Archive for the ‘US Foreign Policy’ Category
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The Troika are celebrating the end of negotiations with Greece, proclaiming that thanks to their tireless efforts the Eurozone remains whole. And why wouldn’t they celebrate. They have demonstrated their power to crush, at least for now, the Greek effort to end austerity and its associated devastating social consequences. Tragically, Syriza has not only surrendered, the nature of its defeat is likely to leave the country worse off, at least both economically and very likely politically as well.
At this point, one of the most important things we can do is try to draw lessons from the Greek experience.
- Perhaps one of the most obvious lessons is that visions of a more humane Europe are not real. European leaders were more than willing to pursue the complete collapse of the Greek economy in order to break Syriza and the movement that gave it power for fear of the demonstration effect a successful Syriza might have had on broader European politics. Using the lever of a European Central Bank cut off of funding for Greek banks, the Troika pressed Syriza to the wall.
Here is how a Guardian blog post described the nature of the discussions leading up to the final Greek surrender:
Alexis Tsipras was given a very rough ride in his meeting with Tusk, Merkel and Hollande, our Europe editor Ian Traynor reports.
Tsipras was told that Greece will either become an effective “ward” of the eurozone, by agreeing to immediately implement swift reforms this week.
Or, it leaves the euro area and watches its banks collapse.
One official dubbed it “extensive mental waterboarding”, in an attempt to make the Greek PM fall into line.
An unpleasant image that highlights just how far we have now fallen from those European standards of solidarity and unity.
- Second, the vicious nature of the European response to the Greek government’s initial offer of moderate austerity, symbolized by the stance of its dominant power Germany, reflects more than ignorance or petty mindedness on the part of European leaders. It reflects the increasingly exploitive nature of contemporary capitalism everywhere. Capitalists, pursuing profits in an increasingly competitive and unstable global system, demand ever greater power to intensify the exploitation of workers everywhere and that is how dominant states approach social policy in their respective countries and international institutions.
- Third, class interests dominate so-called “economic rationality”. A case in point: in the period before the July 5 referendum we learned that IMF staff believed that Greece would be unable to pay its debts under the best of conditions and that therefore any agreement with Greece had to include debt relief while at the very same time the head of the IMF was aggressively joining with European leaders to reject Greek government pleas for just such relief.
- Fourth, since dominant powers will do everything in their power to block meaningful social transformation, those seeking to lead it must prepare people as best they can for the expected class struggle and opposition. In this case Syriza can and should be faulted for not engaging people about the difficulty of achieving both an end to austerity and Eurozone membership under current conditions and doing its best to develop the technical and political capacities necessary for a break from the Euro on its own terms if and when the situation called for it.
Greeks elected a progressive government, voting Syriza into power in January 2015, on the basis of the party’s commitment to both anti-austerity and continuing Eurozone membership. The leadership of Syriza never wavered from encouraging Greeks to believe that both were possible and most Greeks, for many reasons, were eager to believe that this was true. Although the results of the July 5 referendum showed that the Greek working class has a strong fighting spirit, polling also revealed that most of those who voted No hoped that their vote against the European austerity plan would lead to a better deal from Europe, not a break from the Eurozone. They no doubt felt this way because of government pronouncements.
For example, below are the results of polling done the day before the referendum:
Tragically, immediately after the vote the Greek government surprised everyone by returning to negotiations with the Troika with an offer to accept an austerity program much like the one that had been originally placed before the people and rejected. The only meaningful addition was that it included the long held Greek proposal for debt relief. This decision was a serious mistake for two reasons—it generated serious confusion on the part of the Greek population and perhaps even more importantly convinced the Troika that the Greek government was not prepared to use its new domestic support to challenge the status quo. This only emboldened the Troika to proclaim that the referendum had changed everything and now that trust had been lost between the Troika and Syriza leaders, the austerity demands had to be intensified.
In fact, we have learned that Syriza’s leaders did not expect to win the referendum and were prepared to and in fact perhaps hoped to be able to resign and let more conservative forces negotiate and approve a new austerity package. Here is part of an interview with James K. Galbraith, a strong Syriza supporter:
The recent Ambrose Evans Pritchard piece is very much on the mark (” Europe is blowing itself apart over Greece – and nobody seems able to stop it“). The Greek government, and particularly the circle around Alexis, were worn down by this process. They saw that the other side does, in fact, have the power to destroy the Greek economy and the Greek society — which it is doing — in a very brutal, very sadistic way, because the burden falls particularly heavily on pensions. They were in some respects expecting that the yes would prevail, and even to some degree thinking that that was the best way to get out of this. The voters would speak and they would acquiesce. They would leave office and there would be a general election.
It all went downhill from there. In short, Syriza leadership had no plan B. The Troika knew that Syriza was unwilling to pursue its own break from the Eurozone, which meant that its leadership would do anything to remain in the Eurozone. The following is from an interview with Yanis Varoufakis, the former Greek finance minister, that provides insight into the somewhat self-inflicted weakness in Syriza’s bargaining stance:
The referendum of 5 July has also been rapidly forgotten. It was preemptively dismissed by the Eurozone, and many people saw it as a farce – a sideshow that offered a false choice and created false hope, and was only going to ruin Tsipras when he later signed the deal he was campaigning against. As Schäuble supposedly said, elections cannot be allowed to change anything. But Varoufakis believes that it could have changed everything. On the night of the referendum he had a plan, Tsipras just never quite agreed to it.
The Eurozone can dictate terms to Greece because it is no longer fearful of a Grexit. It is convinced that its banks are now protected if Greek banks default. But Varoufakis thought that he still had some leverage: once the ECB forced Greece’s banks to close, he could act unilaterally.
He said he spent the past month warning the Greek cabinet that the ECB would close Greece’s banks to force a deal. When they did, he was prepared to do three things: issue euro-denominated IOUs; apply a “haircut” to the bonds Greek issued to the ECB in 2012, reducing Greece’s debt; and seize control of the Bank of Greece from the ECB.
None of the moves would constitute a Grexit but they would have threatened it. Varoufakis was confident that Greece could not be expelled by the Eurogroup; there is no legal provision for such a move. But only by making Grexit possible could Greece win a better deal. And Varoufakis thought the referendum offered Syriza the mandate they needed to strike with such bold moves – or at least to announce them.
He hinted at this plan on the eve of the referendum, and reports later suggested this was what cost him his job. He offered a clearer explanation.
