Wednesday, September 28, 2011

Why France isn't Really in the News

As the United States continues to harp on the danger of a Eurozone collapse, I thought it would be interesting to read one of Europe’s foremost newspapers, France’s Le Monde. (Alas, I do not master German.)

On the day Fareed Zakaria was treating ‘the most powerful man in Europe’, Manuel Barroso, President of the European Commission, as if he were a wayward student, Le Monde published an article on the Eurozone crisis.  Here is an adaptation:

Usually, the world’s grandees focus on the succession of crises in the emerging economies of Latin America, Eastern Europe, Asia and Africa.  This time, and for the second time, the epicenter of the crisis is in the West.

All the talks make the same point: if true international cooperation and coordination fails to come about, we risk a crisis whose breadth and depth are beyond reckoning. This time, even if the debt problems of America, the Middle East or Japan are real, the sick man is rich, opulent Western Europe. To varying degrees, certain European countries have borrowed more than was reasonable. Faced with the Western world’s economic lethargy, they cannot count on growth to ensure payments on their debt.

For several days, declarations from the biggest emerging countries leave little doubt as to how they see the situation.  Rightly, they consider that Europe has the means to solve its problems without international help, and that the remedies the West has already imposed should have been adopted in Greece. They will not come to the rescue.

Nor should Europe expect any significant help from the IMF.  Madame Lagarde continues to issue dramatic warnings, and the prevailing sentiment at the meeting was well expressed by the Financial Times: “There is no more time to solve the Eurozone’s problems and avoid a world recession.” Europe is in crisis and it’s up to the Europeans to act.  No one will step up to the plate, aside from one-off gestures here and there.  But the agreement between the G20, the IMF and the European Union is more like a declaration of intent rather than a real commitment.

All agree on the need for concerted action, starting with the urgent creation of a crisis center. Europe’s institutions, fragmented and complex, deliver a cacophony of incoherent messages that create skepticism abroad about Europe’s ability to manage its crisis.  The Governor of the the Bank of Brazil offered three crucial lessons in crisis remediation:
> The more a country waits, the more it costs.
> it must have a credible plan
> To be credible, its leaders should refer only to firm decisions.

Many governments are surprised at the lack of action with respect to a problem that is, after all, relatively limited: that of Greece.  Several larger countries have experienced similar problems, even to the point of defaulting, for example Argentina which survived ten years of misery.

Wolfgang Schauble, the German Finance Minister, presented an outline for reform of the International Financial Institute which has the advantage of clarity and coherence. It also calls for fiscal coordination, which he rightly believes to be the indispensable complement to monetary union.  Europe has painfully realized the need to deepen the Eurozone via political institutions and structures capable of managing that coordination.

There was unanimous agreement with former president of the Federal Reserve, Paul Volker, who stated that Europe must now give itself an institution that will oversee and if necessary, intervene in the budgets of the Eurozone countries. Jean-Claude Trichet, President of the European Central Bank, agreed.”

Not surprisingly, this Washington-inspired common front drew sharp reactions from Le Monde’s readers.  (It is interesting for me to note that since I left France in 2000, the readership of this daily, considered to be one of the most serious papers in Europe, now includes people who cannot write French correctly. Never mind, education is a worldwide problem.)  Here are some of the comments posted on Le Monde’s site:

“The fuse is lit and Wall Street, the City and Switzerland are in trouble:
Almost 10 billion of the 15 billion ghost assets have evaporated.  The rest (and probably a lot more) will evaporate during the fourth quarter of this year, which will see the ‘implosive fusion’ of world financial assets. The main reactors will be Wall St and the City.  As foreseen by the European Laboratory of Political Anticipation (LEAP), the solutions to the problem of Euroland countries’ debts will lead to the formation of a critical mass, after which control will be impossible.  But most of the fuel that will feed the reaction and turn it into a real planetary shock is in the United States.  Since July 2011 the process has barely begun. The worst is still to come - and soon.

But let’s turn to Greece’s third crisis: Every time Washington and London have serious problems, Greece is brought to center stage. This summer was catastrophic for the United States. Now in recession, having seen its credit rating downgraded (something the experts considered impossible only six months ago), and with the paralysis of its political system exposed for all the world to see, it is incapable of taking even token measures to reduce its deficit.  At the same time, Great Britain slips deeper into a depression: austerity measures that fail to affect the budget deficit, provoke violent riots, plunging the country into the worst social crisis it has ever seen. As ever widening collusion with Rupert Murdoch is exposed, the coalition government no longer knows why it governs. The situation was ripe for a new media focus on the Greek crisis, and its logical consequence, the end of the Euro!”

