Wednesday, 30 June 2010

The coming economic collapse

OK, I'm sticking my neck out here. I predict that the deficit reduction measures applied in the UK and endorsed by the G20 on Monday will lead to a global economic collapse (depression) in the next couple of years or so. This will be followed by at least a decade of economic stagnation. Reducing the deficits by half is a crazy idea at a time when we are still in the biggest economic crisis since the Great Depression. Yes, we are still in it. The mountains of 'toxic waste' created during the 'credit crunch' which lead to the collapse of Lehmans and many other banks, leading to the bailout, haven't just evaporated. They're still there. Governments worldwide spent $17 trillion on the bailout, £1.4 trillion here in the UK.

There is also the massive amount of 'toxic waste' from the collapse in the commercial property market estimated at £50 billion in the UK alone which has been swept under the carpet. The likelihood is that there were banks that were insolvent before the bailout but that this was hidden from us and many may be insolvent now. Now we have a report that the stock markets are falling because of new fears that European banks are insolvent - see here. But there is no more money to bailout these banks again. When the crunch comes there will be nothing to stop the slide.

The assumption of the 'free' marketeers has always been that the private sector will pick up the slack. But America, long the engine of the world economy, is bust. Japan is still mired is economic stagnation. It has been assumed that growth in China will help to lift the world's economy but there are sign of a downturn there now and increasing unrest from workers who are organising. In any case, the China's economy still isn't big enough to pull the world economy out of recession.

Many people think the Great Depression was about the market crash in 1929. There was much more to it than that. It was followed by further decline in the markets until 1932. The world economy only recovered due to massive American spending on the Second World War, which lead to prosperity in the 1950s as European economies recovered from the War.

No one likes a doom monger, and I'm hoping that history doesn't repeat itself. But the lesson of history is that you can't cut your way out of an economic crisis. That is what Keynes taught us. Ironically he was ignored during the Great Depression and his contribution was only really recognised after the War when things had improved economically. Then, as now, the deficit reduction hawks were in control and that lead to a decade of economic misery which was only relieved by a catastrophic war. History may well be destined to repeat itself. Not as a farce, but as a tragedy.

Monday, 21 June 2010

Government for the rich - by the rich

Tomorrow we get George Osbourne's cuts budget. There has been plenty said about this in the past few weeks, and we have been prepared for swinging cuts. It's been estimated that the cuts could create 750,000 job losses in the public sector - but this doesn't take into account the knock on effects which will mean thousands of job losses in the private sector. Of course, its not just jobs which are under attack but benefits and pensions. Once again we have been hearing the lies about how the public sector have 'gold-plated' pensions when the average pension is just £4,000 and the Local Government Pension Scheme is well funded.

The CBI has been in full class war mode, urging Osbourne to make savage cuts in the public sector and now stating that it should be made more difficult for workers to strike - to ensure that they are powerless to resist. These cuts will not help us to revive our battered economy and may not help in deficit reduction. Why? Because Keynes was right - you can't cut your way out of a recession. The same mistake was made in the 1930s leading to more than a decade of misery with the world economy in a slump. Only the massive boost given to the US economy by the Second World War was able to lift the global economy out of depression.

There is an alternative to all this - it was laid out in the Green Party manifesto. We can reduce the deficit and stimulate the economy be creating more than a million jobs without cutting public services. The answer is a mixture of green taxes and fair taxation with those who benefited most from the boom years bearing their fair share of the burden.

In a press release, Caroline Lucas the Green Party leader said: "Cuts are not an economic inevitability but an ideological choice. Politicians of all parties are now sharpening their axes to slash public spending, forcing those on lower incomes, who depend on public services the most, to pay the highest price for the recent excesses of the bankers. There is a choice. We should ask those best able to pay to foot the bill through fairer taxation. That’s the challenge I’m issuing: for that political choice to be made. It must be clearly asserted that we are not all in this together: that some had more responsibility for this crisis than others, and some benefited more from the boom that preceded it. Those who enjoyed the largest benefits must pay up now. For that to happen, fair taxes, not cuts, must become the new big idea to replace today’s callous and uncaring cuts fanaticism.”