As the crowds were celebrating on Sunday night in Syntagma Square, Syriza’s six-strong inner cabinet held a critical vote. By four votes to two, Varoufakis failed to win support for his plan, and couldn’t convince Tsipras. He had wanted to enact his “triptych” of measures earlier in the week, when the ECB first forced Greek banks to shut. Sunday night was his final attempt. When he lost his departure was inevitable.
“That very night the government decided that the will of the people, this resounding ‘No’, should not be what energised the energetic approach [his plan]. Instead it should lead to major concessions to the other side: the meeting of the council of political leaders, with our Prime Minister accepting the premise that whatever happens, whatever the other side does, we will never respond in any way that challenges them. And essentially that means folding. … You cease to negotiate.”
Of course, it is easy to call for a break with the Eurozone but in reality such a break would not be a walk in the park. For example, Varoufakis makes clear that there were no certainties for what would happen if the government decided on a break:
“He [Tsipras] wasn’t clear back then what his views were, on the drachma versus the euro, on the causes of the crises, and I had very, well shall I say, ‘set views’ on what was going on. A dialogue begun … I believe that I helped shape his views of what should be done.”
And yet Tsipras diverged from him at the last. He understands why. Varoufakis could not guarantee that a Grexit would work. After Syriza took power in January, a small team had, “in theory, on paper,” been thinking through how it might. But he said that, “I’m not sure we would manage it, because managing the collapse of a monetary union takes a great deal of expertise, and I’m not sure we have it here in Greece without the help of outsiders.” More years of austerity lie ahead, but he knows Tsipras has an obligation to “not let this country become a failed state”.
To be a bit more specific, a break from the Eurozone would require nationalization of the banks—an act that would immediately draw the country into a serious legal test with Europe since the banks are technically under the control of the European Central Bank. It would require the government to quickly issue new script as it prepared a new currency, and aggressively engage in an expanded public works program. At the same time it was unclear whether the new script would be accepted and whether the country would have sufficient foreign exchange to maintain minimum purchases of key import items such as food and medicine. Moreover, many businesses, holding debts denominated in euros, would likely be forced into bankruptcy necessitating government takeover. And, all this would take place in a relatively hostile international environment. No doubt some countries would offer words of solidarity, but it appears unlikely that any would or could offer meaningful financial or technical assistance. Still, with proper preparation the possibilities for success could have been greatly enhanced.
Strikingly, Varoufakis mentioned that Syriza had established a small team to think about what a break would mean shortly after their January 2015 election, a team that no doubt was kept small because the government wanted to keep the planning secret. But that was a mistake. Planning should have happened on a large scale and in a visible way. Discussions should have been held with international legal experts as well as with the Brics countries concerning possible use of their new lending and investment facilities. There was no need to keep this planning quiet, quite the opposite—Eurozone leaders should have been made aware that Syriza was seriously studying its alternatives. And the population should have been brought along—that the government would do all in its power to stay in the eurozone as long as this was consistent with an end to austerity.
As it was, Tsprias went back into negotiations unarmed, desperate for a bailout. Once the ECB tightened its support for Greece’s banking system it should have been clear, if not before then, that a German-led Europe was only interested in total surrender on the part of Greece. And as far as I can tell total surrender is what they got.
Greece has agreed to austerity program that is far worse than any previously rejected. Here is the Guardian summary of what was agreed:
Greek assets transfer
Up to €50bn (£35bn) worth of Greek assets will be transferred to a new fund, which will contribute to the recapitalisation of the country’s banks. The fund will be based in Athens, not Luxembourg as Germany had originally demanded.
The location of the fund was a key sticking point in the marathon overnight talks. Transferring the assets out of Greece would have meant “liquidity asphyxiation”, Tsipras said.
As the statement puts it: “Valuable Greek assets will be transferred to an independent fund that will monetise the assets through privatisations and other means.”
The “valuable assets” are likely to include things such as planes, airports, infrastructure and banks, analysts say.
Some of the fund will be used to recapitalise banks and decrease debt, but analysts are sceptical about how much money there will really be to work with.
“Given the experience of the last few years’ privatisation programme, these targets appear overtly optimistic, serving as a signalling mechanism of Greek government commitment to privatisation rather than a meaningful source of financing for bank recapitalisation, growth and debt reduction,” said George Saravelos, a strategist at Deutsche Bank.
Greece has been told that it needs to pass measures to “improve long-term sustainability of the pension system” by 15 July.
The country’s pensions system, and its perceived generosity relative to other eurozone states, has been a key sticking point in the past five months of negotiations with creditors.
The so-called troika of lenders believes that Athens can save 0.25% to 0.5% of GDP in 2015 and 1% of GDP in 2016 by reforming pensions.
Greece had wanted to draw out reform of early retirement rules, starting in October and running until 2025, when everyone would retire at 67. The EU wants the process to start immediately, by imposing huge costs on those who want to retire early to discourage them from doing so. The lenders also say Athens must bring forward the reform programme so it completes in 2022.
VAT and other taxes
Another source of contention in the months of failed negotiations that preceded Monday’s tentative deal, VAT is now also on the block for immediate reform.
The latest agreement demands measures, again by 15 July, for “the streamlining of the VAT system and the broadening of the tax base to increase revenue”.
One of the key objections from Greece’s creditors to its VAT system is a 30% discount for the Greek islands. Athens proposed a compromise on 10 July under which the exemptions for the big tourist islands – where the revenue opportunities are greatest – would end first, with the more remote islands following later.
The onus on Greece to “increase revenue” is likely to mean more items will be covered by the top VAT rate of 23%, including restaurant bills, something that had until recently been a red line for Tsipras.
Another demand for legislation by 15 July is on “the safeguarding of the full legal independence of ELSTAT”, the Greek statistics office.
Balancing the books
Greece has been told it must legislate by 15 July to introduce “quasi-automatic spending cuts” if it deviates from primary surplus targets. In other words, if it cannot cut enough to balance the books, it should cut some more.
In the past, the troika has demanded that Greece commit to a budget surplus of 1% in 2015, rising to 3.5% by 2018.
Talks will begin immediately on bridging finance to avert the collapse of Greece’s banking system and help cover its debt repayments this summer. Greece must repay more than €7bn to the European Central Bank (ECB) in July and August, before any bailout cash can be handed over.
