So much for John Maynard Keynes’ famous prediction that we’d be working 15 hours a week in the future.
U.S. working people work 220 hours per year more than do EU workers — that’s five and a half weeks of extra work!
That sobering comparison is no surprise when we make a comparison of mandatory paid days off. Among the 42 countries that are members of the OECD and/or the European Union, there is only one country with zero paid days of vacation or holidays under the law — the United States. Seven countries require workers be guaranteed 25 or more vacation days per year. Another 25 mandate at least 20 days. Each of those countries also mandate anywhere from eight to 15 paid holidays. Among the 42 countries surveyed, 34 legally require 28 or more days, led by Austria and Malta (38 each) and another half-dozen requiring 36. Turkey, with 12 days of mandatory paid time off, is next worst to the zero of the U.S.
Working conditions are not getting better
The pandemic may be making the above conditions worse. Working at home has led to a working day of two and a half hours longer for employees in the United States, Canada and Britain, according to a report by a business technology company, NordVPN Teams. The company, CNN reported, examined data sent via servers to calculate employee working hours. There were “no significant drop of business [virtual private network] usage at lunch time indicating potential short lunch breaks while working remotely.”
Other surveys have reached similar conclusions. A report by the U.S. staffing firm Robert Half said nearly 70 percent of professionals who work remotely because of the pandemic work on the weekends and 45 percent say they regularly work more hours during the week than they did before the pandemic. For front-line workers not able to work at home, stress and mental health difficulties have increased sharply, with problems particularly acute in the U.S. due to its inability to provide coherent responses to Covid-19 and the chaos triggered by extreme right operatives who created the “Tea Party” organizing the anti-science and anti-intellectual spectacles opposing measures designed to combat the Covid-19 pandemic.
Where does all this lead? To health problems and shorter lifespans. A study conducted by researchers at the World Health Organization and the International Labour Organization reported that excessive working hours led to 745,000 deaths from stroke and ischemic heart disease in 2016, a 29 per cent increase from 2000. The study found that, in 2016, “398,000 people died from stroke and 347,000 from heart disease as a result of having worked at least 55 hours a week. Between 2000 and 2016, the number of deaths from heart disease due to working long hours increased by 42%, and from stroke by 19%.”
Austerity and economic dislocation have taken their toll around the world, but the already existing harshness of life in the United States on top of austerity and dislocation takes a particular toll there. Nearly half a million excess deaths occurred in the U.S. from 1999 to 2015 from drug and alcohol poisonings, suicide, and chronic liver diseases and cirrhosis. A paper published in the peer-reviewed scientific journal PNAS found this increase in the death rate was limited to the U.S. among advanced capitalist countries.
We’re perhaps taken in more bad news than we can reasonably digest. It’s understandable to not wish to take in too much bad news at once. For readers with knowledge of the world, none of the statistics presented above make for a surprise. It is thus tempting to ask: Would the particularly toxic brand of nationalism practiced by millions of United Statesians continue as virulently were the above statistics widely known? Sadly, perhaps it would. If we were to summarize the discourse of U.S. nationalists, it would be: “We’re number one! We can kill more foreigners in less time than any other country! USA! USA!” Is being able to cheerlead for the world’s biggest military really worth working so many hours for such dismal results?
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Systemic Disorder 