Reports from the Economic Front

by Martin Hart-Landsberg

Archive for the ‘Progressive Strategies’ Category

Unhappy Labor Day

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As the Wall Street Journal reports:

Four years into the economic recovery, U.S. workers’ pay still isn’t even keeping up with inflation. The average hourly pay for a nongovernment, non-supervisory worker, adjusted for price increases, declined to $8.77 last month from $8.85 at the end of the recession in June 2009, Labor Department data show.

In other words, as the chart below illustrates, the great majority of workers are experiencing real wage declines over this expansion.

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Growth also remains sluggish, increasing “at a seasonally adjusted annual pace of less than 2% for three straight quarters—below the prerecession average of 3.5%.”  But by intensifying the pace of work and reducing the pay of their employees, corporations have been able to boost their profits despite the slow growth.

The following chart from an Economic Policy Institute study shows the continuing and growing disconnect between productivity and private sector worker compensation (which includes wages and benefits) using two different measures of compensation.

epi trends

As the Economic Policy Institute study explains, “there has been no sustained growth in average compensation since 2004. The stagnation began even earlier, in 2003, when considering wages alone. Since 2003, wages as measured by both the ECI and the ECEC (not shown) have not grown at all—a lost decade for wages.”

The point then is that we need a real jobs program, one that is designed to create new meaningful jobs and boost the well-being of those employed.  Government efforts to sustain the existing expansion have certainly been responsive to corporate interests.  It should now be obvious that such efforts offer workers very little.

Written by marty

August 31st, 2013 at 9:11 am

One Reason It Is Tough To Pass Progressive Legislation

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Dylan Matthews, blogging in the Washington Post, discusses a very interesting paper that provides evidence showing that politicians seriously underestimate the progressivity of their constituents.

David Broockman and Christopher Skovron, the authors of the paper, “surveyed every candidate for state legislative office in the United States in 2012 [shortly before the November election] and probed candidates’ own positions and their perceptions of their constituents’ positions on universal health care, same-sex marriage, and federal welfare programs, three of the most publicly salient issues in both national-level and state-level American politics during the past several years.”  They then matched the results with estimates of the actual district- and issue-specific opinions of those residing in the candidates’ districts using a data set of almost 100,000 Americans.

Here is what they found:

Politicians consistently and substantially overestimate support for conservative positions among their constituents on these issues. The differences we discover in this regard are exceptionally large among conservative politicians: across both issues we examine, conservative politicians appear to overestimate support for conservative policy views among their constituents by over 20 percentage points on average. . . . Comparable figures for liberal politicians also show a slight conservative bias: in fact, about 70% of liberal office holders typically underestimate support for liberal positions on these issues among their constituents.

The following two charts illustrate this bias when it comes to universal health care and same sex marriage.

broockman_graph

As Matthews explain:

The X axis is the district’s actual views, and the Y axis their legislators’ estimates of their views. The thin black line is perfect accuracy, the response you’d get from a legislator totally in tune with his constituents. Lines above it would signify the politicians think the district more liberal than it actually is; if they’re below it, that means the legislators are overestimating their constituents’ conservatism. Liberal legislators consistently overestimate opposition to same-sex marriage and universal health care, but only mildly. Conservative politicians are not even in the right ballpark.

The authors found a similar bias regarding support for welfare programs.  Perhaps even more unsettling, the authors found no correlation between the amount of time candidates spent meeting and talking to people in their districts while campaigning for office and the accuracy of their perceptions of the political positions of those living in their districts.

One consequence of this disconnect is that office holders, even those with progressive views, are reluctant to take progressive positions.  More generally, these results speak to a real breakdown in “the ability of constituencies to control the laws that their representatives make on their behalf.”

 

Written by marty

March 16th, 2013 at 11:20 am

Corporations And The General Welfare

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There is general agreement that the economy is not growing fast enough to boost employment.  The question: What to do about it?

The response, at all levels of government, seems to be: increase corporate subsidies and lower corporate taxes in hopes that corporations will boost investment and, by extension, employment.  Those who promote this response no doubt reason that corporations must be struggling along with workers and need additional incentives and support to become successful “job-creators.”

The chart below, taken from a Paul Krugman blog post, certainly raises questions about this rationale and response.  It shows trends in corporate profits (in red) and business investment (in blue), both measured as shares of GDP.