Its important to understand that the cuts agenda is political - not economic. This is where we get to pay for the mistakes of the bankers and their chums in the market. We have a choice also. We either vote for people who are out to screw us or we opt for a real political alternative. The only party with any alternative to offer is the Green Party.

Sunday, 13 June 2010

Can you fool most of the people most of the time?

I think you can. But why is this? Don't get me wrong I don't underestimate the intelligence of people one bit. People are not stupid - but neither are they all knowing. None of us are. We all need reliable sources of news information to make up our minds about the world we live in, and in the UK most people rely on the main media channels - the BBC, ITV, Sky and the press. And that is the problem. If you feed for information on any one of these sources you are likely to be eating gruel rather than Michelin star food.

Lets take a look at the BBC which is generally regarded as the benchmark for fair reporting. If you want to know what is going on in the world the BBC is a fairly good source of information. But it falls down in one crucial respect. It doesn't report alternative views. It sticks rigidly to whatever is the view of the ruling consensus. Thus you only ever hear one side of the story. In a previous post I blogged about the BBC's craven reporting on Israel. The BBC didn't explore what had happened in the attack on the Gaza aid ships. Instead of investigating what really happened it merely repeated Israeli propaganda. If you think this is just my view read this article by the experienced journalist Robert Fisk in today's Independent. Fisk knows the middle east well. He has years of experience and knows what he is talking about. He is not some Palestinian stooge.

If you want to really understand what is going on in the world you can't rely on the capitalist media. The 'free press' is anything but. It serves the interests of those capitalists who own it just as surely as Pravda served the interests of the Politburo in the Soviet Union. What makes it seem credible is that there are still dissenting voices in 'western' media. People like Johan Hari in the Independent and George Monbiot and Seamus Milne in the Guardian. These people are worth reading. But they are the exceptions.

Anyone who wants to know what is going on needs to look around for sources of alternative reliable information. There are sources on the web but they are not all reliable by any means. You could try Counterfire, Indymedia or Youtube. They all have their limitations but are worth looking at. For example, at the moment on Counterfire website there are some excellent videos and articles about the testimonies of the survivors of the Gaza aid flotilla attack, the banker's coup, and the poverty of ordinary South Africans surrounded by the obscene wealth of the World Cup jamboree. The beauty of something like Indymedia is that it reports the side of the news in the UK that you never hear about in the mainstream media. For example the struggle of ordinary people, trade unionists and ant-fascists against groups like the English Defence League.

Of course most of us lead busy lives and haven't got a lot of time to look at alternative sources. But just try this at least once a week - instead of watching the 6 o'clock news on the BBC spend half an hour looking at Counterfire or one of the other independent media sources for an alternative view. Buy the Morning Star once a week instead of the Guardian. You won't regret it. In time you may wonder why you spent all that money on the 'free press' anyway.

BP is not British and its not profitable

Lets just shatter a few illusions here. Firstly, BP is not British. It is a global corporation and like any global corporation it has no loyalty whatsoever to the UK. The only loyalty BP has is to it's shareholders - around a third of which are American anyway. So when Christopher Meyer starts banging on about how BP is a 'vital British interest' he is talking bollocks. Of course, BP can play at being British if it is advantageous to do so. Equally, if BP doesn't get what it wants here it will, like every other global corporation, threaten to leave - in other words subject the UK government to economic blackmail. BP, therefore, gets to have its cake and eat it - so much for being British!

Secondly, the oil catastrophe in the gulf is not just down to BP. Lets not forget that it was inadequate regulation of oil companies in the gulf which contributed to this disaster. Where have we heard that before? Does it sound familiar? The American government and regulators must share some of the blame - just as they were partly responsible for the collapse of the banks, and hence the economic crisis we are now suffering from.