Here is the text of a petition launched on a French website calling for French banks to be nationalized:

‘We are well aware that our countries’ debts poison Europe. (The U.S. has the same problem, as do the developing countries. Many countries are on the brink of implosion; Greece, Ireland, Portugal, Spain, and now Italy, to mention only the most visible.)  We do not pay enough attention to the social movements this situation provokes, and which also are starting in France, one of the countries that could become bankrupt.

Until 1973, during a period known as the ‘Glorious Thirty’, much of Europe developed at an unprecedented rate.  Countries were able to manage their budgets indepen-dently, by requesting their central banks to print money when necessary. Then President Pompidou decided that European countries should only finance their debt by borrowing from private banks.

His finance minister, Valery Giscard d’Estaing, pushed through the January 3, 1973 law whose Article 15 specified: ‘The public treasury may not present its assets to the Banque de France’, meaning that the national bank could not directly finance the State. This law was confirmed by Article 104 of the Maastricht Treaty - which then became Article 123 of the Lisbon Treaty.

The Eurozone is unique in having this prohibition engraved in the stone of a treaty.  It means that its members are forced to borrow on the financial markets, with interest, for needs not covered by other sources of revenue. Yet countries like the US, Great Britain or Japan do not hesitate to borrow from their central banks when their economic needs require it. In France, banks can borrow at 1% from the European Central Bank and lend to the United States at 3, 5, 7% or more. (Andre-Jacques Holbecq).

This decision threw a spanner in the works.  With higher interest rates added to the debt, countries could no longer repay their loans quickly enough to avoid additional interest - a vicious circle generated by composite interest: more loans must be taken out in order to pay back the original interest, raising the level of debt.

Using France as an example, based on the end of 2009 (the debt has increased since): “The yearly increase in the pubic debt from 1980 to 2009 corresponds approximately to the yearly interest on the debt, which consequently snowballs.  In constant Euros, France’s debt went from 239 billion Euros (21% of GNP at the end of 1999 to 1489 billion Euros (78% of GNP) or an increase of 1250 billion Euros.  During the same period, we paid about 1340 billion Euros in interest to various private lenders - banks and credit firms, pension funds, life insurance companies, etc. (Andre-Jacques Holbecq).

They tried to tell us that this transformation from prosperity to indebtedness was a consequence of the ‘oil’ crisis of 1974, which is actually a legitimate demand since until then we were benefitting from energy resources at ridiculously low prices.   The banks that increased their debt were aided by the states provoked the financial crisis of 2007.

Scapegoats had to be found. Austerity plans succeeded one another, leading to privatizations and the dismantling of public services, as governments try to make their citizens responsible for the deficits they incurred." (Note this language:  What we call the safety net, implying that it is only there for exceptional circumstances, is referred to in a matter of fact way as ‘social services’, which are part of everyone’s life. Also note the repeated use of the words 'just' and 'justice'.)

The recent crisis showed the lack of scruples of the financial sector, which, at the height of the storm, continued to speculate on the misery of the world, in particular on basic foodstuffs, with the poorest countries deprived of the minimum necessary for survival, creating widespread famine.

On behalf of these countries so unjustly treated, we demand reparations by way of debt forgiveness, both vis a vis banks and other governments.
    We must say no to so much injustice, as the citizens of the world are asked to pay the price of errors committed by others.

Private banks must renounce the debts which enabled them to live well all these years. Otherwise our countries will fall like houses of cards, cards rigged from the beginning that leave us no chance of escape.’


Sunday, September 18, 2011

GE Superboss Trips over his own Feet

This morning Fareed Zakaria interviewed the CEO of General Electric, tapped by President Obama to help fix the jobs crisis.  For a while Jeffrey Immelt sounded like a reasonable, old school Republican, only to find himself embarrassed by the fact that GE’s customers span the globe - and GE jobs follow.

But his worst moment came at the end (beware long interviews, even if you head one of the biggest companies in the world).  Bragging about his business relations with China, Immelt said he ordered his managers to study China’s Five Years Plans because, unlike legislation that keeps U.S. business uncertain about the future, with China, business knows what to expect. The Chinese Politburo does not have to reckon with an organized opposition, either political or industrial, hence its decisions are implemented.