Profits and Investment

As you can see, profits have clearly been trending upwards over time, especially during our current recovery.  At the same time, business investment, although improving, remains historically quite low.  It is hard to see a poor profit performance as the root cause of our slow growth and job creation.

Moreover, banks are sitting on record amounts of money.  The chart below, from the St. Louis Federal Reserve, shows that banks are holding approximately $1.5 trillion in excess reserves.  In the past, excess reserves averaged roughly $20 billion.  In other words, our banks just aren’t motivated to make loans.  And, instead of taxing these excess reserves to encourage loan activity, the Federal Reserve is actually paying the banks interest on their holdings.

EXCRESNS_Max_630_378

Now, as noted above, it would not be fair to say that governments are not actively trying to create jobs.  It is just that they are going about it in the wrong way, the wrong way that is, if their aim is to actually create jobs.

Governments continue to shovel huge subsidies and tax breaks at our major corporations.  This, despite the fact that most studies find little evidence that they help promote investment or employment.  What they do, of course, is enhance corporate profits.  They also force cutbacks in public spending, which does have negative effects on the economy and social welfare.  Ironically, these negative effects then cause corporations to shy away from investing.

The New York Times recently ran a good series on state and local tax deals and subsidies written by Louise Story.  She wrote:

A Times investigation has examined and tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies. The beneficiaries come from virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains.

The cost of the awards is certainly far higher. A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid. . . .

A portrait arises of mayors and governors who are desperate to create jobs, outmatched by multinational corporations and short on tools to fact-check what companies tell them. Many of the officials said they feared that companies would move jobs overseas if they did not get subsidies in the United States.

Over the years, corporations have increasingly exploited that fear, creating a high-stakes bazaar where they pit local officials against one another to get the most lucrative packages. States compete with other states, cities compete with surrounding suburbs, and even small towns have entered the race with the goal of defeating their neighbors.

These subsidies can dominate state budgets.  The Times reports that they were equal to approximately one-third the budgets of Oklahoma and West Virginia and almost one-fifth of the budget of Maine.

Here in Oregon, we continue to struggle with budget shortfalls.  And, fearful of losing corporate investment, the state legislature is doing what it can to keep corporate costs down.  In December 2012, Governor John Kitzhaber called the state legislature into special session to pass a bill specially designed to help Nike.

Nike had privately told the Governor that it planned to spend at least $150 million in an expansion which it claimed would create at least 500 jobs over a five year span.  If the state wanted that expansion and those jobs to be in Oregon, it had to reassure the company that its current favorable tax treatment would remain unchanged far into the future.

Although state legislators were not pleased to be presented with a major tax bill with little if any time to study its terms, they passed it.  The new bill guarantees Nike that the state of Oregon will not change how it calculates the company’s state taxes for the next 30 years, regardless of any future changes in the state’s tax policy.  More specifically, it gives the Governor power to offer such a deal to any major company that plans to invest at least $150 million and create at least 500 jobs over a five year span.  It just so happened that Nike is the only company, at least for the moment, receiving this benefit.

To appreciate what is at stake in this deal a little background on how Oregon taxes multi-state corporations like Nike is helpful.  Prior to 1991, Oregon taxed Nike using a formula that considered the state’s share of Nike’s total property, payroll, and sales, with each weighted equally.  In 1991, Oregon double weighted the sales component.  This greatly reduced Nike’s state tax bill, since while its property and payroll are concentrated in Oregon, only a small share of its sales are made in the state.

Then in 2001, Oregon began introducing a “single-sales factor” formula.  As Michael Leachman of the Oregon Center for Public Policy explains:

Under this formula, only in-state sales relative to all US sales matter in determining how much of a company’s profits are apportioned to and thus taxable by Oregon; it doesn’t matter how much of their property or payroll is based in Oregon. The Legislative Assembly in 2005 cut short the phase-in process and fully phased-in the “single-sales” formula for tax years starting on or after July 1, 2005.

The Oregon Department of Revenue estimates that using the single-sales factor formula instead of the double-weighted sales formula is costing Oregon $77.6 million in the current 2005-07 budget cycle, and will cost another $65.6 million in the upcoming 2007-09 budget cycle. The projected decline in the cost of “single-sales” in the upcoming budget cycle is temporary. It is due primarily to a corporate kicker that will slash corporate tax payments by two-thirds this year. In subsequent budget cycles, the revenue hit from “single-sales” will return to a higher level. . . .