Greece has been promised discussions on restructuring its debts. A statement from Sunday night also ruled out any “haircuts”, leaving the €240bn Greece owes to Brussels, the ECB and the International Monetary Fund (IMF) on the books.
Angela Merkel, the German chancellor, said the Eurogroup was ready to consider extending the maturity on Greek loans. She argues that a delay in loan repayments and a lower interest rate act in the same way as a write-off, which is why many analysts point out that the Greek debt mountain is worth the equivalent of 90% of GDP in real terms and not the 180% commonly quoted. Merkel said that for this reason there was no need for a Plan B.
Tsipras pledged to implement radical reforms to ensure the Greek oligarchy finally makes a fair contribution. The agreement thrashed out overnight would allow Greece to stand on its feet again, he said.
Implementation of the reforms would be tough, he said, but “we fought hard abroad, we must now fight at home against vested interests”.
He added: “The measures are recessionary, but we hope that putting Grexit to bed means inward investment can begin to flow, negating them.”
Liberalising the economy
The new deal also calls for “more ambitious product market reforms” that will include liberalising the economy with measures ranging from bringing in Sunday trading hours to opening up closed professions.
Greece’s labour markets must also be liberalised, the other eurozone leaders say. Notably, they are demanding Athens “undertake rigourous reviews and modernisation” of collective bargaining and industrial action.
Pharmacy ownership, the designation of bakeries and the marketing of milk are also up for reform, all as recommended in a “toolkit” from the Paris-based Organisation for Economic Co-operation and Development.
The statement from the euro summit stipulates that Greece will request continued IMF support from March 2016. This is another loss for Tsipras, who had reportedly resisted further IMF involvement in Greece’s rescue.
Greece has been told to get on with privatising its energy transmission network operator (ADMIE).
Greece has been told to strengthen its financial sector, including taking “decisive action on non-performing loans” and eliminating political interference.
Shrinking the state
Athens has been told to depoliticise the Greek administration and to continue cutting the costs of public administration.
The Guardian highlights one of the hidden landmines in the agreement:
Our economics editor Larry Elliott has been going through the details of this morning’s deal and concludes it will deepen the country’s recession, make its debt position less sustainable and that it “virtually guarantees that its problems come bubbling back to the surface before too long.”
One line in the seven-page euro summit statement sums up the thinking behind this act of folly, the one that talks about “quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets”.
Translated into everyday English, what this means is that leaving to one side the interest payments on its debt, Greece will have to raise more in revenues than the government spends each and every year. If the performance of the economy is not strong enough to meet these targets, the “quasi-automatic” spending cuts will kick in. If Greece is in a hole, the rest of the euro zone will hand it a spade and tell it to keep digging.
This approach to the public finances went out of fashion during the 1930s but is now back. Most modern governments operate what are known as “automatic stabilisers”, under which they run bigger deficits (or smaller surpluses) in bad times because it is accepted that raising taxes or cutting spending during a recession reduces demand and so makes the recession worse.
At least according to press reports, Tsprias put up his greatest fight over inclusion of the IMF in monitoring the agreement and privatization. The IMF is definitely in. As for privatization or what the Guardian calls “Asset Transfer,” gains were minimal. One can question in fact whether at least the latter area is one where Tsprias should have tried to draw lines. At least on the face of it, it would seem that it would have made more sense to fight the demand to “liberalize” labor markets. A victory here would have given the state freedom to encourage the development of a strong labor movement, regardless of ownership.
Moreover, as noted in the summary, Greece is still not guaranteed new loans or debt relief. Its parliament has to pass all of the above and then the government gets to start negotiations again.
As the Guardian reports:
European leaders lined up to say Grexit has been averted, but this snappy soundbite glides over the fact the eurozone has simply agreed to open negotiations on an €86bn (£62bn) bailout. Although this is a step to shoring-up confidence in the euro, it is only a promise to have more talks with no guarantee of success.
Talks on the bailout plan are forecast to last around four weeks. “We know time is critical for Greece, but there are no shortcuts,” said Klaus Regling, the official in charge of the the European Stability Mechanism, the eurozone’s permanent bailout fund that Greece hopes to tap.
But these formal talks can only begin, if eurozone leaders avoid several political and financial tripwires. The Greek government has until the end of Wednesday to ensure that sweeping reforms to its pension system and VAT rates are written into law. If Greek lawmakers meet this eurozone-imposed deadline, the baton will pass to the creditors. At least five countries, including Germany, the Netherlands and Finland, will have to put the idea of opening negotiations on a bailout to a parliamentary vote.
Politics could be overtaken by financial deadlines. Athens faces demands to repay €7bn of debts in July, including €3.5bn due to the European Central Bank on Monday (20 July).
Eurozone officials are working round the clock to come up with emergency funds that will help Greece bridge the gap before a permanent bailout kicks in. “It’s not going to be easy,” said Jeroen Dijsselbloem, the hawkish Dutch politician, who was re-elected chair of the eurozone group of finance ministers on Monday. Several options were being discussed on bridge finance, but no one had found “the golden key to solve the problem”, he said, although he hopes to see progress by Wednesday.
The ECB will also continue to maintain a choke hold on the Greek economy perhaps for months, tightening if any deviations take place.
They told clients tonight that the European Central Bank is unlikely to cut Greece much slack until the third bailout is agreed.
We suspect the ECB will stall an ELA decision until Greece begins to legislate the new deal later this week.
Greece would still face a tight ELA cap, however. We expect the ELA cap will remain carefully calibrated and controlled at least until the new ESM loan is fully in place. Access to banks could be fully normalised only in the fall.
It is hard to see this agreement as anything but failure. Clearly the main responsibility for this disaster rests with the leaders of Germany and the European Union. They showed that they had no interest in meaningful, honest negotiations, fearing that they would likely lead to a real challenge to their power. But unfortunately Syriza’s leadership did not make the best of the bad hand they were dealt. They needed to talk more truthfully to the population about the political/class nature of and reasons for the difficult challenges they faced and do the maximum possible to strengthen their negotiating position and prepare the population for the failure that they thought likely.
Hopefully, the Greek people will find the time and space necessary to digest and learn the lessons from this struggle and successfully regroup. We all must.
My latest article, on capitalist globalization, appears in the current issue of the journal Critical Asian Studies. For a limited time the journal is making it freely available. Here is the abstract and below it a link to the article itself.