With the world financial crisis felt mainly in the West, China is also all that stands in the way of a U.S. default, as the BRICs and other developing countries see consistently high growth rates. Referring to the Euro Zone crisis, Immelt warned that Greece was not the biggest problem: “It’s a tiny economy”, he said, “while Italy’s is the seventh largest in the world, and if it goes belly up, the rest of the Euro zone will not be able to save it.” According to Fareed, Christine Lagarde will probably be the last non-Asian head of the IMF.

Before moving on to an inconclusive debate about next Tuesday’s Palestinian request for statehood at the Security Council,  Fareed gave a no-holds barred critique of Obama’s Cuba policy. Our Caribbean nemesis turns out to have one of the biggest undersea reserves of petroleum in the world. Cuba watchers have known exploration was under way, but this probably wasn’t taken seriously by the White House. Otherwise why, just days ago, would Obama have declared that Cuba has not democratized enough to merit a lifting of our embargo? As oil companies from every corner of the globe rush to be part of the action off Cuba’s shores, we can only sit and watch. Worse, if there is an incident like last year’s BP disaster off the coast of Louisiana, Florida will be the most affected, and we would be hoisted by our own petard, our embargo forbidding us from sending men or machines to minimize the damage.

Thursday, September 15, 2011

The Great Disconnect

Every morning I turn on the TV while eating breakfast, hoping that by some far-fetched miracle, it will broadcast some of the news I saw yesterday on Aljazeera - or China News - or Indonesian News.
Alas, whether on CNN or MSNBC, the only thing going is the latest installment of the national soap opera.  How do those high paid anchors sleep at night?
Oh, there is talk here and there of America’s decline (by far the best of which is Adam Gopnik’s long, funny piece in the October 12th New Yorker, ‘Decline, Fall, Rinse, Repeat’). But most air time is taken up with convoluted calculations and analyses of ‘who’s on first, what’s on second’. In our on-going marathon, barely interrupted by a quadrennial election, there is a void:
'In the beginning God created the heaven and the earth.
-And the earth was without form, and void; and darkness was upon the face of the deep. And the Spirit of God moved upon the face of the waters.
- And God said, Let there be light: and there was light.
-And God saw the light, that it was good.' But alas: 'and God divided the light from the darkness.'
Many Americans seem to believe that God separated them (the light, the City Upon a Hill), from the rest of humanity (those of various shades of darkness). Hence they accept to be force-fed an endless soap opera instead of enlightening (sic) and ever changing facts about the rest of the world:
- The deadly floods in Pakistan, leaving survivors to sleep outdoors in the continuing rain (Pakistan is only mentioned when we have a bone to pick with its military);
- The attack on the Israeli Embassy in Cairo by Egyptians who have long disapproved of their government’s cooperation with a Jewish state determined never to allow the Palestinians a state of their own;
- The futuristic fair in China's far western region of Xinjiang, intended to placate the Uighurs, a Turkic speaking Muslim people, who feel neglected;
- The Guatemalan presidential election that pits an ex-general against a businessman, with Nobel Peace Prize laureate and Mayan activist Rigoberta Menchu polling little more than 2 per cent.
Not coincidentally, President Obama recently stated that Cuba is not doing enough for him to lift the decades old blockade, even as it turns toward a mixed (capitalist/-socialist) economy. The one that would enable us to have single-payer health care and decent support for the unemployed, as the world economy contracts (see Sarah Jaffe’s piece on the notion of jobs becoming obsolete on yesterday’s Alternet).
The more our airwaves are occupied with navel gazing, the fewer tools we’ll have to solve our own problems and cooperate with those at the bottom of the hill.

Tuesday, September 6, 2011

What News Service Do You Read?

Here is a comparison of the way in which CNN and the BBC treated Turkey’s recall of its Ambassador to Israel over Israel’s refusal to apologize for killing nine Turkish citizens in a raid on a boat trying to reach Gaza with humanitarian aid last year.

Not until the seventh paragraph of the story did CNN state what the issue was. It cites the insult to Israel in the first paragraph, then emphasizes Israel’s positive attitude:

“Turkey's fiery (sic) prime minister ratcheted up rapidly-escalating tensions with Israel on Tuesday, comparing Ankara's once-close middle eastern ally to a "spoiled boy" and announcing additional sanctions would soon be imposed.”


“Multiple Israeli sources said they are doing what they can to be responsible and reverse the negative dynamic. Some Israeli officials believe the current troubles between the two countries are minor bumps that can be smoothed out with time and the proper diplomacy.”