Take Nike, for example. Nike lobbied for the switch to single-sales factor apportionment and it’s easy to see why. At the Oregon Center for Public Policy, we conservatively estimate that Nike’s 2006 tax cut from “single-sales” was over $16 million. Other prominent, profitable firms such as Intel also received a massive tax break from “single-sales.”

As Michael Munk points out:

The governor’s deal is also particularly cynical when at a time of declining public services desperate politicians are dragging out a regressive sales tax out of mothballs and The Oregonian’s “fact checker finds “mostly true” a finding that Oregon’s existing tax breaks (including almost $900B a year in corporate welfare) exceed tax collections.

Of course, this stance towards the needs of Oregonians is nothing new for Nike.  In 2010, Oregonians voted in favor of two measures (66 and 67) which temporarily raised taxes on the very wealthy and corporations.  Phil Knight, the Nike CEO, not only gave $100,000 to the anti-Measures campaign, he also wrote an article published in the Oregonian newspaper in which he said:

Measures 66 and 67 should be labeled Oregon’s Assisted Suicide Law II.

They will allow us to watch a state slowly killing itself.

They are anti-business, anti-success, anti-inspirational, anti-humanitarian, and most ironically, in the long run, they will deprive the state of tax revenue, not increase it.

The current state tax codes are all of those things as well. Measures 66 and 67 just take it up and over the top.

Knight even threatened to leave the state.  He didn’t, but I guess the last laugh is his, now that his company’s tax situation is secure for the next 30 years.

So—what lies ahead—more counterproductive state policies and head scratching about why things are going poorly for working people, or a change in strategy?

Written by marty

February 9th, 2013 at 3:08 pm

Who Is For Change?

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Many expected that the severity of the Great Recession, recognition that the prior expansion was largely based on unsustainable bubbles, and an anemic post-crisis recovery, would lead to serious discussion about the need to transform our economy.   Yet, it hasn’t happened.

One important reason is that not everyone has experienced the Great Recession and its aftermath the same. Jordan Weissmann, writing in the Atlantic, published the following figure from the work of  Edward Wolff.  As of 2010, median household net worth was back to levels last seen in the early 1960s.  In contrast, mean household net worth had only retreated some ten years.

Wolff_Mean_and_Median_Net_Wealth-thumb-615x433-106876

The great disparity between median and mean wealth declines is a reflection of the ability of those at the top of the wealth distribution to maintain most of their past gains.  And the lack of discussion about the need for change in our economic system is largely a reflection of the ability of those very same people to influence our political leaders and shape our policy choices.

 

Written by marty

December 27th, 2012 at 7:33 pm

Scaling The Fiscal Cliff

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With the election over, the news is now focused, somewhat hysterically, on the threat of the fiscal cliff.

The fiscal cliff refers to the fact that at the end of this calendar year several temporary tax cuts are scheduled to expire (including those that lowered rates on income and capital gains as well as payroll taxes) and early in the next year spending cuts are scheduled for military and non-military federal programs.  See here for details on the taxes and programs.

Most analysts agree that if tax rates rise and federal spending is cut the result will be a significant contraction in aggregate demand, pushing the U.S. economy into recession in 2013.

The U.S. economy is already losing steam.  GDP growth in the second half of 2009, which marked the start of the recovery, averaged 2.7% on an annualized basis.  GDP growth in 2010 was a lower 2.4%.  GDP growth in 2011 averaged a still lower 2.0%.  And growth in the first half of this year declined again, to an annualized rate of 1.8%.

With banks unwilling to loan, businesses unwilling to invest or hire, and government spending already on the decline, there can be little doubt that a further fiscal tightening will indeed mean recession.

So, assuming we don’t want to go over the fiscal cliff, what are our choices?

Both Republicans and Democrats face this moment in agreement that our national deficits and debt are out of control and must be reduced regardless of the consequences for overall economic activity.  What they disagree on is how best to achieve the reduction.  Most Republicans argue that we should renew the existing tax cuts and protect the military budget.  Deficit reduction should come from slashing the non-military discretionary portion of the budget, which, as Ethan Pollack explains, includes:

safety net programs like housing vouchers and nutrition assistance for women and infants; most of the funding for the enforcement of consumer protection, environmental protection, and financial regulation; and practically all of the federal government’s civilian public investments, such as infrastructure, education, training, and research and development.