From the Claw to the Lion
A Critical Look at Capitalist Globalization
This article argues that capitalist globalization is largely responsible for creating or intensifying many of our most serious economic and social problems. It first describes the forces that drove core country transnational corporations to create a complex system of cross-border production networks. It then maps the resulting new international division of labor, in which Asian countries, especially China, import primary commodities from Latin American and sub-Saharan African countries to produce exports for core countries, especially the United States. In core countries, globalization has led to the destruction of higher paying jobs, financialization of economic activity, and stagnation. While the new international division of labor has boosted third world rates of growth, especially in Asia, it has also left the third world with unbalanced and inequitable economies. Moreover, contradictions in the globalization process point to the spread of core country stagnation to the third world. Capitalist globalization has increased third world dependence on core country consumption while simultaneously undermining core country purchasing power. The article ends by discussing a process and program of transformation that highlights the feasibility of an alternative to global capitalism as well as the organizational capacities and institutional arrangements that must be developed if we are to realize it.
The article can be read or downloaded for free here.
President Obama continues to press for a form of fast track approval to ensure Congressional support for two major trade agreements, the Trans-Pacific Trade Partnership Agreement with 11 other countries (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) and the Trans-Atlantic Trade and Investment Partnership Agreement with the entire European Union.
Both agreements, based on leaks of current negotiating positions, have been structured to promote business interests and will have negative consequences for working people relative to their wages and working conditions, access to public services, and the environment.
These agreements are being negotiated in secret: even members of Congress are locked out of the negotiating process. The only people that know what is happening and are in a position to shape the end result are the U.S. trade representative and a select group of 566 advisory group members selected by the U.S. trade representative.
Thanks to a recent Washington Post blog we can see who these advisory group members are and, by extension, whose interests are served by the negotiations. According to the blog post, 480 or 85% of the members are from either industry or trade association groups. The remaining 15% are academics or members of unions, civil society organizations, or government committees. The blog post includes actual names and affiliations.
Here we can see the general picture of corporate domination of U.S. trade policy as illustrated by the Washington Post.
In short, corporate interests are well placed to directly shape our trade policies. No wonder drafts of these treaties include chapters that, among other things, lengthen patent protection for drugs, promote capital mobility and privatization of public enterprises, and allow corporations to sue governments in supra-national secret tribunals if public policies reduce expected profits.
The following charts, taken from a National Priorities Project post, highlight our federal budget priorities.
As the post explains:
President Obama recently released his fiscal year 2016 budget proposal. Budgets are about our nation’s priorities: What are we going to spend money on? How are we going to raise the money we want to spend?
Though the budget ultimately enacted by Congress may look very different from the budget request released by the president, the president’s budget is important. It’s the president’s vision for the country in fiscal year 2016 and beyond, and it reflects input and spending requests from every federal agency.
Here’s a look at the overall proposed budget:
Here’s a look at the allocation of discretionary tax dollars:
Here”s a look at the relative balance of military and non-military discretionary spending over time:
Here’s a look at the structure of taxes supporting federal spending:
Wealth inequality isn’t just growing among individuals. It is also growing among corporations—and that is not good for the U.S. economy.
According to Bloomberg News:
Eighteen American businesses held 36 percent of corporate wealth in 2013, up from 27 percent in 2009, according to a report from Standard & Poor’s, a credit rating firm in New York. The bottom 80 percent have lost ground, with just 11 percent.
The top 1 percent includes all the big companies you might well imagine, including Microsoft, Google, Apple, Coca-Cola, and Ford Motor Company.
The top companies are holding ever more of their wealth as cash and outside the United States. The wealthiest 1 percent of corporations raised the share of their assets held as cash from 20.4 percent in 2009 to 23.6 percent in 2013. The rest of the corporate sector held cash balances that were worth less than 7 percent of their total assets.
- Apple is holding 78 percent of its $40.7 billion in cash overseas.
- Cisco is holding 93 percent of its $47.1 billion in cash overseas.
Among other things this behavior means that corporations are dramatically cutting their tax obligations to the U.S. government. The congressional Joint Committee on Taxation estimates that this corporate strategy cost the U.S. Treasury over $83 billion dollars in revenue this fiscal year.
Corporations, fearful that the government might take steps to force them to invest this money in the United States economy, are exploring new strategies. For example, some are merging with foreign companies so that they can legally establish themselves in lower tax countries.
Bloomberg News ends its story as follows:
“You could argue that companies that make a billion dollars and don’t pay taxes are freeloaders,” said Mitch Rofsky, president of the Better World Club, an insurer based in Portland, Oregon, and member of the American Sustainable Business Council, a group of small employers.
“It’s basically an issue of do our economic models work, is infrastructure supported, does government have the money it needs,” Rofsky said. “It’s unfair.”
Unfortunately under capitalism fairness is besides the point. What matters is power and our challenge is to build popular support for effective policies that privilege the public interest over the private.
Floyd Norris, writing in the New York Times, summarizes key economic trends as follows:
Corporate profits are at their highest level in at least 85 years. Employee compensation is at the lowest level in 65 years.
The Commerce Department last week estimated that corporations earned $2.1 trillion during 2013, and paid $419 billion in corporate taxes. The after-tax profit of $1.7 trillion amounted to 10 percent of gross domestic product during the year, the first full year it has been that high. In 2012, it was 9.7 percent, itself a record….
Before taxes, corporate profits accounted for 12.5 percent of the total economy, tying the previous record that was set in 1942, when World War II pushed up profits for many companies. But in 1942, most of those profits were taxed away. The effective corporate tax rate was nearly 55 percent, in sharp contrast to last year’s figure of under 20 percent.
The Commerce Department also said total wages and salaries last year amounted to $7.1 trillion, or 42.5 percent of the entire economy. That was down from 42.6 percent in 2012 and was lower than in any year previously measured.
Including the cost of employer-paid benefits, like health insurance and pensions, as well as the employer’s share of Social Security and Medicare contributions, the total cost of compensation was $8.9 trillion, or 52.7 percent of G.D.P., down from 53 percent in 2012 and the lowest level since 1948.
Benefits were a steadily rising cost for employers for many decades, but that trend seems to have ended. In 2013, the figure was 10.2 percent, the lowest since 2000.
Norris’s article also includes the following chart which presents after-tax corporate profits, effective corporate tax rates, employee compensation, and changes in the S&P index by presidential term.