Others believe the deteriorating relationship has little to do with Israel and more to do with a reorientation of Turkish foreign policy towards the Muslim world.

A possible Erdogan trip to Gaza is contributing to that school of thought. Diplomats in Cairo and Ankara tell CNN that Erdogan is tentatively scheduled to visit Cairo next week. There is growing speculation in local media that the Turkish prime minister may try to visit Gaza via Egypt's Rafah border crossing."


"Despite deteriorating political relations between Jerusalem and Ankara, trade has grown substantially between the two countries over the last year, according to Turkish government statistics."

The BBC gets right to the heart of the matter:

“Turkey expelled the Israeli ambassador on 2 September and also suspended military co-operation with Israel last week.

The move follows the expulsion of Israel's ambassador over its refusal to apologize for the 2010 raid on a flotilla of activists heading for Gaza, in which nine Turks were killed.

A UN report has concluded that Israel used 'excessive force' in its raid, but that the naval blockade was legal.

Turkey has vowed to take the case to the International Court of Justice.  Based in The Hague, the ICJ is a permanent UN court set up to rule on state-to-state disputes."


"Israel has expressed regret for the loss of lives. But Mr Erdogan described the raid as "savagery" and accused Israel of acting like 'a spoiled boy' in the region.”

In an update of the story, read at 11.30 eastern time, the BBC elaborated on the court’s findings, concluding with: “The report noted ‘forensic evidence showing that most of the deceased were shot multiple times, including in the back, or at close range’".

At that time, CNN had not added anything to its story.

On Labor Day, American and Arab Workers on the Global Up and Down Escalators

As we celebrate this pro forma holiday - a last chance for a barbecue, where it isn’t raining - and we prepare for the 10th anniversary of 9/11, what is the status of American workers compared to those in Muslim nations?

This week’s Nation is devoted to the Arab Awakening.  The depth of the articles is remarkable, providing the most complete picture of the situation in the Middle East that I have read. What struck me reading them is that having risen up, Arab workers have crucial choices that American workers do not have: they argue freely whether to have an Islamic state, or a liberal or social democratic state. True, the fifty-year old Muslim Brotherhood is using its grass roots experience to organize for the coming elections. But it is no longer monolithic.

The Arab peoples do not simply form a compendium of events and players. Their struggle illustrates where the United States on one hand, and the rest of the world on the other, are going. The vast majority of the world’s peoples are on an ‘up’ escalator, rising from deprivation of economic and civil rights to espouse the most avant-garde ideas of sustainability, economic and gender equality. Like a lone ship passing in the night, the United States is on the down escalator that would take us back to where the Arab street has been for centuries.

- While large swathes of Arab youth fight for a secular, democratic society, the Tea Party preaches a return to the Protestant fundamentalism of the Pilgrims, which is not very different from Islamic fundamentalism.

- While trade unions are playing an important role in Tunisia, Yemen, and Egypt, American trade unions are being driven into extinction. (French colonization of North Africa brought much suffering to its people, but it also brought a tradition of strong trade unions...)

- While Arab women participate in freedom squares, inspiring Israelis to set up similar camps in Tel Aviv and other towns, Michelle Bachman tells American women to ‘obey’ their husbands.

What does all this mean?

First of all, as I have pointed out before, nothing is forever.  All empires die: the Western Roman Empire lasted 500 years, the French and British Empires, about 400 years each, Hitler’s Empire, 12 years, the Soviet Empire in Eastern Europe, 45. (I expect that readers who focus mainly on numbers, will call me out on some of this, but I continue to hope that most will retain the overall message of my posts. I am numerically challenged, but I usually get my insights right.)

If we take as our starting point the end of World War II, when the United States occupied Japan and Germany, and gradually become the dominant force in Western, then Eastern Europe and the Middle East, by 2010, the American Empire has lasted 65 years.

Increasingly, the pundits dare to murmur, sotto voce, that this country is in decline. I believe the reasons go beyond the inevitable ‘what goes around comes around’: they are at root due to our rejection of the path taken by all the other developed nations after the second world war, under the broad heading of social democracy.

In the United States, the terms Marxism, Communism, Socialism, have consistently provided ready markers for a suavely organized campaign against the many. Now, as Arab peoples debate every ideological and religious belief under the sun, we are fed a continuous diet of carefully hedged opinions as to who might be the next Republican presidential candidate, and whether he or she might constitute a serious challenge to the man who only three years ago represented our best hope of breaking out of our cage.