The table below shows the various programs/budgets that make up the non-security discretionary budget and their relative size.  The chart that follows shows how spending on this part of the budget is already under attack by both Democrats and Republicans.

Unfortunately, the Democrat’s response to the fiscal cliff is only marginally better than that of the Republicans.  President Obama also wants to shrink the deficit and national debt, but in “a more balanced way.”  He wants both tax increases and spending cuts.  He is on record seeking $4 trillion in deficit reduction over a ten year period, with a ratio of $2.50 in spending cuts for every $1 in new revenue.

The additional revenue in his plan will come from allowing tax cuts for the wealthy to expire, raising the tax rate on the top income tax bracket, and limiting the value of tax deductions.  While an important improvement, President Obama is also committed to significant cuts in non-military discretionary spending.  Although his cuts would not be as great as those advocated by the Republicans, reducing spending on most of the targeted programs makes little social or economic sense given current economic conditions.

So, how do we scale the fiscal cliff in a responsible way?

We need to start with the understanding that we do not face a serious national deficit or debt problem.  As Jamie Galbraith notes:

. . . is there a looming crisis of debt or deficits, such that sacrifices in general are necessary? No, there is not. Not in the short run – as almost everyone agrees. But also: not in the long run. What we have are computer projections, based on arbitrary – and in fact capricious – assumptions. But even the computer projections no longer show much of a crisis. CBO has adjusted its interest rate forecast, and even under its “alternative fiscal scenario” the debt/GDP ratio now stabilizes after a few years.

Actually, as the chart below shows, the deficit is already rapidly falling.  In fact, the decline in government spending over the last few years is likely one of the reasons why our economic growth is slowing so dramatically.

As Jed Graham points out:

From fiscal 2009 to fiscal 2012, the deficit shrank 3.1 percentage points, from 10.1% to 7.0% of GDP.  That’s just a bit faster than the 3.0 percentage point deficit improvement from 1995 to ’98, but at that point, the economy had everything going for it.

Other occasions when the federal deficit contracted by much more than 1 percentage point a year have coincided with recession. Some examples include 1937, 1960 and 1969.

In short, we do not face a serious problem of growing government deficits.  Rather the problem is one of too fast a reduction in the deficit in light of our slowing economy.

As to the challenge of the fiscal cliff—here we have to recognize, as Josh Bivens and Andrew Fieldhouse explain, that:

the budget impact and the economic impact are not necessarily the same. Some policies that are expensive in budgetary terms have only modest economic impacts (for example, the 2001 and 2003 tax cuts aimed at high-income households are costly but do not have much economic impact). Conversely, other policies with small budgetary costs have big economic impacts (for example, extended unemployment insurance benefits).

In other words, we should indeed allow the temporary tax rate deductions for the wealthy to expire, on both income and capital gains taxes.  These deductions cost us dearly on the budget side without adding much on the economic side.  As shown here and here, the evidence is strong that the only thing produced by lowering taxes on the wealthy is greater income inequality.

Letting existing tax rates rise for individuals making over $200,000 and families making over $250,000 a year, raising the top income tax bracket for both couples and singles that make more than $388,350, and limiting tax deductions will generate close to $1.5 trillion dollars over ten years as highlighted below in a Wall Street Journal graphic .

However, in contrast to President Obama’s proposal, we should also support the planned $500 billion in cuts to the military budget.  We don’t need the new weapons and studies are clear that spending on the military (as well as tax cuts) is a poor way to generate jobs.  For example, the table below shows the employment effects of spending $1 billion on the military versus spending the same amount on education, health care, clean energy, or tax cuts.

defense.jpg

And, we should also oppose any cuts in our non-security discretionary budget. Instead, we should take at least half the savings from the higher tax revenues and military spending cuts–that would be a minimum of $1 trillion–and spend it on programs designed to boost our physical and social infrastructure.  Here I have in mind retrofitting buildings, improving our mass transit systems, increasing our development and use of safe and renewable energy sources like wind and solar, and expanding and strengthening our social services, including education, health care, libraries, and the like.

Our goal should be a strong and accountable public sector, good jobs for all, and healthy communities, not debt reduction.  The above policy begins to move us in the right direction.

The Times They May be Changing

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One of the biggest obstacles to improving economic conditions has been majority belief that our current economic system is capable of delivering steady improvements in living and working conditions.  Because of that belief, it has been easy for economic and political elites to convince large numbers of people that current economic problems must be the result of too much government spending, or immigrants, or unions, or taxes or . . . . In other words anything but capitalism itself.