Two things are worth highlighting.
First, the steady climb in the ratio of after-tax corporate profits to GDP over the Clinton, Bush, and Obama administrations. The ratio is now at a record high.
Second, the decline in employee compensation as a share of GDP. This ratio has tumbled to a post-Truman low.
These pre-and after-tax profit and compensation trends are no accident. They are the result of economic policies which had as their primary goal the enhancement of corporate profitability. These policies include:
- Corporate tax cuts
- Free Trade Agreements designed to promote the globalization of production and finance
- Financial sector liberalization
- Labor law reforms designed to weaken worker organizing and collective action
- Privatization of government services
- Cuts in and the tightening of eligibility standards for social programs
- Public sector bailouts and subsidization of private sector activities.
Unfortunately, while these policies succeeded brilliantly in achieving their goal, success has come at high social cost. They have worsened living and working conditions for growing numbers of people as well as the overall health of the economy.
The following four charts, published by Doug Henwood on his Left Business Observer blog, offer one window on the weakened state of our economy. The charts show the real movement of GDP, Consumption, Investment, and Government Spending through the end of 2013 relative to their respective long term trends (1970-2007).
Note how things fell off a cliff in the recession. GDP, consumption, and government spending are all about 15% below where they’d be had they continued to grow in line with their long-term trend. (The hysteria over out-of-control government spending looks ludicrous in the light of this graph.) Investment is about 25% below where it “should” be thanks largely to the housing collapse, though it’s staging something of a recovery. The other components have yet to begin closing the gap, because the recovery’s been so weak.
The economy’s weak five year expansion has existed comfortably with record profits (and a growing concentration of income and wealth) because the policies which helped to secure the latter tend, by their nature, to weaken economic fundamentals. Think tax cuts, bailouts, free trade agreements, privatization, and the like.
In short, as long as both political parties prioritize corporate profits, we can expect bipartisan support for current policies and thus a continuation of socially negative trends. There is no way forward for the majority of Americans without a fundamental shift in priority and policies.
The US government, on behalf of our largest corporations, continues to push for approval of the Transpacific Trade Partnership (TPP), a new “so-called” free trade agreement.
It is striking how political and business leaders rally around the virtues of free trade. The WTO, NAFTA, TPP, the Korea-U.S. Free Trade Agreement, etc. are all presented as vehicles for freeing trade and thus boosting efficiency and majority living conditions. Notice—it is the World Trade Organization, the North American Free Trade Association, etc.
Two problems—first free trade does not automatically lead to benefits for working people. Second, these agreements do far more than reduce trade barriers.
The theory of comparative advantage, which underpins most arguments for free trade, is based on numerous assumptions, including full employment, full mobility of labor and capital within a country, complete lack of mobility of labor and capital across national borders, perfect competition, automatic currency movements to balance trade, a lack of externalities . . . the list goes on. The fact is that if any one of these assumptions is violated there is no assurance that dropping tariffs and other trade barriers will benefit working people; in fact, quite the opposite is likely to result. (For more see my recent book, Capitalist Globalization: Consequences, Resistance, and Alternatives.)
Moreover, while lowering barriers to trade gets all the attention, these agreements generally have more than twenty chapters that are designed to restrict the ability of governments to regulate the production, investment, and employment activity of foreign investors as well as more directly promote the power of transnational corporations to freely pursue profits. See here, here, and here for the Korea-U.S. Free Trade Agreement and here and here for the TPP.
As more and more U.S. workers have come to see how globalization has led to a hollowing out of manufacturing, growing downward pressure on wages and working conditions, corporate tax avoidance, and enhanced political power for large corporations, they are often lectured that they are part of the global wealthy and therefore should support these agreements to help workers in other countries.
Well, 2014 marks that twentieth anniversary of NAFTA and Mark Weisbrot, writing in the Guardian newspaper, provides a useful summary of how things worked out for Mexico.
Here is an excerpt:
But what about Mexico? Didn’t Mexico at least benefit from the agreement? Well if we look at the past 20 years, it’s not a pretty picture. The most basic measure of economic progress, especially for a developing country like Mexico, is the growth of income (or GDP) per person. Out of 20 Latin American countries (South and Central America plus Mexico), Mexico ranks 18, with growth of less than 1 percent annually since 1994. It is of course possible to argue that Mexico would have done even worse without NAFTA, but then the question would be, why?
From 1960-1980 Mexico’s GDP per capita nearly doubled. This amounted to huge increases in living standards for the vast majority of Mexicans. If the country had continued to grow at this rate, it would have European living standards today. And there was no natural barrier to this kind of growth: this is what happened in South Korea, for example. But Mexico, like the rest of the region, began a long period of neoliberal policy changes that, beginning with its handling of the early 1980s debt crisis, got rid of industrial and development policies, gave a bigger role to de-regulated international trade and investment, and prioritized tighter fiscal and monetary policies (sometimes even in recessions). These policies put an end to the prior period of growth and development. The region as a whole grew just 6 percent per capita from 1980-2000; and Mexico grew by 16 percent – a far cry from the 99 percent of the previous 20 years.
For Mexico, NAFTA helped to consolidate the neoliberal, anti-development economic policies that had already been implemented in the prior decade, enshrining them in an international treaty. It also tied Mexico even further to the U.S. economy, which was especially unlucky in the two decades that followed: the Fed’s interest rate increases in 1994, the U.S. stock market bust (2000-2002) and recession (2001), and especially the housing bubble collapse and Great Recession of 2008-9 had a bigger impact on Mexico than almost anywhere else in the region.
Since 2000, the Latin American region as a whole has increased its growth rate to about 1.9 percent annually per capita – not like the pre-1980 era, but a serious improvement over the prior two decades when it was just 0.3 percent. As a result of this growth rebound, and also the anti-poverty policies implemented by the left governments that were elected in most of South America over the past 15 years, the poverty rate in the region has fallen considerably. It declined from 43.9 percent in 2002 to 27.9 percent in 2013, after two decades of no progress whatsoever.
But Mexico has not joined in this long-awaited rebound: its growth has remained below 1 percent, less than half the regional average, since 2000. And not surprisingly, Mexico’s national poverty rate was 52.3 percent in 2012, basically the same as it was in 1994 (52.4 percent). Without economic growth, it is difficult to reduce poverty in a developing country. The statistics would probably look even worse if not for the migration that took place during this period. Millions of Mexicans were displaced from farming, for example, after being forced into competition with subsidized and high-productivity agribusiness in the United States, thanks to NAFTA’s rules.