Finally and most importantly its crucial to understand just how BP and other corporations do make profits. Most people think that corporations make profits by selling stuff - like oil. Well they do, but in making or extracting and selling stuff they incur costs. The maths are simple. If they bring in more money than they have spent (in costs) they make a profit, and they are entitled to pass on that profit to shareholders - right? Wrong! Its wrong because most if not all capitalist 'enterprises' never pay all the costs that they incur. What they do is dump those costs onto society and the environment. In the case of BP the costs avoided by BP were brilliantly summed up by George Monbiot in this article - I recommend you read it. Economists have a word for these costs - they call them externalities.

The avoided costs are usually in the form of inadequate wages and environmental pollution. Corporations are able to pay staff wages on which they cannot afford to live because of subsidies in the form of welfare payed for by the taxpayer. In this country Tax Credits are just one example of this kind of subsidy. Inadequate environmental regulation here, and around the world, means that corporations are literally able to dump their toxic waste into the environment. The taxpayer picks up the tab for clean up and the local population pays in ill health and disease. One of the worst examples of this is in Nigeria where oil companies have devastated the landscape whilst making huge 'profits' - see this link.

The 'profits' of capitalism are the poverty of individuals, the devastation of communities and the degradation of the environment. Capitalism is little more than a racket which governments turn a blind eye to. The people who suffer are us, and the people who pay for it are us. Just as we are being made to pay for their economic crisis.

Saturday, 5 June 2010

Not such a bad week for the Israelis after all

Surely some mistake? Hasn't the Israeli government been roundly condemned for its recent murderous attack on vessels carrying aid to Gaza? But ever since the attack, which resulted in the deaths of nine aid activists, the Israeli propaganda machine and its allies have swung into action - and very effective it is too. We have been told that poor special forces soldiers, armed to the teeth with automatic weapons, were attacked by vicious activists wielding iron bars. The aggressors and killers have become the victims. It's a total distortion of the truth, a bit like saying that the victims of the Cumbrian gunman Derrick Bird deliberately threw themselves in front of the bullets he fired so that he would become a serial killer.

The Israeli forces committed an act of piracy on the high seas and the occupants of the vessels they stormed were perfectly, if foolishly, entitled to defend themselves. What's shocking about this whole episode is not just the deaths of the activists but the way the British media, lead by Israeli cheerleaders the BBC, have supinely swallowed the Israeli propaganda. For some years now the Israelis have been mounting a very successful campaign to persuade the world that they are the victims and the Palestinians are the aggressors and an awful lot of people have swallowed that big, fat juicy lie. The truth is that the Israelis are the aggressors and the Palestinians the victims. On the one side we have a state with one of the most powerful armies in the world, nuclear weapons, a navy and F16 fighters. On the other side we have people throwing stones, fighters with small arms, and home made rockets. Yes, it literally is David and Goliath. We know who David is and it's not the Israelis. We are repeatedly told that the Israelis have the right to defend themselves but apparently the Palestinians do not.

How have the Israelis managed to be so successful in this? Well, there are several factors; one is the disarray and decline of the left; another is the very well oiled propaganda machine; but perhaps the most important is the relentless bullying of opponents by the Israelis and their supporters. Anyone who criticises Israeli actions is condemned as an anti-semite - a very convenient and effective way of smearing and silencing critics.

Gaza is nothing more than a massive prison where the Palestinians are corralled and made to live in a state of poverty, deprivation and humiliation. No wonder they elected a government like Hamas. Its is to the eternal credit of the Palestinians that they have refused to bow to Israeli domination despite 60 years of this treatment. It's a disgrace to world community that this appalling situation has been allowed to continue for so long. Al Qaeda and Hamas are the creations of the Americans and Israelis. Whether groups like Hamas and Hezbollah will be the undoing of Israel in the long run remains to be seen. If they are the Israelis will have no one to blame but themselves.