However, there are now signs that the times may be changing.

A New York Times blog post by Thomas B. Edsall discusses some recent polling data which suggests that growing numbers of Americans, what many analysts are calling the rising American electorate–unmarried women, young people, Hispanics, and African Americans–are open to serious economic change.

For example, Edsall summarizes the results of one poll as follows:

When voters were asked whether cutting taxes or investing in education and infrastructure is the better policy to promote economic growth, the constituencies of the new liberal electorate consistently chose education and infrastructure by margins ranging from 2-1 to 3-2 — African Americans by 62-33, Hispanics by 61-37, never-married men by 56-38, never-married women by 64-30, voters under 30 by 63-34, and those with post-graduate education by 60-33.

Conservative constituencies generally chose lowering taxes by strong margins — whites by 52-42, married men by 59-34, married women by 51-44, all men by 52-41; older voters between the ages of 50 and 65 by 54-42.

The constituencies that make up the rising American electorate are firmly in favor of government action to reduce the gap between rich and poor, by 85-15 among blacks, 74-26 for Hispanics; 70-30 never-married men; 83-15 never-married women; and 76-24 among voters under 30. Conservative groups range from lukewarm to opposed: 53-47 for men; 53-47 among voters 50-65; 46-54 among married men; 52-47 among all whites.

 One of the clearest divides between the rising American electorate and the rest of the country is in responses to the statement “Government is providing too many social services that should be left to religious groups and private charities. Black disagree 67-32; Hispanics disagree 57-40; never-married women 70-27; never-married men, 59-41; young voters, 66-34; and post-grad, 65-34. Conversely, whites agree with the statement 54-45; married men agree, 60-39; married women, 55-44; all men, 55-43.

Edsall also cites a 2011 Pew Research Center Poll that is even more suggestive of support for fundamental change.  Although it is impossible to know what people mean by the terms capitalism and socialism, the table below, taken from the poll, suggests that opposition to capitalism is at significant levels among many of the groups that comprise the rising American electorate.

Polling data is not the same as political action of course.  But the negative views of capitalism and surprisingly strong support for socialism among many in the population must be worrisome to those who continue to benefit from existing economic relations.

One can only imagine that far more people will come to hold these views if government leaders succeed in using the artificially created “fiscal cliff” to further cut key social programs.  People want action on jobs, not cuts in government spending, regardless of whether those cuts are accompanied by tax increases on the wealthy.

Written by marty

November 19th, 2012 at 9:54 pm

Economics And Values

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Mainstream economics is largely built on theories that assume that people are best understood as highly competitive and individualistic maximizing agents. In fact, capitalism is said to be the most desirable economic system ever constructed precisely because its laws of motion are in sync with these traits.  Capitalism’s desirability is easily called into question, however, if people highly value fairness, cooperation, and relations of solidarity.  After all, capitalist imperatives tend to work against the development of social conditions and institutions that promote these values.

Many supporters of capitalism draw upon studies of non-human animal behavior to defend their assumptions about human nature.  But, as the Ted Talk by Frans de Waal found here (and below) demonstrates, non-human animals also greatly value fairness, cooperation, and relations of solidarity.

After watching the video take a few moments to imagine an economic system that builds upon these attractive values, then compare the policies that would be helpful to create it with the policies we currently promote to strengthen our existing economic system.  For example, how would this foundational shift influence our thinking about how best to organize production, relate production decisions to social and community needs, structure the ownership of society’s productive assets, and so on.

 

 

 

The Election And The Economy

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Its election season and Republicans and Democrats are working hard to demonstrate that they support dramatically different policies for rejuvenating the economy. 

While the Democratic Party’s call for more government spending makes far more sense than the Republican Party’s call for cuts in government spending (see below), the resulting back and forth hides the far more serious reality that our existing economic system no longer appears capable of supporting meaningful social progress for the great majority of Americans.  

The chart below helps to highlight our economy’s worsening stagnation tendencies.  Each point shows the 10 year annual average rate of growth and the chart reveals a decade long growth trend that is moving sharply downward.  