It’s tough to imagine Mexico doing worse without NAFTA. Perhaps this is part of the reason why Washington’s proposed “Free Trade Area of the Americas” was roundly rejected by the region in 2005 and the proposed Trans-Pacific Partnership is running into trouble. Interestingly, when economists who have promoted NAFTA from the beginning are called upon to defend the agreement, the best that they can offer is that it increased trade. But trade is not, to most humans, an end in itself. And neither are the blatantly mis-named “free trade agreements.”
In sum, we don’t help workers here or anywhere else by falling for government and business pronouncements surrounding the TPP or other similar agreements.
Unfortunately, far too many people remain confused about what these agreements really do and that has weakened our ability to defeat them. One reason is that far too many people see them as disconnected from on-going domestic policies and struggles, as separate initiatives that are too complex to understand. In reality, these agreements are simply another way for corporate interests to advance current domestic attacks on the public sector and unions and efforts to promote privatization, tax cuts, corporate mobility, and financialization. We need to see that we are up against a coherent set of political and economic interests and organize accordingly.
This long post examines the causes of and offers a response to the dangerous escalation of tensions on the Korean peninsula.
While the details of U.S.-North Korean relations are complex, the story is relatively simple. In brief, the U.S. government continues to reject possibilities for normalizing relations with North Korea and promoting peace on the Korean peninsula in favor of a dangerous policy of regime change. Unfortunately, but not surprisingly, the U.S. media supports this policy choice with a deliberately one sided presentation of events designed to make North Korea appear to be an unwilling and untrustworthy negotiating partner.
As a corrective, in what follows I offer a more complete history of U.S -North Korean relations, focusing on the major events that frame current tensions over North Korea’s nuclear program. This history makes clear that these tensions are largely the result of repeated and deliberate U.S. provocations and that our best hope for peace on the Korean Peninsula is an educated U.S. population ready and able to challenge and change U.S. foreign policy.
Perhaps the best starting point for understanding the logic of U.S.-North Korean relations is the end of Korean War fighting in 1953. At U.S. insistence, the fighting ended with an armistice rather than a peace treaty. A Geneva conference held the following year failed to secure the peace or the reunification of Korea, and U.S. demands were the main reason for the failure.
The United States rejected North Korean calls for Korea-wide elections, supervised by a commission of neutral nation representatives, to establish a new unified Korean government, a proposal that even many U.S. allies found reasonable. Instead, the U.S. insisted, along with South Korea, that elections for a new government be held only in the North and under the supervision of the U.S. dominated United Nations. Needless to say, the conference ended without any final declaration, Korea divided, and the United States and North Korea in a continuing state of war.
Up until the late 1980s/early 1990s, an interrelated, contentious but relatively stable set of relationships—between the United States and the Soviet Union and between North Korea and South Korea—kept North Korean-U.S. hostilities in check. The end of the Soviet Union and transformation of Russia and other Central European countries into capitalist countries changed everything.
The loss of its major economic partners threw North Korea’s economy into chaos; conditions only worsened the following years as a result of alternating periods of flood and drought. The North Korean government, now in a relatively weak position, responded by seeking new trade and investment partners, which above all required normalization of relations with the United States. The U.S. government had a different response to the changed circumstances; seeking to take advantage of the North’s economic problems and political isolation, it rejected negotiations and pursued regime change.
It is the interplay of U.S. and North Korean efforts to achieve their respective aims that is largely responsible for the following oft repeated pattern of interaction: the North tries to force the United States into direct talks by demonstrating its ability to boost its military capacities and threaten U.S. interests while simultaneously offering to negotiate away those capacities in exchange for normalized relations. The United States, in turn, seizes on such demonstrations to justify ever harsher economic sanctions, which then leads North Korea to up the ante.
There are occasional interruptions to the pattern. At times, the United States, concerned with North Korean military advances, will enter into negotiations. Agreements are even signed. But, the U.S. rarely follows through on its commitments. Then the pattern resumes. The critical point here is that it is the North that wants to conclude a peace treaty ending the Korean War and normalize relations with the United States. It is the U.S. that is the unwilling partner, preferring to risk war in the hopes of toppling the North Korean regime.
The Framework Agreement, 1994-2002
The U.S. government began to raise public concerns about a possible North Korean nuclear threat almost immediately after the dissolution of the Soviet Union. These concerns were driven by many factors, in particular the U.S. need for a new enemy to justify continued high levels of military spending. Colin Powell, then head of the Joint Chiefs of Staff, explained in testimony to Congress that with the Soviet Union gone, the United States was running out of enemies. All that was left, he said, was Fidel Castro and Kim Il Sung.
The North had shut down its one operating reactor in 1989 for repairs. In 1992, the CIA claimed that the North used the shutdown to reprocess plutonium and was now in possession of one or two nuclear weapons, a claim disputed at the time by the State Department. The North also denied the claim but offered to settle U.S. nuclear concerns if the United States would enter into normalization talks.
The Clinton Administration rejected the invitation and began planning for war. War was averted only because of Jimmy Carter’s intervention. He traveled to North Korea and brokered an agreement with Kim Il Sung that Clinton reluctantly accepted. The resulting 1994 Framework Agreement required the North to freeze its graphite-moderated reactor and halt construction of two bigger reactors. It also required the North to store the spent fuel from its operating reactor under International Atomic Energy Association (IAEA) supervision.
In exchange, the U.S agreed to coordinate the building of two new light water reactors (which are considered less militarily dangerous) that were to be finished by 2003. Once the reactors were completed, but before they were fully operational, the North would have to allow full IAEA inspections of all its nuclear facilities. During the period of construction, the U.S. agreed to provide the North with shipments of heavy oil for heating and electricity production.
Perhaps most importantly, the agreement also called for the United States to “move toward full normalization of political and economic relations” with the North and “provide formal assurances to the DPRK against the threat or use of nuclear weapons by the United States.”
Tragically, although rarely mentioned in the U.S. media, the U.S. government did little to meet its commitments. It was repeatedly late in delivering the promised oil and didn’t begin lifting sanctions until June 2000. Even more telling, the concrete for the first light water reactor wasn’t poured until August 2002. Years later, U.S. government documents revealed that the United States made no attempt to complete the reactors because officials were convinced that the North Korean regime would collapse.