As David Leonhardt explains:

The economy’s recent struggles arguably began in late 2001, when a relatively mild recession ended and a new expansion began. The problem with this new recovery was that it wasn’t especially strong. From the fourth quarter of 2001 through the fourth quarter of 2007 (when the financial crisis began), the economy grew at an average annual rate of only 2.7 percent. By comparison, the average annual growth rate of both the 1990s and 1980s expansions exceeded 3.5 percent.

This mediocre expansion was followed by the severe recession and weak recovery brought on by the financial crisis. The combined result is that, in recent years, the economy has posted its slowest 10-year average growth rates since the Commerce Department began keeping statistics in 1947.

In fact, the economic growth figures for the period 1995 to 2007 were artificially propped up by a series of bubbles, first stock and then housing.  Once those bubbles popped, average growth rates began steadily falling.  

The weakness (and unbalanced nature) of our current weak recovery is well captured in the following chart from Catherine Rampell, which compares the percent change in various indicators in the current recovery (which began in June 2009) with previous post-war recoveries.  The first point to stress is that the current recovery lags the average in all indicators but one: corporate profits.  The second is that government spending has actually been falling during the current recovery, no doubt one reason that the percent increase in so many indictors remains below the average in previous recoveries; the public sector is actually smaller today than it was three years ago.

The relative strength in the performance of corporate profits helps to explain why the two established political parties feel no real pressure to focus on our long term economic problems; corporations just don’t find the current situation problematic despite the economy’s weak overall economic performance.  

Even more telling of the growing class divide is the explosion in income inequality over the last thirty years, which is illustrated in the following chart.

In other words, while corporations have succeeded in raising profits at the expense of wages, those in the top income brackets have been even more successful in raising their income at the expense of almost everyone else.  Notice, for example, that median household income in 2010 is roughly where it was in the late 1980s while the median income of the top households racked up impressive gains. Thus, the very wealthy have every reason to do what they are currently doing, which is using their wealth to ensure that candidates restrict their economic proposals to reforms that will do little to change the existing system.

The takeaway: without a mass movement demanding change, election debates are unlikely to seriously address our steady national economic decline.

“Occupy” With Chinese Characteristics

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The Asia Times Online calls it “‘Occupy’ with Chinese Characteristics.” Whether Chinese activists identify with the Occupy Movement is unclear.  What is clear is the growing activism of:

a confrontational vanguard of young people – high school students and twenty-somethings (collectively known as “after 80s” and “after 90s” for their birth years) who appear quite happy to mix it up violently with the cops and cadres.

The most recent confrontation took place on July 28thin Qidong.   Qidong, as the Austalian Socialist Alternative explains,

is located on an estuary of the Yangtze River; across the way stands China’s biggest city, Shanghai. The Yangtze River Delta is one of China’s richest regions, but high speed economic development has come at the cost of severe environmental destruction. For example, more than half of coastal areas in Jiangsu province (where Qidong is located) are categorised as “seriously polluted zones” by the Ocean and Fishery Bureau. The main source of pollution is the industrial wastewater illegally discharged by corporations.

The Chinese government wants to build a new pipeline that would take wastewater from a special economic zone near Shanghai to a major Qidong fishing port on the Yellow Sea.  The pipeline would serve a paper mill and nearly completed pulp plant, both of which are owned by a large Japanese multinational, Oji Paper Company of Japan.  The people of Qidong don’t believe Chinese government claims that the wastewater will be safe and have voiced opposition to the pipeline since 2009 when the government first proposed its construction.  

THE RESISTANCE MOVEMENT IN ACTION

Here is a report from a Japanese newspaper about what happened in Qidong:

About 5,000 people filled the streets in central Qidong before 6 a.m., when the rally began. The protesters began chanting, “Protect the environment” against the dangers posed by a plan for a drainage pipeline into local waters.

But less than 10 minutes later, the crowd broke through a row of police officers blocking the main street and started marching toward the city government building 1 kilometer away. The demonstrators became louder after they reached the building.

Several minutes later, they pulled down the steel gate and swarmed over the premises.

About 2,000 occupied the inner courtyard, several thousand on the street in front of the city government building and many others in nearby structures overlooking the building, bringing the total of protesters to more than 10,000.

Here are some pictures that help to give a feeling for the day’s events:

 

This was, as Socialist Action describes, a well planned action:  

In order to stop this disastrous project, small-scale protests had been occurring since June, but were suppressed by the local government with various means. When China’s summer school holiday began in July, many students in Qidong decided to help build a bigger protest movement. They used social media to spread the information, but also produced many leaflets “To the people of Qidong” and distributed them in shopping centres and other public spaces. . . .

Big banners of petition with countless signatures were carried in the middle of the column, saying “Resolutely Resist Oji Paper Discharging Wastewater at Qidong”. Organisers equipped with megaphones led the chanting: “Opposing Oji Paper, defending our home!” A teenage woman, holding an anti-pollution t-shirt with her mother, marched proudly in the front of the contingent. More people arrived. The demonstration was growing like a rolling snowball.

People were taking photos from the roadsides and posting them online. Within hours, the news of Qidong had spread like a wild fire nationally. . . . Some shops offered free bottled water and bread to the protesters as support.  A 70-year-old woman reproached the cops: “These kids are doing the right thing, don’t disrupt them.” Most of the police personnel who arrived in the morning were local residents, whose families would be affected by the pollution as much as the protesters, so they generally sympathised with the cause. Moreover, they were heavily outnumbered so could not stop the protesters anyway!

Outside the municipal building, the protesters demanded that the government stop Oji Paper from building industrial wastewater pipes. The officials rejected the demand with the excuse that the government would have to pay a great amount of compensation to the company if they cancelled the project. The response enraged the crowd and thousands of protesters stormed the building. They surrounded the party secretary (the highest government official in a city) and asked him to wear an anti-pollution T-shirt. On his refusal the protesters stripped him naked and chased him around.

Large quantities of poker cards, condoms, expensive cigarettes and imported wine were found in those officials’ offices. These things were displayed on the roadside as evidence of government corruption.

The outcome, as reported by Asia Times Online, was a victory for the demonstrators:

The announcement posted on the Qidong municipal website on July 28, the same day as the demonstrations, stated:

After careful considerations, the Nantong City Government has decided to halt the implementation of the Nantong Large-Scale Project for Expelling Standards-Meeting Water into the Sea in Qidong.

An electronic billboard in Qidong displayed a less nuanced, more crowd-pleasing message on the same day, even as demonstrators were gathered in the city center:

After careful consideration, the Nantong City Government has decided to cancel this project for ever. 

MOVEMENT BUILDING

The Qidong protest was no isolated event.  For example, it followed the three day June struggle in Shifang (in Sichuan province, Southwest China) to halt the construction of a copper smelter.  According to Asia Times Online,

In Shifang, activists among a crowd of several thousand attempted to bumrush the municipal government building, but were repelled in a police action that turned into something of a police riot. The result was dozens of serious injuries inflicted on agitators, demonstrators, and hapless bystanders alike, and a marked swing in national popular sympathy toward the demonstrators.

Despite the repression, the activists did succeed in forcing the government to cancel the project.  Socialist Action notes that the Shifang action was itself inspired by:

a 100,000-strong demonstration in Dalian (in Liaoning province, Northeast China) last year, which compelled the local government to promise to move a chemical plant. . . . 

From Dalian to Shifang, then to Qidong, young people dominated. They used social media to organise their actions, their enthusiasm to agitate the masses and their bodies to fight the cops. Many of them were born after 1989, but they have inherited the spirit of Tiananmen Square. Such a generation of youth are not only active in environmental struggles, but also in the strikes taking place in the factories of Pearl River Delta, in the land rights uprisings occurring in the villages of Guangdong, in the battles against police brutality that occur in every city on a daily basis.

There is a lot going on in China that is not reported in this country.  While there is indeed labor repression there is also resistance fueled by the desire of many Chinese to change the direction of their country. Rather than seeing ourselves locked in some kind of zero sum economic competition with China, we should be looking to connect with Chinese activists, sharing experiences and strategies.  After all, we also are in desperate need of a change in direction.

Written by marty

August 6th, 2012 at 5:33 pm

The Greek Crisis and Militarization

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Greece has been in recession for close to four years and its economy continues its downward slide.  Its unemployment stands at 20.9%, youth unemployment at 48%.  In the words of the Guardian’s economic editor:  

Greece is broke and close to being broken. It is a country where children are fainting in school because they are hungry, where 20,000 Athenians are scavenging through waste tips for food, and where the lifeblood of a modern economy – credit – is fast drying up.

According to the conventional wisdom, Greece’s current economic problems are the result of years of too much public spending on social programs and too little tax collection.  Foreign borrowing enabled the Greek state to finance its ever larger budget deficits and sustain growth.  However, this strategy reached its limits in 2008.  The global crisis dramatically increased the country’s deficits and foreign lenders grew worried about Greece’s ability to pay its debts.  Unable to tap credit markets, the Greek state and economy entered into crisis.  