The Bush administration had no use for the Framework Agreement and was more than happy to see it terminated, which it unilaterally did in late 2002, after charging the North with violating its terms by pursuing nuclear weapons through a secret uranium enrichment program. Prior to that, in January 2002, President Bush branded North Korea a member of the “axis of evil.” In March, the terms of a new military doctrine were leaked, revealing that the United States reserved the right to take preemptive military strikes and covert actions against nations possessing nuclear, biological, and chemical weapons as well as use nuclear weapons as an option in any conflict; North Korea was listed as one of the targeted nations. In July, President Bush rejected a North Korean request for a meeting of foreign ministers, calling Kim Jong Il a “pygmy” and a “spoiled child at the dinner table”
It is certainly possible that North Korea did begin a uranium enrichment program in the late 1990s, although the Bush Administration never provided proof of the program’s existence. However, what is clear is that the North did halt its plutonium program, allowing its facilities to deteriorate, with little to show for it. The failure of the United States to live up to its side of the agreement is highlighted by the fact that North Korea’s current demands are no different from what it was promised in 1994.
The North Korean government responded to the Bush administration’s unilateral termination of the Framework Agreement by ordering IAEA inspectors out of the country, restarting its plutonium program, and pledging to build a nuclear arsenal for its defense.
Six Party Talks, 2003-7
Fearful of a new war on the Korean peninsula, the Chinese government organized talks aimed at deescalating tensions between the United States and North Korea. The talks began in August 2003 and included six countries—the United States, North Korea, South Korea, Japan, China, and Russia. Two years of talks failed to produce any progress in resolving U.S.-North Korea differences. One reason: the U.S. representative was under orders not to speak directly to his North Korean counterpart except to demand that North Korea end its nuclear activities, scrap its missiles, reduce its conventional forces, and end human rights abuses. The North, for its part, refused to discuss its nuclear program separate from its broader relations with the United States.
Finally, in mid-2005, the Chinese made it known that they were prepared to declare the talks a failure and would blame the United States for the outcome. Not long after, the United States ended its opposition to an agreement. In September 2005, the six countries issued a Joint Statement, which was largely a repackaged Framework Agreement. While all the countries pledged to work towards the denuclearization of the Korean peninsula, most of the concrete steps were to be taken by the United States and North Korea “in a phased manner in line with the principle of ‘commitment for commitment, action for action’.”
Unfortunately, the day after the Joint Statement was issued, the United States sabotaged it. The U.S. Treasury announced that it had “proof” that North Korea was counterfeiting $100 bills, so called super notes, an action it said amounted to war. It singled out the Macao-based Banco Delta Asia, which was one of North Korea’s main financial connections to the west, for supporting the country’s illegal activities, froze its dollar accounts, and warned other banks not to conduct business with it or service any North Korean dollar transactions. The aim was to isolate North Korea by denying it access to international credit markets. The charge of counterfeiting was rejected by the North, most Western currency experts, and even China and Russia who were given a presentation of evidence by the U.S. Treasury. However, fearful of possible U.S. retaliation, most banks complied with U.S. policy, greatly harming the North Korean economy.
The timing of the counterfeit charge was telling. The U.S. Treasury had been concerned with counterfeit super notes since 1989 and had originally blamed Iran. The sum total identified was only $50 million, and none of the notes had ever circulated in the United States. This was clearly yet another effort to stop normalization and intensify economic pressure on North Korea.
The North announced that its participation in Six Party talks was contingent on the withdrawal of the counterfeit charge and the return of its Banco Delta Asia dollar deposits. After months of inaction by the United States, the North took action. On July 4, 2006, it test-fired six missiles over the Sea of Japan, including an intercontinental missile. The U.S. and Japan condemned the missile firings and further tightened their sanctions against North Korea. In response, on October 8, 2006, North Korea conducted its first nuclear test. Finally, the U.S. agreed to reconsider its financial embargo and the North agreed that if its money was returned and it received energy supplies and economic assistance it was willing to once again shutdown its nuclear facilities, readmit international inspectors, and discuss nuclear disarmament in line with steps toward normalization of relations with the United States.
The Six Party talks began again in December 2006 but the process of securing implementation of the Joint Statement was anything but smooth. The U.S. chief negotiator at the talks announced in February 2007 that all frozen North Korean deposits would be unfrozen and made available to the North within 30 days; the North was given 60 days to shut down its reactor. However, the Treasury refused to withdraw its charges, and no bank was willing to handle the money for fear of being targeted as complicit with terrorism. It took the State Department until June 25 to work out a back-door alternative arrangement, thereby finally allowing the Six Party agreement to go into effect.
The Six Party Agreement, 2007-9
As noted above, the Six Party agreement involved a phased process. Phase 1, although behind schedule because of the U.S. delay in releasing North Korean funds, was completed with no problems. In July 2007, North Korea shut down and sealed its Yongbyon nuclear complex which housed its reactor, reprocessing facility, and fuel rod fabrication plant. It also shut down and sealed its two partially constructed nuclear reactors. It also invited back IAEA inspectors who verified the North Korean actions. In return, the U.S. provided a shipment of fuel oil.
Phase 2, which began in October, required the North to disable all its nuclear facilities by December 31, 2007 and “provide a complete and correct declaration of all its existing nuclear programs.” In a separate agreement it also agreed to disclose the status of its uranium enrichment activities. In exchange, the North was to receive, in stages, “economic, energy, and humanitarian assistance.” Once it fulfilled all Phase 2 requirements it would also be removed from the U.S. Trading with the Enemy Act and the State Sponsors of Terrorism list.
North Korean complaints over the slow delivery of fuel oil delayed the completion of this second phase. However, in May 2008, North Korea completed the last stage of its required Phase 2 actions when it released extensive documentation of its plutonium program and in June a declaration of its nuclear inventory. In response, the U.S. removed North Korea from its list of state sponsors of terrorism.
However, the U.S. government failed to release the remaining promised aid or end the remaining sanctions on North Korea. It now demanded that North Korea accept a highly intrusive verification protocol, one that would open up all North Korean military installations to U.S. inspection, and made satisfaction of Phase 2 commitments dependent on its acceptance. The U.S. was well aware that this demand was not part of the original agreement. As Secretary of State Rice stated, “What we’ve done, in a sense, is move up issues that were to be taken up in phase three, like verification, like access to the reactors, into phase two.”
The North offered a compromise—a Six Party verification mechanism which would include visits to declared nuclear sites and interviews with technical personal. It also offered to negotiate a further verification protocol in the final dismantlement phase. The U.S. government rejected the compromise and ended all aid deliveries.
In February 2009, the North Korea began preparation to launch a satellite. South Korea was preparing to launch a satellite of its own in July. The North had signed the appropriate international protocols governing satellites and was now providing, as required, notification of its launch plan. The Obama administration warned the North that doing so would violate sanctions placed on the country after its nuclear test. In response, the North declared that it had every right to develop its satellite technology and if the U.S. responded with new sanctions it would withdraw from the Six Party talks, eject IAEA monitors, restart its reactors, and strengthen its nuclear deterrent.
The North launched its satellite in April. In June, the U.S. won UN support for enhanced sanctions, and the North followed through on its threat. In May the North conducted a second nuclear test, producing yet another round of sanctions.
In April and December 2012 the North again launched earth observation satellites. Although before each of these launches the U.S. asserted that these were veiled attempts to test ballistic missiles designed to threaten the United States, after each launch almost all observers agreed that the characteristics of the launches—their flight pattern and the second stage low-thrust, long burntime–were what is required to put a satellite in space and not consistent with a missile test.
After the December launch, the only successful one, the U.S. again convinced the Security Council to apply a new round of sanctions. And in response, the North carried out its third nuclear test in February 2013. The North Korean Ministry of Foreign Affairs pointed out that there have been “more than 2,000 nuclear tests and 9,000 satellite launches” in the world, “but the UN Security Council has never passed a resolution prohibiting nuclear tests or satellite launches.” The Security Council responded to the North’s nuclear test by approving stricter sanctions.
In addition to sanctions, the U.S. has also intensified its military provocations against the North in hopes of destabilizing the new North Korean regime led by Kim Jung Un. For example, in 2012, U.S.-South Korean military analysts conducted the world’s largest computerized war simulation exercise, practicing the deployment of more than 100,000 South Korean troops into North Korea to “stabilize the country in case of regime collapse.” As part of their yearly war games, U.S. and South Korean forces also carried out their largest amphibious landing operations in 20 years; 13 naval vessels, 52 amphibious armored vehicles, 40 fighter jets and helicopters, and 9,000 U.S. troops were involved.
As part of its March 2013 war games, the U.S. flew nuclear-capable B-2 Stealth bombers over South Korea; these are also the only planes capable of dropping the 30,000-pound Massive Ordnance Penetrator bomb, which was developed to destroy North Korean underground facilities. Nuclear-capable B-52 bombers also flew over South Korea, dropping dummy munitions. The United States also sent the nuclear-powered submarine USS Cheyenne, equipped with Tomahawk missiles, into Korea waters.
The North Korean government responded to these threats in three ways. First, the content of their declarations changed. In particular, they began to focus their own threats on the U.S. as well as South Korea. For example, the government stated, “If the US imperialists brandish nuclear weapons, we — in complete contrast to former times — will by means of diversified, precision nuclear strike in our own style turn not just Seoul, but even Washington, into a sea of fire.” It also asserted, for the first time, that its nuclear weapons were no longer negotiable. At least, not “as long as the United States’ nuclear threats and hostile policy exist.”
Second, the government put North Korean forces on full alert, including all artillery, rockets, and missiles. Kim Jong Un announced that the country would “answer the US imperialists’ nuclear blackmail with a merciless nuclear attack.” Finally, it announced, in April, that it would restart its uranium enrichment program and its Yongbyon reactor.
What Lies Ahead
The Obama administration has adopted what it has called the doctrine of “strategic patience” in dealing with North Korea. But as made clear from above, in reality the U.S. has continued to pursue an aggressive policy towards North Korea, motivated by the hope that the regime will collapse and Korean reunification will be achieved by the South’s absorption of the North, much like the German experience.
The consequence of this policy is ever worsening economic conditions in the North; continuing military buildup in the United States, Japan, China, and both North and South Korea; a strengthening of right-wing forces in South Korea and Japan; and the growing threat of a new war on the Korean peninsula. There are powerful interests in Japan, South Korea, and the United States that are eager to further militarize their respective domestic and foreign policies, even at the risk of war. Tragically, their pursuit of this goal comes at great cost to majorities in all the countries concerned, even if war is averted.
The North has made clear its willingness to enter direct talks with the United States. It is only popular pressure in the United States that will cause the U.S. government to change its policy and accept the North Korean offer. It is time for the U.S. government to sign a peace treaty finally ending the Korean War and take sincere steps towards normalization of relations with North Korea.
So, what government believes that it has the right to kill anyone, regardless of where they are, if the head of state believes that the person is a threat to the country’s national security? No, the answer is not the government of North Korea. It is the government of the United States.
And how does the government of the United States justify its policy of targeted assassinations? According to a recent New York Times article:
On Page 4 of the unclassified 16-page “white paper,” Justice Department lawyers tried to refute the argument that international law does not support extending armed conflict outside a battlefield. They cited as historical authority a speech given May 28, 1970, by John R. Stevenson, then the top lawyer for the State Department, following the United States’ invasion of Cambodia.
Since 1965, “the territory of Cambodia has been used by North Vietnam as a base of military operations,” he told the New York City Bar Association. “It long ago reached a level that would have justified us in taking appropriate measures of self-defense on the territory of Cambodia. However, except for scattered instances of returning fire across the border, we refrained until April from taking such action in Cambodia.”
In fact, Nixon had begun his secret bombing of Cambodia more than a year earlier. (It is not clear whether Mr. Stevenson knew this.) So the Obama administration’s lawyers have cited a statement that was patently false.
To be sure, the administration may have additional arguments in support of its use of drones in Yemen, Pakistan, Somalia and other countries. To secure the confirmation of John O. Brennan as the C.I.A. director, it recently showed members of the Congressional intelligence committees some of the highly classified legal memos that were the basis for the white paper. But Mr. Obama has asked us to trust him, and Cambodia offers us no reason to do so.
The following link illustrates the escalation of drone warfare under President Obama by highlighting every known drone attack in Pakistan since 2004 and the estimated casualties: http://drones.pitchinteractive.com/
After watching the graphic take a few moments to explore the site, especially the victims and news links.
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.
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.