In response to the crisis, European institutions and the IMF have offered the Greek state special loans (so they can pay their debts to foreign banks—mostly German and French).  In exchange, the Greek government has agreed to slash its spending.  This has meant massive cuts in state employment and social programs and, of course, a worsening of the country’s economic downturn.

Interestingly, while the media has demonized Greek workers for creating the deficits and moralized about their need to readjust to the realities of Greek economic capacities, little attention has been paid to military spending as a cause of the deficits and the unwillingness of European leaders to demand a significant change in Greek defense spending.

 Here is what a Guardian reporter has to say  

The current EU-IMF bailout remains conditional on further austerity measures, including reducing pensions, the minimum-wage and civil service jobs. However, one area of the Greek budget doesn’t seem to have received much scrutiny: its huge military spending. . . .

In 2006, as the financial crisis was looming, Greece was the third biggest arms importer after China and India. And over the past 10 years its military budget has stood at an average of 4% of GDP, more than £900 per person. If Greece is in need of structural reform, then its oversized military would seem the most logical place to start. In fact, if it had only spent the EU average of 1.7% over the last 20 years, it would have saved a total of 52% of its GDP – meaning instead of being completely bankrupt it would be among the more typical countries struggling with the recession. 

So, what is driving this military spending—well just as German and French banks have been among the biggest lenders to the Greek state, German and French arms producers have been among the biggest arms sellers to the Greek state.  As the Guardian article explains:

In the five years up to 2010, Greece purchased more of Germany’s arms exports than any other country, buying 15% of its weapons. Over the same period, Greece was the third-largest customer for France’s military exports and its top buyer in Europe. Significantly, when the first bail-out package was being negotiated in 2010, Greece spent 7.1bn euros (£5.9bn) on its military, up from 6.24bn euros in 2007. A total of £1bn was spent on French and German weapons, plunging the country even further into debt in the same year that social spending was cut by 1.8bn euros. It has claimed by some that this was no coincidence, and that the EU bail-out was explicitly tied to burgeoning arms deals.

Greece has finally begun to reduce its military spending, but the cuts in the military budget have been far smaller than those in social programs.  In fact, Greece remains in the top spot in the EU for spending on the military as a percentage of GDP and is still one of the world’s biggest weapons importers.

An article in the German press offers the following picture of how military spending is being handled relative to social programs:

In 2010 the military spending budget should have been cut by only 0.2 percent of economic output, or by €457 million. That sounds like a lot, but the same document proposed to cut back on social spending by €1.8 billion. In 2011, according to the EU Commission, Greece was to strive for “cutbacks in defense spending”. The Commission, though, didn’t make it explicit.

The Greek Parliament was quick to exploit this freedom. The 2012 budget proposes cuts to the social budget of another nine percent, or about €2 billion. The contributions to NATO, on the other hand, are expected to rise by 50 percent, to €60 million, and current defense spending by up to €200 million, to €1.3 billion – an increase of 18.2 percent.

And the German Federal Government’s stance? According to a spokesman, responding to an enquiry, the German government supports “the policy of consolidation of the Greek Prime Minister Papademos. The government’s guiding assumption is that the Greek government will, on its own responsibility, contemplate meaningful cuts in military spending.”

On June 17, Greece will hold national parliament elections.  As the Washington Post explains: 

Let’s recall the background. Greece owes a whole bunch of money it can’t repay. In February, the country received a $140 billion bailout from the IMF, the European Central Bank, and the European Commission. In exchange, Greece is supposed to make a bunch of sharp spending cuts. Greek voters don’t like this, given that their country’s economy is already in tatters. But if they don’t accept further austerity, they might not get the bailout. . . . So that’s the context for the upcoming Greek parliamentary elections.

The two parties leading in the opinion polls are Syriza (Coalition of the Radical Left), which rejects the austerity agreement and is promoting a restructuring of the Greek economy (of course, more is at issue than just military spending), and Nea Dimokatia (New Democracy), which has basically endorsed the status quo.  Here is an article that provides some background on the main parties contesting the upcoming election and here is a statement of Syriza’s program for economic transformation.  The statement is well worth reading; it includes policies that would be helpful for people in many countries.